It depends on who does it. “Accounting fraud” is not a single offence in China. A bookkeeping error that is corrected is not a crime, but deliberately misleading financial reporting, hiding or destroying the records, or signing off on false figures can be prosecuted under several articles of the Criminal Law.
Which Criminal Law articles apply
The central provision is Article 161, which targets companies that owe a disclosure duty. If a company gives shareholders or the public a false or misleading financial report – or fails to disclose important information it is required to disclose – and this seriously harms shareholders or others, the directly responsible managers and other responsible persons face up to five years’ imprisonment or criminal detention, plus a fine. In especially serious cases the term is five to ten years. Controlling shareholders or actual controllers who organise, direct or conceal the conduct are punished on the same basis.
Two related offences matter when someone tries to cover things up. Article 162-1 makes it a crime to conceal or deliberately destroy accounting vouchers, account books or financial reports where the circumstances are serious – up to five years plus a fine, and the company can also be fined. Article 229 targets accountants, auditors and other intermediaries who deliberately issue false supporting documents such as audit or valuation reports: up to five years, or five to ten years in the aggravating situations listed in the article. Where the false figures are used to raise money from the public through securities, Article 160 (fraudulent issuance of securities) can also apply.
What this means in practice
The dividing line is duty and harm. The risk rises sharply when the company is listed or must report to investors, when records are destroyed to hide the problem, or when a professional certifies figures they know are false. Crucially, the exposure sits on the individuals who signed and directed, not only on the company – directors, finance chiefs and controllers are the ones in the frame.
Scenario (hypothetical): a listed manufacturer inflates its revenue to hit an earnings target, and its finance director deliberately shreds the supporting invoices. The individuals behind the false report can face Article 161; the finance director personally also faces the destruction offence in Article 162-1.
The bottom line: ordinary accounting mistakes are civil or administrative matters, but deliberately deceptive reporting, destruction of records or false audit certifications can be prosecuted as crimes in China.
Wang Guan | Co-founder, Beijing Haolue Law Firm | +86 17813108512