Laws of the Guangdong Province

Regulations of the Shenzhen Special Economic Zone on the Audit of the Economic Responsibilities of the Legal Representatives of State-Owned Enterprises within the Term of Office

(Adopted at the Nineteenth Meeting of the Standing Committee of the Second Shenzhen Municipal People' s Congress on December 17, 1997, revised according to Resolution on the Revising of "Regulations of the Shenzhen Special Economic Zone on the Audit of the Economic Responsibilities of the Legal Representatives of State-Owned Enterprises within the Term of Office" of the Third Meeting of the Standing Committee of the Third Shenzhen Municipal People' s Congress of December 22, 2000.)

Chapter I General Provisions

       Article 1 In order to strengthen the supervision of the economic responsibilities of the legal representatives of state-owned enterprises within the term of office, evaluate their achievements of management objectively, fairly, and guarantee the safety and increase in value of state-owned assets, these regulations are hereby formulated in accordance with the basic principles of the related laws, regulations of the state and in the light of the practical conditions of the Shenzhen Special Economic Zone.

       Article 2 These regulations shall apply to the audit of the economic responsibilities of the legal representatives of the solely state-owned enterprises, state-owned holding enterprises affiliated with the Shenzhen municipal, district people' s governments.

       The economic responsibilities within the term of office referred to in these regulations shall mean the responsibilities which the legal representatives of the solely state-owned enterprises, state-owned holding enterprises (hereinafter referred to as the state-owned enterprises) should have for the authenticity, legality, and efficacy of their enterprises' assets, liabilities, profits and loss, and the related economic activities within their term of office.

       Article 3 If there is one of the following situations, the audit of the responsibilities of the legal representative of a state-owned enterprise shall be conducted:

(1)   the legal representative' s term of office expires;

(2)   the legal representative leaves office because of transfer, dismissal, resignation, retirement within the term of office;

(3)   the assets of the enterprise is reorganized by sale, auction, etc.;

(4)   the enterprise is bankrupted, disbanded.

Without the audit of the economic responsibilities within the term of office, the

legal representative of a state-owned enterprise shall not be relieved from the economic responsibilities within the term of office.

       Article 4 The audit of the economic responsibilities within the term of office shall be done in accordance with the laws, regulations, and rules, and in adherence to the principle of independence, objectivity, and fairness.

       Article 5 The municipal, district agencies of audit (hereinafter referred to as the audit agencies) shall be responsible for the audit of the economic responsibilities of the legal representatives of the state-owned enterprises affiliated with the governments at the same level.

       The management institutions of the state-owned assets of the municipal, district people' s governments and other related departments shall, within the scope of their respective duties, assist the audit agencies in auditing the economic responsibilities of the legal representatives of the state-owned enterprises within the term of office.

       Article 6 An audit agency shall establish and improve an administration system of the audit of the economic responsibilities within the term of office, standardize the auditing action, direct, supervise, and inspect the audit of the economic responsibilities within the term of office done by the internal audit institutions, social audit organizations, and report the audit of the economic responsibilities within the term of office to the people' s government at the same level.

       Article 7 According to the related rules of the state, a joint meeting system shall be put into practice for the audit of the economic responsibilities of the legal representatives of the state-owned enterprises within the term of office in order to report, exchange the state of affairs of the audit of the economic responsibilities within the term of office, study and solve the major issues in the audit of the economic responsibilities within the term of office. The joint meeting shall be composed of the government departments of audit, supervision, finance, personnel, state-owned assets management, etc. and other related departments.

       An office shall be set up under the joint meeting to be responsible for day-to-day work, and the office shall be placed in the audit agency.

       Article 8 The result of the audit of the economic responsibilities of the legal representatives of state-owned enterprises shall be the basis for the management institutions of the state-owned assets, operation institutions of the state-owned assets , proprietary units of the state-owned assets, and other related departments to assess, appoint and remove, reward and punish the legal representatives.

