Audit Law of the People’s Republic of China

Audit Law of the People’s Republic of China

(Adopted at the Ninth Meeting of the Standing Committee of
the Eighth National People’s Congress on August 31, 1994,
promulgated by Order No.32 of the President of
the People’s Republic of China on August 31, 1994 and
effective as of January 1, 1995)

Contents

• Chapter I General Provisions
• Chapter II Audit Institutions and Auditors
• Chapter III Functions and Responsibilities of Audit Institutions
• Chapter IV Limits of Authority of Audit Institutions
• Chapter V Audit Procedures
• Chapter VI Legal Liability
• Chapter VII Supplementary Provisions

Chapter I General Provisions

Article 1 This Law is formulated in accordance with the
Constitution, with a view to strengthening the State
supervision through auditing, maintaining the financial and
economic order of the country, promoting the building of a
clean government and ensuring the sound development of the
national economy.

Article 2 The State shall practise a system of supervision
through auditing. The State Council and the local people’s
governments at or above the county level shall establish
audit institutions.

Budgetary revenues and expenditures of various departments
of the State Council, of the local people’s governments at
various levels and their departments, financial revenues and
expenditures of State-owned monetary organizations,
enterprises and institutions, as well as other budgetary
revenues and expenditures and financial revenues and
expenditures subject to auditing according to this Law,
shall be supervised through auditing in accordance with the
provisions of this Law.

Audit institutions shall, according to law, supervise
through auditing the authenticity, legality and beneficial
results of the budgetary revenues and expenditures or
financial revenues and expenditures specified in the
preceding paragraph.

Article 3 Audit institutions shall conduct supervision
through auditing in accordance with the functions and
powers, as well as procedures prescribed by law.

Article 4 The State Council and the local people’s
governments at or above the county level shall annually
present to the standing committees of the people’s
congresses at the corresponding levels the audit reports
prepared by audit institutions on budget implementation and
other budgetary revenues and expenditures.

Article 5 Audit institutions shall independently exercise
their power of supervision through auditing in accordance
with the law, and be free from interference by any
administrative organ, public organization or individual.

Article 6 Audit institutions and auditors shall, in
handling audit matters, be objective and fair, practical and
realistic, clean and honest, and keep Secrets.

Chapter II Audit Institutions and Auditors

Article 7 The State Council shall establish the National
Audit Administration to take charge of the audit work
throughout the country under the leadership of the Premier
of the State Council. The Auditor-General shall be the
administrative leader of the National Audit Administration.

Article 8 Audit institutions of the people’s governments
of provinces, autonomous regions, municipalities directly
under the Central Government, cities divided into districts,
autonomous prefectures, counties, autonomous counties,
cities not divided into districts and municipal districts
shall be in charge of the audit work within their respective
administrative areas under the respective leadership of
governors of provinces, chairmen of autonomous regions,
mayors, prefectural heads, or heads of counties and
districts as well as under the leadership of audit
institutions at the next higher levels.

Article 9 Local audit institutions at various levels shall
be responsible and report on their work to the people’s
governments at the corresponding levels and to the audit
institutions at the next higher levels, and their audit work
shall be directed chiefly by the audit institutions at the
next higher levels.

Article 10 Audit institutions may, as required by work,
appoint resident audit officers within areas under their
jurisdiction.

Resident audit officers shall, according to the
authorization of audit institutions, conduct audit work in
accordance with the law.

Article 11 Funds necessary for audit institutions to
perform their functions shall be included in the budgets of
the governments and guaranteed by the people’s governments
at the corresponding levels.

Article 12 Auditors shall possess the professional
knowledge and ability suitable to the audit work they engage
in.

Article l3 In handling audit matters, if auditors have an
interest in the auditees or the audit items, they shall
withdraw.

Article 14 Auditors shall have the obligation to guard
State secrets and the auditees’ business secrets they have
come to know in performing their functions.

Article 15 Auditors shall be protected by law in performing
their functions in accordance with the law.

No organization or individual may refuse or obstruct
auditors’ performance of their functions in accordance with
the law, or retaliate against auditors.

