Laws of the People's Republic of China

CONTENTS

CHAPTER I GENERAL PRINCIPLES

CHAPTER II AUDIT OFFICES AND AUDITORS

CHAPTER III PRINCIPAL TASKS OF AN AUDIT OFFICE

CHAPTER IV PRINCIPAL POWERS AND FUNCTIONS OF AN AUDIT OFFICE

CHAPTER V AUDIT WORK PROCEDURE

CHAPTER VI INTERNAL AUDITING

CHAPTER VII SOCIAL AUDITING

CHAPTER VIII LEGAL LIABILITY

CHAPTER IX SUPPLEMENTARY PRINCIPLES

CHAPTER I GENERAL PRINCIPLES

   Article 1. These Regulations are formulated to improve the audit supervision of financial income and expenditure and related economic activities, to enforce financial and economic law and discipline, to increase economic performance, to strengthen overall control and administration and to ensure the smooth implementation of the socialist modernisation programme.

   Article 2. The State shall establish audit offices to implement an audit supervisory system.

An audit office shall undertake audit supervision of the various people's government departments at an equivalent level to itself, lower level people's government authorities, State finance organs, State-owned enterprises and institutional units and other State-funded units to ascertain the authenticity, legality and performance of their financial income and expenditure.

   Article 3. An audit office shall undertake audit supervision in accordance with the provisions of State laws, statutory regulations and policies.

An audit office shall exercise independent supervisory rights in accordance with the law and no other administrative organ, social group or individual shall be permitted to interfere.

The audit conclusions and decisions of an audit office must be implemented by the units under audit and the relevant personnel. If an audit conclusion or decision involves another related unit, this unit shall assist in the implementation process.

   Article 4. An audit office shall operate under a dual leadership system. It shall be responsible to and shall submit work reports to its equivalent level people's government authority and superior level audit office. Priority shall be given to audit work assigned by the leaders of its superior level audit office.

   Article 5. An area under State audit jurisdiction where an audit office has yet to establish an agency may, in accordance with requirements, establish an internal audit body or provide auditors to implement an internal audit system.

   Article 6. Social audit organisations established in accordance with the law may accept commissions to develop account auditing and to provide consultancy services.

CHAPTER II AUDIT OFFICES AND AUDITORS

   Article 7. The State Council shall establish an Audit Administration. The Audit Administration shall be the State's supreme audit office and, under the leadership of the Premier of the State Council, shall organise the leadership of the entire State's audit work and shall be responsible for audit mattes which come within its audit scope.

   Article 8. The various levels of people's governments at county level and above shall establish audit offices. Under the leadership of the provincial head, autonomous region chairman, mayor, prefecture head, county head or district head respectively, and its superior level audit office, a local audit office at any of the various levels shall organise the leadership of its own administrative district's audit work and shall be responsible for all audit matters which come within the audit scope of its own audit office level.

   Article 9. An audit office may, in line with work requirements, establish an agency in a key district or department to undertake audit supervision.

   Article 10. The leaders of audit offices at the various levels shall be appointed or dismissed in accordance with the provisions governing cadre administrative jurisdiction. The appointment or dismissal of persons in charge of local audit offices at the various levels (including the leader and deputy leader) shall be subject to prior approval by their superior level audit office.

   Article 11. Auditors shall conduct their auditing work in accordance with the law and shall be dedicated to their work, adhere to principles, be objective and impartial, honest when performing their official duty and maintain confidentiality.

Auditors shall exercise their functions and powers in accordance with the law and shall receive the protection of the law. Retaliation by any person is not allowed.

CHAPTER III PRINCIPAL TASKS OF AN AUDIT OFFICE

   Article 12. An audit office shall conduct audit supervision of the financial income and expenditure of the following units:

(1) the various people's government departments at its equivalent level and lower level people's government authorities;

(2) State financial institutions;

(3) State-owned enterprises, institutional units and capital construction units;

(4) other units which receive State fund allocations or allowances;

(5) Sino-foreign joint equity enterprises, Sino-foreign cooperative enterprises, domestic affiliated enterprises and other enterprises with State assets;

(6) other units which the provisions of State laws and statutory regulations stipulate as requiring audit supervision.

   Article 13. An audit office shall conduct audit supervision of the aforesaid units in the following areas:

(1) financial budget implementation and final financial accounts;

(2) credit plan implementation and the results;

(3) financial plan implementation and final accounts;

(4) financial income and expenditure relating to capital construction and transformation projects;

(5) administration of State assets;

(6) non-budgetary fund income and expenditure;

(7) financial income and expenditure relating to projects which are funded through foreign capital loans or which are the recipients of international assistance;

(8) various economic activities and other areas of economic performance which are income and expenditure related;

(9) acts which seriously infringe upon State assets or which, through serious damage, waste, etc., adversely harm the economic interests of the State;

(10) auditing matters relating to the contract liabilities of State-owned enterprises;

(11) other matters which require auditing in accordance with the provisions of State laws and statutory regulations.

