Chapter V 

Audit Procedures

Article 42 An audit institution shall form an audit team based on the audit matters as specified in the approved plan of audit assignments, and shall serve the audit notification on the auditee three days prior to initiating the audit; under special circumstances, an audit institution may, upon approval of the leading person of an audit institution of the people's government at or above the county level, directly initiate an audit on the strength of the audit notification.

An auditee shall cooperate with the audit institution in the audit and provide necessary working conditions.

An audit institution shall improve the efficiency of its audit work.

Article 43 An auditor shall conduct an audit and obtain the supporting documents by examining the financial and accounting information, the documents and data related to the audit matters, the cash and physical inventory, the negotiable securities, and the information system, and conducting fact-finding inquiries upon the entities and individuals concerned.

Fact-finding inquiries upon the entities and individuals concerned shall be conducted by no fewer than two auditors, who shall produce their auditors' certificates and a duplicate of the audit notification.

Article 44 After conducting an audit of audit matters, an audit team shall submit an audit report to the audit institution. Prior to such submission, the audit team shall seek comments from the auditee. The auditee shall, within 10 days from the date it receives the audit team’s report, deliver its written comments to the audit team. The audit team shall submit to the audit institution the auditee’s written comments along with its own report.

Article 45 An audit institution shall, in accordance with the procedures specified by the National Audit Office, deliberate on the report submitted by the audit team, and issue an audit report of the audit institution after considering the auditee’s comments. Where there is a violation of the state regulations governing the revenue and expenditure which shall be dealt with or a sanction shall be imposed against according to law, the audit institution shall make an audit decision within the scope of its statutory authority. Where a violation shall be dealt with or a sanction shall be imposed against by a competent organ or entity, the audit institution shall transfer the case to such an organ or entity in accordance with law.

An audit institution shall serve its audit report and audit decision on an auditee and to the competent organ or entity, and submit it to the audit institution at the next level up. An audit decision shall go into effect as of the date of service.

Article 46 Where an audit institution at a higher level considers that an audit decision made by an audit institution at a lower level is in violation of the relevant state regulations, it shall instruct the latter to modify or revoke the audit decision, and, when necessary, may also directly modify or revoke such a decision.

Chapter VI 

Legal Liability

Article 47 Where an auditee, in violation of the provisions of this Law, refuses to provide or delays the provision of the information relating to the audit matters, provides inauthentic or incomplete information, or refuses or hinders the examination, investigation, or verification of the relevant information, the audit institution concerned shall order it to take corrective measures, and may circulate a notice of criticism and give it warnings. The auditee who refuses to take corrective measures shall be held legally liable in accordance with law.

Article 48 Where an auditee, in violation of the provisions of this Law, transfers, conceals, falsifies, or destroys the financial or accounting information, or other business and management documents relating to the revenue and expenditure, or transfers, conceals, or willfully destroys the assets in its possession that are obtained in violation of the state regulations, if the audit institution considers that the person in charge who is directly responsible and other directly responsible persons shall be given sanctions according to law, the audit institution shall make a recommendation to the auditee for further actions, or transfer the case to a supervisory organ or other competent organs and entities. The relevant organs and entities shall inform the audit institution of the results in writing. Where a crime is constituted, criminal liability shall be pursued in accordance with law.

Article 49  Where an act of a department (including an entity directly affiliated thereto) of the government at the same or lower level violates the budget, or otherwise violates the state regulations governing the budgetary revenue and expenditure, an audit institution, the people's government, or a competent organ or entity shall, within the scope of its statutory authority and in accordance with laws and administrative regulations, take the following measures in light of the different circumstances:

(1) ordering that the money subject to return be turned over within a specified time limit;

(2) ordering that the embezzled state-owned assets be returned within a specified time limit;

(3) ordering that the illegal gains be disgorged within a specified time limit;

(4) ordering that the matter concerned be dealt with in accordance with the state regulations governing the unified financial and accounting systems; and

(5) taking other measures.

Article 50 Where an act of an auditee violates the state regulations governing the financial revenue and expenditure, an audit institution, people's government, or competent organ or entity shall, within the scope of its statutory authority and in accordance with laws and administrative regulations, take the measures as specified in the preceding article in light of the different circumstances, and may impose sanctions on the auditee according to law.

Article 51  An auditee shall implement an audit decision made by an audit institution thereon within the scope of its statutory authority.

Where an audit institution orders an auditee to turn over the money subject to return  in accordance with law, but the auditee refuses to follow the order, the audit institution shall notify the competent organ or entity. The said organ or entity shall withhold the money or take other measures in accordance with laws and administrative regulations, and inform the audit institution of the results in writing.

Article 52  An auditee shall make rectifications as regards the problems identified by an audit institution within the specified time limit, report the rectification results to the audit institution, the people's government at the same level, or the competent organ or entity, and make announcements to the public in accordance with regulations.

The people's governments at all levels and the competent organs or entities shall urge the auditee to make rectifications as regards the problems identified by the audit institution. The audit institution shall follow up on the auditee's rectification.

The audit and rectification results shall serve as an important reference for evaluating the performance of, appointing and removing, and giving awards to and imposing punishment on the leading officials, and for making policies and improving  systems. An auditee who refuses to make rectifications as regards the problems or falsifies the information on rectification shall be held legally liable in accordance with law.

Article 53  Where an auditee refuses to accept the audit decision made by an audit institution regarding its financial revenue and expenditure, it may apply for an administrative reconsideration or bring an administrative lawsuit in accordance with law.

Where an auditee refuses to accept the audit decision made by an audit institution regarding its budgetary revenue and expenditure, it may request the people's government at the same level to rule on it, and such a ruling is final.

Article 54  Where an auditee is found to have violated the state regulations governing the revenue and expenditure, if the audit institution considers that the person in charge who is directly responsible and other directly responsible persons shall be sanctioned in accordance with law, the audit institution shall make recommendations for further actions to the auditee, or transfer the case to a supervisory organ and a competent organ or entity. The relevant organ or entity shall inform the audit institution of the result in writing.

Article 55  Where an auditee violates the provisions of the relevant laws or administrative regulations governing the revenue and expenditure, and if a crime is constituted, criminal liability shall be pursued in accordance with law.

Article 56  Where a person retaliates against or frames an auditor, the person shall be sanctioned in accordance with law; if a crime is constituted, the person shall be held criminally liable in accordance with law.

Article 57  Where an auditor abuses the authority, engages in a malpractice for personal gains, neglects duties, or divulges or illegally provides others with the state secrets, work-related secrets, trade secrets, and personal privacy and personal information obtained, the auditor shall be sanctioned in accordance with law; if a crime is constituted, the auditor shall be held criminally liable in accordance with law.

Chapter VII  

Supplementary Provisions

Article 58  Economic accountability audits and tenure-based natural resources and assets accountability audits of leading officials shall be conducted in accordance with this Law and the relevant state regulations.

Article 59  The regulations on the audit work of the Chinese People's Liberation Army and the Chinese Armed Police Force shall be formulated by the Central Military Commission in accordance with this Law.

The audit institutions and military audit organs shall establish and improve a collaboration and cooperation mechanism, and conduct joint audits of the civil-military economic matters in accordance with relevant state regulations.

Article 60  This Law shall go into effect 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 repealed at the same time.