Persons in charge of audit institutions shall be appointed
or removed in accordance with legal procedures. None of them
may be removed or replaced at random unless they are found
guilty of illegal acts, or negligent of duties or no longer
qualified for the post.

Chapter III Functions and Responsibilities of Audit Institutions

Article 16 Audit institutions shall exercise supervision
through auditing over the budget implementation, final
accounts and management and use of extra-budgetary funds of
departments (including units directly subordinate to them)
at the corresponding levels and of the people’s governments
at lower levels.

Article 17 The National Audit Administration shall, under
the leadership of the Premier of the State Council, exercise
supervision through auditing over the implementation of the
central budget and submit audit reports thereon to the
Premier.

Local audit institutions at various levels shall, under the
respective leadership of the governors of provinces,
chairmen of autonomous regions, mayors, prefectural heads
and heads of counties or districts as well as under the
leadership of audit institutions at the next higher levels,
exercise supervision through auditing over the budget
implementation at the corresponding levels and submit audit
reports to the people’s governments at the corresponding
levels and to the audit institutions at the next higher
levels.

Article 18 The National Audit Administration shall exercise
supervision through auditing over the financial revenues and
expenditures of the Central Bank.

Audit institutions shall exercise supervision through
auditing over the assets, liabilities, profits and losses of
the State-owned monetary organizations.

Article 19 Audit institutions shall exercise supervision
through auditing over the financial revenues and
expenditures of State institutions.

Article 20 Audit institutions shall exercise supervision
through auditing over the assets, liabilities, profits and
losses of the State-owned enterprises.

Article 2l Audit institutions shall conduct audit in a
regular and planned way with regard to the State-owned
enterprises that are vital to the national economy and the
people’s livelihood, or the State-owned enterprises that
heavily depend upon government subsidies, or have large
amounts of losses, and other State-owned enterprises
designated by the State Council or the people’s governments
at the corresponding levels.

Article 22 Supervision through auditing over the
enterprises with State-owned assets controlling their shares
or playing a leading role shall be prescribed by the State
Council.

Article 23 Audit institutions shall exercise supervision
through auditing over the budget implementation and final
accounts of the State’s construction projects.

Article 24 Audit institutions shall exercise supervision
through auditing over the financial revenues and
expenditures of the social security funds, funds from public
donations and other relevant funds and capital managed by
governmental departments or by public organizations
authorized by the governments.

Article 25 Audit institutions shall exercise supervision
through auditing over the financial revenues and
expenditures of projects with aids or loans provided by
international organizations or governments of other
countries.

Article 26 In addition to the audit matters specified in
this Law, audit institutions shall, in accordance with the
provisions of this Law as well as relevant laws, or
administrative rules and regulations, exercise supervision
through auditing over the matters that shall be audited by
audit institutions as stipulated by other laws,
administrative rules and regulations.

Article 27 With regard to particular matters relating to
the State’s budgetary revenues and expenditures, audit
institutions shall have the power to carry out special
investigations through auditing among relevant localities,
departments and units and report the results there of to the
people’s governments at the corresponding levels and to the
audit institutions at the next higher levels.

Article 28 Audit institutions shall determine their audit
jurisdiction on the basis of the auditees’ subordinate
relations in budgetary and financial affairs or the
supervisory and managerial relations with respect to the
State-owned assets of the auditees.

Where a dispute arises on audit jurisdiction between audit
institutions, the matter shall be determined by an audit
institution superior to both disputing parties.

Audit institutions at higher levels may authorize audit
institutions at lower levels to audit the matters which are
within the jurisdiction of the former and specified in
paragraph 2 of Article 18 to Article 25 in this Law. Audit
institutions at higher levels may directly audit the major
matters under the jurisdiction of audit institutions at
lower levels. However, unnecessary repetitive audits shall
be avoided.

Article 29 Departments of the State Council and of the
local people’s governments at various levels, State-owned
monetary organizations, enterprises and institutions shall
establish and improve their internal auditing systems in
accordance with the relevant regulations of the State. Such
internal auditing shall be subject to the professional
guidance and supervision of audit institutions.