   Article 14. Audit scope shall be determined by audit offices at the various levels in accordance with the State's financial system and the jurisdictional framework pertaining to the financial affairs of the units under audit.

A superior level audit office may empower a matter which comes within its audit scope to a lower level audit office and may directly undertake the auditing of a matter of major importance which comes within the audit scope of a lower level audit office.

An audit office may commission an internal audit body or social audit organisation to audit matters which come within the audit scope of the office.

CHAPTER IV PRINCIPAL POWERS AND FUNCTIONS OF AN AUDIT OFFICE

   Article 15. During the audit process an audit office shall have the following supervisory and investigative powers:

(1) power to request a unit under audit to submit its financial budget, finance plans, final accounts, accounting statements and other relevant information;

(2) power to inspect the relevant accounts and assets of a unit under audit, to consult relevant documents and information and to attend any relevant meeting held by the unit under audit;

(3) power to investigate the relevant organs, groups, enterprises, institutional units or personnel involved with matters relating to an audit, with the aforesaid units or personnel being required to provide the audit office with all relevant information and testimonial material;

(4) power to request the relevant department in charge to enact an interim stay ruling in a case where an act that is seriously damaging State interests or violating financial or economic legislation is currently occurring and, if the stay proves ineffectual, power to notify the relevant financial department or bank to temporarily suspend access to the relevant funds.

(5) power to adopt interim measures, such as sealing up or confiscation accounts, assets, etc., should the unit under audit obstruct or disrupt auditing work.

   Article 16. An audit office may handle a violation of financial or economic legislation by a unit under audit in accordance with the following provisions:

(1) issue a warning or circulate a notice of criticism;

(2) order any income or expenditure related matters involved with a violation of State regulations to be rectified;

(3) order the return or confiscation of any illegal earnings;

(4) recover misappropriated State assets;

(5) issue a direction to temporarily suspend access to funds or suspend bank loans in a case where the unit under audit violates regulations through the use of funds or a bank loan, resulting in serious damage to State interests;

(6) issue a fine in accordance with the provisions of the relevant statutory regulations.

If a unit under audit refuses to return illegal funds or to pay fines, etc., the audit office may notify the bank to withhold the relevant amount of money.

   Article 17. If, in the case of a unit under audit which has violated the law as described in the previous Article, the audit office thinks that the persons directly responsible or the persons in charge of the unit should be issued with an administrative penalty, it may hand over the matter for investigation or to the relevant departments for handling. If the circumstances are serious enough to constitute a crime, a judicial organ may be requested to pursue criminal liability in accordance with the law.

CHAPTER V AUDIT WORK PROCEDURE

   Article 18. Audit offices at the various levels shall determine the focal point of their audit work and shall formulate audit project plans, in accordance with State policies and the requirements of their superior level audit offices and equivalent level government authorities.

   Article 19. After an audit office has clarified an audit matter, it shall notify the unit under audit.

A unit under audit shall co-operate with the work of the audit office and shall provide the necessary conveniences to facilitate the work of the audit office.

   Article 20. An auditor shall conduct an audit based on such means as inspection of credentials and accounts, consultation of documents and information, examination of cash and material goods and investigation of the relevant units and personnel and shall acquire testimonial material.

Testimonial material shall bear the signature or seal of the person providing it.

   Article 21. After an auditor has conducted an audit, an auditor's report shall be presented to affiliated audit offices.

The opinion of the unit under audit shall be sought regarding an auditor's report. The unit under audit shall submit a written response within 10 days of receipt of the report.

   Article 22. After an audit office has examined and approved an auditor's report and made audit conclusions and decisions, it shall notify the unit under audit and any other relevant units to implement its rulings.

An audit office shall seek the opinion of the relevant departments when making audit conclusions and decisions on an important matter.

The finance department or another relevant competent department shall ratify final accounts or handle them in the following year, based on the audit conclusions and decisions given on these final accounts.

   Article 23. If a audit under audit disagrees with the audit office's audit conclusions or decisions, it may, within 15 days of receipt of notice of the said conclusions and decisions, apply to the superior level audit office for a review of the case. The superior level audit office shall issue a reassessed audit conclusion and decision within 30 days of receipt of the review application. In special circumstances the time limit for reviewing audit conclusions and decisions may be extended appropriately.

The original audit conclusions and decisions shall be implemented as usual during an audit review.

   Article 24. The reassessed audit conclusions and decisions of a superior level audit office or the audit conclusions and decisions of the Arbitration Administration shall be regarded as final judgements.

If an audited unit disagrees with a final audit conclusion or decision, it may submit a complaint to the audit office which made the final judgement or to its superior level audit office.