Chapter II Jurisdiction of the Audit and Auditing Organizations

       Article 9 The operation institutions of the state-owned assets affiliated with the municipal, district people' s governments and the state-owned enterprises operated under authorization shall be audited by the audit agencies at the same level.

       As for the audit of the state-owned enterprises under the state-owned enterprises prescribed in the previous section, it shall be decided by the enterprise at a higher level according to the principle of control of an enterprise one level below; if the audit agency believes it is necessary, the audit may be conducted directly by this agency.

       The audit decided by an enterprise shall be done by an internal audit institution of the enterprise or entrusted to a social audit organization.

       Article 10 The audit of the economic responsibilities of the legal representatives within the term of office shall be administered according to plans. The institutions in charge of the administration of the legal representatives of the municipal, district state-owned enterprises shall submit by the end of November of every year a name list of the personnel whose economic responsibilities within the term of office need to be audited in the following year. The audit which will be done directly by the audit agency shall be brought into an audit plan to be organized for implementation; as for the audit decided by an enterprise, the operation institution of the state-owned assets affiliated with the municipal, district people' s governments or the state-owned enterprise operated under authorization shall make an audit plan, report the plan to the audit agency at the same level for record, and organize its implementation.

       If it is necessary to adjust the audit plan for a special reason, the institution in charge of the administration of the legal representatives of the state-owned enterprises shall submit a name list of the personnel for the adjustment to the audit agency at the same level, the audit agency or enterprise shall revise the audit plan according to the audit jurisdiction and organize its implementation.

       Article 11 The institutions conducting the audit of the economic responsibilities within the term of office shall have the following function and power:

(1)   to check the accounting documents, accounting books, accounting statements, of an enterprise under auditing and the other materials related to the economic responsibilities of the legal representative within the term of office;

(2)   to inquire of the related units and individuals, and to obtain evidence materials;

(3)   the other function and power prescribed by laws, regulations.

Article 12 The funds needed for the audit agency to conduct the audit of the

economic responsibilities of the legal representatives within the term of office shall be entered in the fiscal budget of the people' s government at the same level, and used for this special purpose only. If the audit is entrusted to a social audit organization, the expenses shall be born by the entrusting unit.

       Article 13 Auditors shall have the professional knowledge and competence corresponding to the audit of the economic responsibilities within the term of office.

       Auditors shall keep the business secret known from the audit of the economic responsibilities within the term of office.

       Article 14 Auditors who conduct the audit of the economic responsibilities within the term of office according to law shall be under the protection of law. Any organizations, individuals shall not refuse, obstruct and interfere in the auditors' execution of their duties according to law, and shall not retaliate the auditors.

Chapter III Items and Procedures of the Audit

       Article 15 The main items of the audit of the economic responsibilities of the legal representatives of a state-owned enterprise within the term of office shall include:

(1)   the implementation of the laws, regulations, rules, and policies concerning finance and economy;

(2)   the achievements of maintaining value, increasing value of state-owned assets and other operation targets within the term of office;

(3)   the assets, liabilities, profits and loss of the enterprise;

(4)   the major decision-making on production, operation, investment;

(5)   the other items needed to be audited.

In order to find out the related facts in auditing, the institution conducting the

audit of the economic responsibilities within the term of office shall have the power to trace the years before the legal representative' s term of office, but have to draw a clear distinction between stages and between responsible persons.

       Article 16 When the term of office of the legal representative of a state-owned enterprise expires, the audit of the economic responsibilities within the term of office shall be started in 10 days before the date of expiration.

       In case of leaving the office within the term of office because of transfer, dismissal, resignation, retirement, etc., the audit of the economic responsibilities within the term of office shall be started in 10 days from the date of decision or approval.

       When an enterprise engages in asset reorganization by sale, auction or is bankrupted, disbanded, the audit of the economic responsibilities within the term of office shall be started in 30 days from the date of decision or approval.

       The institution conducting the audit shall notify in writing the enterprise and its legal representative under the audit 3 days before the audit begins.

       Article 17 It shall be not allowed to appoint to a new office the legal representative of a state-owned enterprise whose economic responsibilities within the term of office has not been audited.

