Audit Law of the People’s Republic of China

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Audit Law of the People’s Republic of China

(Adopted at the 9th Meeting of the Standing Committee of the Eighth National People’s Congress on August 31, 1994; amended for the first time in accordance with the Decision on Amending the Audit Law of the People’s Republic of China adopted at the 20th Meeting of the Standing Committee of the Tenth National People’s Congress on February 28, 2006; and amended for the second time in accordance with the Decision on Amending the Audit Law of the People’s Republic of China adopted at the 31st Meeting of the Standing Committee of the Thirteenth National People’s Congress on October 23, 2021)

Contents

Chapter I General Provisions

Chapter II Audit Institutions and Auditors

Chapter III Duties and Responsibilities of Audit Institutions

Chapter IV Authorities 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 for the purposes of strengthening auditing oversight, maintaining the fiscal and economic order of the state, improving the use efficiency of fiscal funds, promoting the building of a clean government, and ensuring the sound development of the national economy and society.

Article 2 The state implements a system of auditing oversight, and upholds the leadership of the Communist Party of China over audit work to build a centralized, unified, authoritative, and efficient audit system with comprehensive coverage.

The State Council and the local people’s governments at or above the county level each shall establish an audit institution.

The revenue and expenditure of all State Council departments, the local people’s governments at all levels as well as the various departments thereof, the revenue and expenditure of the state-owned financial institutions, enterprises, and other institutions, and other revenue and expenditure which are subject to audit according to this Law, shall be audited in accordance with the provisions of this Law.

An audit institution shall, in accordance with law, exercise auditing oversight over the revenue and expenditure specified in the preceding paragraph to verify its authenticity, lawfulness, and effectiveness.

Article 3 An audit institution shall perform audits within the scope of its authorities and in accordance with the procedures provided by law.

An audit institution shall, in accordance with laws and regulations governing revenue and expenditure, and other relevant state regulations, conduct audit appraisals and make audit decisions within the scope of its statutory authorities.

Article 4 The State Council and the local people’s governments at or above the county level each shall annually present the audit work report to the standing committee of the people’s congress at the same level. The report shall cover the audit results of budget implementation, draft final accounts, and other revenue and expenditure, especially focusing on the audit results of budget implementation and performance. The report shall also cover the audit results of the state-owned resources and assets in accordance with relevant laws and administrative regulations. When necessary, the standing committee of the people’s congress may adopt a resolution on the report.

The State Council and the local people’s governments at or above the county level each shall report to the standing committee of the people’s congress at the same level the rectification results of the issues identified in the report.

Article 5 An audit institution shall independently exercise its authority of auditing oversight in accordance with law, free from interference by any administrative authority, social organization, or individual.

Article 6 In handling audit matters, an audit institution or auditor shall be objective, fair, honest, and shall seek truth from facts and keep secrets.

Chapter II 

Audit Institutions and Auditors

Article 7 The State Council establishes the National Audit Office to take charge of the auditing oversight nationwide under the leadership of the Premier of the State Council. The Auditor General is the administrative head of the National Audit Office.

Article 8 The audit institution of the people’s government of a province, an autonomous region, a municipality directly under the central government, a city divided into districts, an autonomous prefecture, a county, an autonomous county, a city not divided into districts, and a municipal district shall take charge of the auditing oversight within the administrative area it is located in, under the leadership of the governor of the province, the governor of the autonomous region, the mayor, the prefect of the prefecture, the head of the county, the head of the municipal district, as well as under the leadership of the audit institution at the next level up.

Article 9 Local audit institutions at all levels each shall be responsible to and shall report their work to the people’s governments at the same level and to the audit institutions at the next level up, whereas the audit business shall be directed primarily by the audit institutions at higher levels.

Article 10 An audit institution may, on a need basis and upon approval by the people’s government at the same level, establish outposted audit offices in the area under its jurisdiction.

An outposted audit office shall, upon authorization of the audit institution, conduct audits in accordance with law.

Article 11  The funds necessary for an audit institution to perform its duties and responsibilities shall be budgeted and guaranteed.

Article 12  Audit institutions shall see that auditors are competent and professional, firm in ideal and conviction, willing to serve the people, proficient and practical in work, ready to take on responsibilities, and honest and upright.

Audit institutions shall strengthen the supervision over the auditors’ legal compliance and performance of duties and responsibilities, and urge them to act with due diligence in accordance with law.

Audit institutions and auditors are subject to supervision according to law.

Article 13 An auditor shall possess the professional knowledge and ability commensurate with the audit work engaged in.

An audit institution may, on a need basis, hire persons with professional knowledge related to the audit matters to participate in the audit.

Article 14  No audit institution or auditor may engage in any activity that may affect the law-based independent performance of the duties and responsibilities of auditing oversight, or interfere with any normal business operation and management activity of an auditee and the relevant entity thereof.

Article 15 In handling the audit matters, an auditor who has an interest in an auditee or an audit matter shall withdraw from the audit.

Article 16  Audit institutions and auditors shall keep confidential the state secrets, work-related secrets, trade secrets, and personal privacy and personal information which they become aware of in the process of performing their duties, and shall not divulge or illegally provide such information to others.

Article 17 Auditors are protected by law in performing their duties in accordance with law.

No organization or individual shall refuse auditors to perform, or obstruct them from performing their duties in accordance with law, or retaliate against them.

Leading persons of audit institutions shall be appointed or removed in accordance with the statutory procedure. They shall not be removed or replaced unless they violate laws or neglect their duties, or are otherwise disqualified for the post.

Leading persons of local audit institutions at various levels shall be appointed or removed after consultation is made with the audit institution at the next level up.