   Article 25. Audit offices shall investigate the implementation of audit conclusions and decisions.

   Article 26. Audit offices at the various levels shall establish audit records of all audit items they handle and shall carry out administration in accordance with regulations.

CHAPTER VI INTERNAL AUDITING

   Article 27. State financial institutions, large and medium scale State-owned enterprises, construction units which undertake large scale capital construction projects and State institutional units which handle relatively large amounts of income and expenditure, as well as government departments, etc., within which audit offices have yet to establish agencies, may establish internal audit bodies or provide auditors.

   Article 28. Internal audit bodies and auditors shall, under the leadership of their own unit leaders, conduct internal audit supervision of the financial income and expenditure and economic performance of their own unit and subordinate units, in accordance with the provisions of State laws, statutory regulations and policies.

Internal audit bodies and auditors shall accept professional guidance from audit offices.

   Article 29. An internal audit body or auditor shall carry out internal audit supervision within its own unit and subordinate units on the following matters:

(1) implementation of and final accounts relating to financial plans or a unit's budget;

(2) economic activities relating to financial income and expenditure and related economic performance;

(3) administration of the assets of the State and units;

(4) acts in violation of State financial and economic legislation.

(5) other audit matters which its unit leader has assigned for handling.

Internal audit bodies and auditors shall be responsible for directing the internal audit work of subordinate units.

CHAPTER VII SOCIAL AUDITING

   Article 30. Social audit organisations shall be institutional units which independently undertake audit investigations and consultancy pursuant to the law, receive payment for their services, are themselves responsible for their own income and expenditure, conduct independent accounting and pay tax in accordance with the law.

   Article 31. The establishment of a social audit organisation shall be subject to approval by the Audit Administration or an audit office at provincial, autonomous region or directly administered municipality level.

A social audit organisation which has had its establishment approved shall begin operation only after registering with the local administration for industry and commerce and obtaining a business licence.

   Article 32. A social audit organisation may accept commissions from State organs, enterprises, institutional units or individuals to undertake the following types of work:

(1) financial income and expenditure related audit investigations;

(2) authentication of economic cases;

(3) verification and annual examinations of registered funds;

(4) establishment of accounts and financial accounting system and providing consultancy in such areas as finance, accounting, tax and economic management;

(5) training of audit, finance and accounting personnel.

If a social audit organisation accepts a commission from a foreign investment enterprise to undertake investigative services, the matter shall be handled in accordance with the provisions of the Regulations of the People's Republic of China on Certified Public Accountants.

A social audit organisation shall maintain strict confidentiality in respect of information and knowledge acquired in the process of its professional work.

   Article 33. A social audit organisation shall accept administrative and professional guidance form audit office.

An audit report produced by a social audit organisation as the result of audit work commissioned by an audit office shall be submitted to the audit office for examination and approval.

CHAPTER VIII LEGAL LIABILITY

   Article 34. An audit office may issue a warning, circulate a notice of criticism and, depending on the circumstances, may also impose a fine on a unit or persons directly responsible, the persons in charge of a unit or other related persons if these Regulations are violated in any of the following ways:

(1) refusing to provide the relevant documents, books of account, certificates, accounting statements, information or testimonial material;

(2) obstructing an auditor from performing his duty or resisting or disrupting supervisory or investigative work;

(3) practising fraud or concealing the truth;

(4) refusing to implement audit conclusions or decisions;

(5) retaliating against audit or inspection personnel.

   Article 35. An audit office may impose fines at its discretion and, in accordance with provisions on cadre administrative jurisdiction, may also issue an administrative penalty or recommend that an administrative penalty be imposed, if an auditor violates these Regulations in any of the following ways:

(1) using his powers of office to seek personal gain;

(2) practising fraud, favouritism or other irregularities;

(3) neglecting his duties, thereby causing the State or the unit under audit to incur significant losses;

(4) revealing State secrets;

   Article 36. If a unit or individual who has been penalised under the provisions of Article 34 or 35 disagrees with the penalty decision, it may appeal to the body above the decision issuing organ.

   Article 37. If any act as outlined in Article 34 or 35 is serious enough to constitute a crime, the audit office shall request that the judicial organ pursue the criminal liability of the persons directly responsible, the people in charge of the unit, the auditor or other related people in accordance with the law.

CHAPTER IX SUPPLEMENTARY PRINCIPLES

   Article 38. Detailed provisions for audit work relating to the Chinese People's Liberation Army shall be formulated elsewhere by the Military Commission of the Central Committee of the Communist Party of China.

   Article 39. The Audit Administration shall be responsible for interpreting these Regulations and shall formulate detailed implementing rules.

   Article 40. These Regulations shall take effect from 1 January 1989. The Provisional Regulations of the State Council on Auditing, promulgated 29 August 1985, shall be annulled simultaneously.