       Article 18 In order to conduct the audit of the economic responsibilities within the term of office, an audit group shall be set up, provided with the corresponding auditors, and the people who have the professional knowledge related to the audit items may be engaged to participate in the audit according to the needs of this work.

       Article 19 Any auditor who is related to the audited enterprise and its legal representative as an interested party shall voluntarily withdraw.

       If the audited enterprise and its legal representative believe that an auditor is related to them as an interested party so that the fairness of the audit might be affected, they shall have the right to challenge the auditor.

       The institution conducting the audit of the economic responsibilities within the term of office shall decide if an auditor shall withdraw.

       Article 20 During the audit of the economic responsibilities within the term of office, the audited enterprise and the related persons shall provide the following materials:

(1)   the reports or the summaries of the work of the legal representative within the term of office;

(2)   the responsibility pledge of the legal representative within the term of office;

(3)   the related materials such as accounting documents, accounting books, accounting statements, etc.;

(4)   the related materials concerning assets, liabilities, profits and loss, etc.;

(5)   the enterprise constitution, contracts or agreements, production and operation plans, and the materials related to major decisions, etc.,

(6)   the other related materials.

The materials provided by the audited enterprise and the related persons shall be

truthful, intact, and shall not be destroyed, fabricated, removed, hidden.

       Article 21 The institution conducting the audit of the economic responsibilities within the term of office shall complete the audit in 45 days from the date of issuing the audit notice, the audit may be extended after the approval by the unit deciding the audit if there is a special situation.

       Article 22 After auditing, the audit group shall submit an audit report to the institution conducting the audit.

       Before the audit report is submitted to the institution conducting the audit, the opinion of the audited enterprise and its legal representative shall be solicited. The audited enterprise and its legal representative shall give their opinion in writing in 10 days from the date of receiving the audit report; in case of failure to give the opinion in writing, it shall be regarded as no objection.

       Article 23 After examining and approving the audit report, the institution conducting the audit shall put forward an audit result report. If the audit is conducted by the audit agency, the audit agency shall submit the audit result report to the government at the same level, and send copies to the institution in charge of the administration of the legal representatives of the state-owned enterprises and the related departments; if the audit is conducted by the internal audit institution, social audit organization, they shall submit the audit result report to the unit deciding the audit, the unit deciding the audit shall send the copies of the audit result report to the audit agency at the same level and the related departments for record.

Article 24 An audit result report shall include the following items:

(1) the explanation on the scope, focal points of the audit and the related circumstances;

(2) the opinion and basis of the evaluation of the assets, liabilities, profits and loss of the audited enterprise;

(3) the opinion and basis of the evaluation of the economic responsibilities of the legal representative within the term of office;

(4) the opinion on how to determine the nature of the actions of the audited enterprise in financial revenue and expenditure which have violated the state rules, and how to handle, punish these actions.

If the legal representative of an audited enterprise has an objection to the audit result, an appeal may be lodged according to the related rules.

       Article 25 The confirmation of the assets, liabilities, profits and loss of the enterprise, with which the legal representative is affiliated, in the audit result report submitted by the audit agency shall be acknowledged by the related departments and personnel.

       Article 26 In case of no stipulations in these regulations, the procedure of the audit of the economic responsibilities within the term of office shall follow the related laws, regulations, rules.

Chapter IV Audit Management

       Article 27 If the actions of an audited enterprise and the related persons to violate the laws, regulations concerning finance and economy have been found out in the audit of the economic responsibilities within the term of office, the audit agency, the unit deciding the audit, or the institution conducting the audit shall handle it according to the following rules within the scope of their respective statutory duties:

(1)   the decision on ongoing actions to violate the laws, regulations concerning finance and economy shall be made promptly, and these actions shall be stopped;

(2)   if the actions to violate the laws, regulations concerning finance and economy, which are found out in the audit, involve the accounts of the enterprise so that some adjustments have to be made, the audited enterprise shall be instructed to make correction by a deadline or an explanation shall be given in the audit report;

(3)   if a serious loss is found in the enterprise' property, the case shall be promptly removed to the management institution of the state-owned assets, the operation institution of the state-owned assets, or the proprietary unit of the state-owned assets separately according to the relationship of proprietary subordination for investigation and settlement;

(4)   if it is found in the audit that the actions of the audited enterprise, legal representative and the related persons break the criminal law, a report shall be promptly filed to the entrusting unit or the case shall be removed to the judicial office for decision.

