MEASURES FOR EXAMINATION AND APPROVAL OF ACCOUNTING FIRMS WITH LIMITED LIABILITY

The Ministry of Finance

Circular of the Ministry of Finance on Printing and Distributing Measures for Examination and Approval of Accounting Firms with Limited
Liability

CaiKuaiXieZi [1998] No.55

July 3,1998

Finance departments (bureaus) of various provinces, autonomous regions, municipalities directly under the Central Government:

Measures for Examination and Approval of Accounting Firms with Limited Liability is hereby delievred to you, please abide by and carry
out accordingly.

Measures for Examination and Approval of Accounting Firms with Limited Liability

Article 1

These Measures are formulated in accordance with the provisions of the Law of the People’s Republic of China on Certified Public Accountants
and other relevant laws and regulations.

Article 2

An accounting firm with limited liability (hereinafter referred to as a firm) is a social intermediary organization in which certified
public accountants contribute capital to initiate its establishment, undertake certified public accountancy and assume limited liability.

Article 3

Establishment of a firm shall be approved by the Ministry of Finance or the finance department (bureau) of the province, autonomous
region or municipality directly under the Central Government.

Article 4

A firm shall assume liability for its debts to the extent of all its assets.

Contributors of a firm shall assume liability to the extent of their respective capital contributions.

Article 5

The following conditions shall be met for the establishment of a firm:

(1)

having more than five promoters who conform to the requirements provided in Article 6 of these Measures;

(2)

having more than 10 full-time practitioners of an age within the age limit for the profession prescribed by the State, including more
than five certified public accountants registered in China;

(3)

having a registered capital of more than RMB300,000 yuan;

(4)

having fixed office premises; and

(5)

other conditions provided by the examining and approving authority.

The finance department (bureau) of the province, autonomous region or municipality directly under the Central Government may, depending
on the specific circumstances of their respective areas, formulate specific provisions on the number of practitioners and certified
public accountants and the amount of registered capital which shall not below those conditions provided in Item 2 and 3 in the preceding
paragraph.

Article 6

A promoter who applies to establish a firm shall meet the following conditions:

(1)

having obtained a certificate of a Chinese certified public accountant, and having more than three years’ experience in conducting
independent audit work in a firm and having a sound professional ethics record;

(2)

being a contributor to the firm;

(3)

not working in other units for obtaining labor remuneration such as wages;

(4)

being of an age within the age limit for the profession prescribed by the State; and

(5)

other conditions provided by the examining and approving authority.

Article 7

A contributor who applies to establish a firm shall meet the following conditions:

(1)

having obtained a certificate of a Chinese certified public accountant;

(2)

practicing business in the firm and not working in other units for obtaining labor remuneration such as wages; and

(3)

other conditions provided by the examining and approving authority.

Article 8

A firm effectuates a chief accountant accountability system, and the chief accountant is the legal representative of a firm.

A promoter shall serve as the chief accountant, and the relevant procedures for recommendation and election and specific requirements
shall be provided by the articles of association of the firm.

Article 9

The name of a firm shall not be preceded by such name as industry or department which can easily cause misunderstanding, nor shall
China or merely the post_title of an area be used as the name of a firm.

Article 10

To establish a firm, a promoter shall submit an application report to the institutes or associations of certified public accountants
of the province, autonomous region or municipality directly under the Central Government where the firm is located, and shall have
the following materials attached thereto:

(1)

articles of association(draft) of the firm;

(2)

promoters’ resume, originals and photocopies of the certified public accountants’ certificates, originals and photocopies of the ID
cards and a work appraisal report issued by their original firms;

(3)

contributors’ resume, originals and photocopies of the certified public accountants’ certificates, originals and photocopies of the
ID cards and a work appraisal report issued by their original firms;

(4)

contributors’ agreement;

(5)

materials relating to the person proposed to serve as the chief accountant;

(6)

certification of capital contribution;

(7)

other certified public accountants’ originals and photocopies of the ID cards, originals and photocopies of the certified public accountants’
certificates and a work appraisal report issued by their original firms;

(8)

other practitioners’ basic information and the photocopies of their ID cards;

(9)

the firm’s internal management system (draft);

(10)

a valid certification of property right of the office premises or the right to use it; and

(11)

other materials required by the examining and approving authority.

The articles of association (draft)of a firm and contributors’ agreement shall be notarized.

Article 11

The articles of association of a firm (draft) shall clearly specify the following matters:

(1)

name and address of the firm;

(2)

scope of business operations;

(3)

registered capital;

(4)

name of the promoters and contributors;

(5)

rights and obligations of contributors;

(6)

forms, time and amount of contributions made by the contributors;

(7)

conditions and methods for an contributor to change his contributions;

(8)

the legal representative;

(9)

measures for the establishment and creation of its internal organizations, its functions and powers and deliberation rules;

(10)

measures of the firm’s dissolution and liquidation; and

(11)

other matters necessary to be stipulated.

Article 12

The contributors’ agreement shall clearly specify the following matters:

(1)

rights of contributors;

(2)

liability which shall be assumed by contributors;

(3)

forms, time and amount of contributions;

(4)

conditions and methods to change contributions; and

(5)

other matters which are required by the examining and approving authority or contributors deem necessary to be clearly specified.

Article 13

The firm’s internal management system (draft) shall include the following systems:

(1)

a personnel management system;

(2)

a financial management system;

(3)

a quality control system of practicing business;

(4)

a business records management system; and

(5)

other management systems which are required by the examining and approving authority or the firm deems necessary to be worked out.

Article 14

The examination and approval of a firm shall be handled in accordance with the following procedures:

(1)

Contributors submit an application report and relevant materials to the institutes of certified public accountants of the province,
autonomous region or municipality directly under the Central Government.

(2)

The institutes of certified public accountants of the province, autonomous region or municipality directly under the Central Government
shall, within 30 days of receipt of the application report, complete its examination, put forward its opinions of approval or disapproval
and make a report to the head of the finance department (bureau) of the province, autonomous region or municipality directly under
the Central Government, and the head of the finance department (bureau) of the province, autonomous region or municipality directly
under the Central Government shall make a decision of approval or disapproval. The applicant shall be notified within 15 days after
the decision of approval or disapproval is made.

(3)

A firm approved by the finance department (bureau) of the province, autonomous region or municipality directly under the Central Government
shall be sent to the Chinese Institute of Certified Public Accountants for reporting to the Ministry of Finance for the record. Where
the Chinese Institute of Certified Public Accountants in its review finds that the examination and approval are improper, it shall
make a report to the Minister-in-charge of the Ministry of Finance within 30 days of receipt of the report for the record, and the
Minister-in-charge of the Ministry of Finance shall decide whether it is necessary to notify the original examining and approving
authority to carry out re-examination.

Article 15

An approved firm shall, within 20 days of receipt of the approval document, obtain an Accounting Firm Practicing Business License
uniformly printed by the Ministry of Finance from the local institute of certified public accountants of the province, autonomous
region or municipality directly under the Central Government and undergo relevant registration formalities in accordance with provisions.

Article 16

A firm shall conduct independent accounting, pay taxes according to law and implement the financial accounting systems for accounting
firms with limited liability formulated by the Ministry of Finance.

Article 17

“More than” or “:within” referred to in these Measures all includes the given figure.

Article 18

These Measures shall enter into force as of the date of promulgation. The Interim Measures on Establishing, Examining and Approving
Accounting Firms with Limited Liability promulgated y the Ministry of Finance on December 31, 1993 (Caikuaixiezi [93] No. 121) shall
be nullified simultaneously.