Article 30 Public audit firms that independently conduct
public audit according to law shall be guided, supervised
and managed in accordance with relevant laws and regulations
of the State Council.

Chapter IV Limits of Authority of Audit Institutions

Article 31 Audit institutions shall have the power to
require auditees to submit, in accordance with the relevant
regulations, their budgets or plans for financial revenues
and expenditures, statement about budget implementation,
final accounts and financial reports, audit reports produced
by public audit firms and other information relating to
their budgetary revenues and expenditures or financial
revenues and expenditures. Auditees shall not refuse to do
so, or delay the submission or make false reports.

Article 32 Audit institutions shall, in conducting audit,
have the power to examine the accounting documents, account
books, accounting statements and other information and
assets relating to budgetary revenues and expenditures or
financial revenues and expenditures of the auditees, and the
auditees shall not refuse such examination.

Article 33 Audit institutions shall, in conducting audit,
have the power to carry out investigations among units or
individuals concerned of issues relating to audit matters
and obtain relevant testimonial material. The units and
individuals concerned shall support and assist the audit
institutions in their work by providing them with truthful
information and relevant testimonial material.

Article 34 When audit institutions conduct audit, the
auditees shall not transfer, conceal, falsify or destroy
their accounting documents, account books, accounting
statements or other information relating to their budgetary
revenues and expenditures or financial revenues and
expenditures, and shall not transfer or conceal the assets
that are in their possession but obtained in violation of
the regulations of the State.

Audit institutions shall have the power to stop the
auditees’ ongoing acts of budgetary revenues and
expenditures or financial revenues and expenditures
violating the regulations of the State. If they fail in
stopping such acts, they shall, with the approval of the
responsible persons of audit institutions at or above the
county level, notify the financial departments and the
competent authorities to suspend allocation of the funds
directly related to the acts of budgetary revenues and
expenditures or financial revenues and expenditures
violating the regulations of the State or to suspend the use
of the funds already allocated. However, adoption of the
above-mentioned measures shall not hinder the lawful
business activities, production and operation of the
auditees.

Article 35 If audit institutions consider that the
regulations of the competent departments at higher levels on
budgetary revenues and expenditures or financial revenues
and expenditures implemented by the auditees contravene the
law or the administrative rules and regulations, they shall
suggest that the competent departments concerned make
rectifications. If the competent departments concerned do
not make rectifications, the audit institutions shall refer
the matter to the competent organs for disposition according
to law.

Article 36 Audit institutions may issue circulars about
their audit results to the relevant governmental departments
or publish such results to the public.

Audit institutions shall, in circulating or publishing
audit results, keep State secrets and business secrets of
the auditees in accordance with the law and observe the
relevant regulations of the State Council.

Chapter V Audit Procedures

Article 37 Audit institutions shall form audit teams
according to the audit matters specified in the plans of the
audit projects and shall serve advices of audit on the
auditees three days prior to the performance of audit.

The auditees shall cooperate with audit institutions in
their work and provide necessary working conditions.

Article 38 Auditors shall conduct audit and obtain
testimonial material by means of examining accounting
documents, account books, accounting statements, and
documents and data relating to the audit items, checking
cash, negotiable securities and other property, and making
investigations among units and individuals concerned.

Auditors shall, in making investigations among units and
individuals concerned, produce their auditor’s certificates
and copies of advices of audit.

Article 39 Audit teams shall, after the performance of
audit, submit audit reports to the audit institutions.
However, prior to the submission, they shall solicit
opinions of the auditees. The auditees shall, within ten
days from the date of receiving the audit reports, send
their comments in writing to the audit teams or audit
institutions.

Article 40 Audit institutions shall, after examining the
audit reports, give evaluations of the audit matters and
issue auditor’s opinions. They shall, within the sphere of
their statutory functions and powers, make audit decisions
on acts of budgetary revenues and expenditures or financial
revenues and expenditures violating the regulations of the
State that must be dealt with or punished according to law,
or they shall make suggestions concerning disposition or
punishment to the competent authorities.

Audit institutions shall, within 30 days from the date of
receiving the audit reports, serve auditor’s opinions and
audit decisions on the auditees and units concerned.