Article 28 If it is confirmed by the audit that one of the following situations

applies to a legal representative within the term of office, in addition to bearing the responsibilities prescribed by laws, regulations, this person shall not hold the post of the legal representative of a state-owned enterprise or the proprietary representative of the state-owned assets in 3 years:

(1)   the poor operation and management leads to the serious loss of state-owned assets;

(2)   the illegal undertaking of production and operation infringes upon the interests of the state, society seriously;

(3)   the person should bear the major responsibilities for the failure to achieve the targets of maintaining, increasing the value of state-owned assets, the target of profit growth or the target of loss reduction in two consecutive years;

(4)   the practicing of frauds, falsifying of the statements of assets, liabilities, profits and loss within the term of office infringes upon the interests of the state, society seriously;

(5)   the other situations prescribed by laws, regulations.

Chapter V Legal Liabilities

       Article 29 If a state-owned enterprise, in violation of these regulations, has failed to organize the audit, the audit agency shall circulate a notice of criticism, impose a fine of more than 5,000 but less than 10,000 RMB on its legal representative, impose a fine of more than 2,000 but less than 5,000 RMB on the directly responsible person concerned, and instruct the enterprise to do the audit afterward according to these regulations.

       Article 30 If one of the following acts has been taken in violation of these regulations, the audit agency shall impose a fine of more than 5,000 but less than 10,000 RMB on the related responsible person; if the circumstances are serious, a fine of more than 10,000 but less than 20,000 RMB shall be imposed; if a crime has been constituted, the criminal responsibility shall be ascertained according to law:

(1)   to refuse to provide the data and evidence materials related to the audit items such as accounting documents, accounting books, accounting statements, etc.;

(2)   to provide falsified evidence materials, to cover up the truth;

(3)   to destroy, remove, hide, alter the data related to the audit items;

(4)   to obstruct auditors from executing duties;

(5)   to retaliate and frame auditors, materials-providers, informants, witnesses.

Article 31 If the personnel of the  audit agencies, management institutions of the

state-owned assets, state-owned enterprises, in violation of these regulations, have abused power, practiced favoritism and engaged in irregularities, neglected duties, the supervisory department or the units which they are affiliated with shall impose administrative punishments; if a crime has been constituted, the criminal responsibility shall be ascertained according to law.

       Article 32 If social audit organizations and their practicing personnel, in violation of these regulations, have provided untrue or false audit report, or failed to give an explanation in the audit report about the major problems found in the auditing, the Municipal Association of Certified Public Accountants shall give warnings, and order correction; if the circumstances are serious, the municipal department of finance shall confiscate illegal earnings, impose a fine of one to three times of the illegal earnings, and revoke the certificates for practice.

       Article 33 The auditor who, in violation the second section of Article 13 of these regulations, has leaked the business secret and caused the loss of an enterprise, shall be held for corresponding legal liabilities.

       Article 34 If a party concerned has an objection to the administrative punishment decision made by an administrative organization, an application for review may be filed to the organization one level higher than the organization making the punishment decision within 60 days from the date of receiving the punishment notice; if there is an objection to the review decision, legal action may be taken at the people' s court within 15 days from the date of receiving the review decision. The party concerned may also take legal action directly at the people' s court within 15 days from the date of receiving the punishment notice.

       If the party concerned has neither applied for review, nor taken legal action at the people' s court, nor executed the decision, the administrative organization making the administrative punishment decision may apply to the people' s court for coercive execution.

Chapter VI Supplementary Provisions

       Article 35 The municipal government may formulate the detailed rules for implementation according to these regulations.