Audit decisions shall enter into force from the date when
they are duly served.

Chapter VI Legal liability

Article 41 If an auditee, in violation of this Law, refuses
or delays provision of information relating to audit
matters, refuses or hinders examination, the audit
institution concerned shall order a rectification and may
circulate a notice of criticism and issue a warning. Whoever
refuses to make rectification shall be investigated for
responsibility in accordance with the law.

Article 42 When an audit institution discovers that an
auditee, in violation of the provisions of this Law,
transfers, conceals, falsifies or destroys accounting
documents, account books, accounting statements or other
material relating to budgetary revenues and expenditures or
financial revenues and expenditures, the audit institution
shall have the power to stop such acts.

If an auditee commits any of the acts specified in the
preceding paragraph, and if the audit institution considers
that the persons in charge and other persons who are held
directly responsible should be given administrative
sanctions according to law, the audit institution shall put
forward suggestions to this effect. The auditee or its
superior organ or the supervisory organ shall make decisions
without delay in accordance with the law. If the case
constitutes a crime, it shall be investigated for criminal
responsibility by the judicial organ according to law.

Article 43 If an auditee, in violation of this Law,
transfers or conceals assets gained unlawfully, the audit
institution, the people’s government or the competent
authorities shall have the power to stop such acts within
the sphere of its statutory functions and powers or appeal
to the court for adoption of preservative measures.

If an auditee commits any of the acts specified in the
preceding paragraph, and if the audit institution considers
that the persons in charge and other persons who are held
directly responsible should be given administrative
sanctions according to law, the audit institution shall put
forward suggestions to this effect. The auditee or its
superior organ or the supervisory organ shall make a
decision without delay in accordance with the law. If the
case constitutes a crime, it shall be investigated for
criminal responsibility by the judicial organ according to
law.

Article 44 With respect to the acts violating the budgets
or other acts of budgetary revenues and expenditures
violating the regulations of the State committed by
departments (including units directly subordinate to them)
at the corresponding levels or by the governments at lower
levels, audit institutions, the people’s governments or the
competent authorities shall deal with them within the sphere
of their statutory functions and powers and in accordance
with the laws and administrative rules and regulations.

Article 45 With respect to the acts of financial revenues
and expenditures violating the regulations of the State
committed by an auditee, the audit institution, the
people’s government or the competent authorities shall,
within the sphere of its statutory functions and powers and
in accordance with the laws and administrative rules and
regulations, order the auditee to turn over within a time
limit the part of the revenues that should be turned over,
to return within a time limit the income gained unlawfully
or the State-owned assets seized illegally or take other
rectifying measures, and may impose punishment on the
auditee according to law.

Article 46 With respect to the persons in charge and other
persons who are held directly responsible for the acts of
budgetary revenues and expenditures or financial revenues
and expenditures committed by the auditee in violation of
the regulations of the State, if the audit institution
considers that they should be given administrative sanctions
according to law, the audit institution shall put forward
suggestions to this effect. The auditee or its superior
organ or the supervisory organ shall make a decision without
delay in accordance with the law.

Article 47 If an auditee violates the provisions of
relevant laws or administrative rules and regulations
governing budgetary revenues and expenditures or financial
revenues and expenditures and if the case constitutes a
crime, the auditee shall be investigated for criminal
responsibility according to law.

Article 48 Where anyone retaliates or makes a false charge
against an auditor, if the case constitutes a crime, he
shall be investigated for criminal responsibility according
to law; if the case does not constitute a crime, he shall be
given an administrative sanction.

Article 49 Where an auditor abuses his functions and
powers, engages in malpractices for selfish ends, or
neglects his duties, if the case constitutes a crime, he
shall be investigated for criminal responsibility; if the
case does not constitute a crime, he shall be given an
administrative sanction.

Chapter VII Supplementary Provisions

Article 50 Audit regulations for the Chinese People’s
Liberation Army shall be formulated by the Central Military
Commission in accordance with this Law.

Article 51 This Law shall enter into force as of January 1,
1995. The Audit Regulations of the People’s Republic of
China promulgated by the State Council on November 30, 1988
shall be annulled therefrom.