Chapter III  

Duties and Responsibilities of Audit Institutions

Article 18 An audit institution shall exercise auditing oversight over the budget implementation, the final accounts, and other revenue and expenditure of the departments (including the entities directly affiliated to them) of the people’s government at the same level and of the people’s governments at lower levels.

Article 19 The National Audit Office shall, under the leadership of the Premier of the State Council, exercise auditing oversight over the budget implementation and the draft final accounts, as well as other revenue and expenditure of the Central Government, and submit the audit reports thereon to the Premier.

Local audit institutions at all levels shall, under the respective leadership of the governors of provinces, governors of autonomous regions, mayors, prefects of prefectures, and heads of counties or municipal districts, as well as under the leadership of the audit institutions at the next level up, exercise auditing oversight over the budget implementation, draft final accounts, as well as other revenue and expenditure of the people’s governments at the same level, and submit audit reports thereon to the people’s governments at the same level and to the audit institutions at the next level up.

Article 20  The National Audit Office shall exercise auditing oversight over the revenue and expenditure of the central bank.

Article 21  An audit institution shall exercise auditing oversight over the revenue and expenditure of the state institutions as well as other public institutions that use fiscal funds.

Article 22 An audit institution shall exercise auditing oversight over the assets, liabilities, profits, losses, and other revenue and expenditure of the state-owned enterprises, state-owned financial institutions, and the enterprises or financial institutions controlled or dominated by the state-owned capital.

Under the circumstances that major fiscal or financial interests of the state are involved, the National Audit Office may, for the purpose of safeguarding the national economic security and upon approval by the State Council, conduct special audit investigations or audits of the financial institutions other than those specified in the preceding paragraph.

Article 23 An audit institution shall exercise auditing oversight over the budget implementation and final accounts of the construction projects fully or mainly invested by the government, and the management and use of the funds as well as the construction and operation of other major public works involving national and public interests.

Article 24 An audit institution shall exercise auditing oversight over the state-owned resources and assets.

An audit institution shall exercise auditing oversight over the revenue and expenditure of the social insurance funds, the National Social Security Fund, the public donations, and other public funds which are managed by government departments or by other government-delegated entities.

Article 25 An audit institution shall exercise auditing oversight over the revenue and expenditure of the projects for which aid or loans are provided by international organizations or by the governments of other countries.

Article 26 An audit institution shall exercise auditing oversight over the auditees’ implementation of the major state economic and social policy measures in accordance with the approved plans of audit assignments.

Article 27 In addition to the audit matters as specified in this Law, an audit institution shall, in accordance with the provisions of this Law and other relevant laws and administrative regulations, exercise auditing oversight over the matters that are subject to audit as provided by other laws and administrative regulations.

Article 28 An audit institution may conduct a comprehensive audit of all matters of an auditee that are required to be audited by law, or conduct a special audit of a specific matter thereof.

Article 29 An audit institution shall have the authority to conduct special audit investigations into specific matters relating to the state’s budgetary revenue and expenditure in the relevant local people’s governments, government departments, and other entities, and report the results to the people’s government at the same level and to the audit institution at the next level up.

Article 30 Where risks and potential dangers in economic and social operation are identified by an audit institution in the process of performing its audit duties and responsibilities, it shall, in a timely manner, report them to the people’s government at the same level or notify the competent organ or entity thereof.

Article 31 An audit institution shall determine its audit jurisdiction based on the auditee’s fiscal or financial affiliation, or the supervisory and managerial relationship arising from the state-owned resources and assets.

Where a dispute arises over the audit jurisdiction between or among the audit institutions, it shall be determined by an audit institution superior to the disputing parties.

An audit institution at a higher level may, regarding a matter within its audit jurisdiction, authorize an audit institution at a lower level to audit the matter, except that any matter specified in Article 18 through Article 20 of this Law may not be delegated to an audit institution at a lower level. An audit institution at a higher level may directly audit a major matter falling within the audit jurisdiction of a lower-level audit institution; provided, however, any unnecessary repetitive audit shall be avoided.

Article 32 An auditee shall strengthen its leadership over the internal audit work, and establish and improve its internal audit system in accordance with relevant state regulations.

An audit institution shall provide professional guidance on and supervision over the internal audit work of the auditees.

Article 33 Where an entity required by law to be audited by an audit institution, has been audited by a public accounting firm, the audit institution shall have the authority to verify the audit reports produced by the firm in accordance with the regulations of the State Council.

Chapter IV 

Authorities of Audit Institutions

Article 34 An audit institution shall have the authority to require an auditee to provide the financial and accounting information, and business, management, and other information relating to its revenue and expenditure, including electronic data and the relevant documents, in accordance with the specifications made by the audit institution. The auditee shall not refuse, delay the provision thereof, or make a false report.

The leading person of an auditee shall be responsible for the timeliness, authenticity, and completeness of the information provided by the auditee.

Where an audit institution needs to verify the information with an auditee in the process of conducting comprehensive analyses of the electronic data and other information obtained therefrom, the auditee shall cooperate.

Article 35 The government information systems and data sharing platforms shall be made accessible to audit institutions in accordance with regulations.

Where the electronic data and other information obtained by an audit institution through the government information systems and data sharing platforms suffice to meet the needs, the audit institution shall not require the auditee to duplicate the provision.

Article 36 When conducting an audit, an audit institution shall have the authority to examine an auditee’s financial and accounting information, and the business, management, and other information and assets relating to its revenue and expenditure, and to examine the security, reliability, and economy of the auditee’s information system, and the auditee shall not refuse.

Article 37 When conducting an audit, an audit institution shall have the authority to carry out investigation into the issues relating to the audit matter of the relevant entities or individuals and obtain the supporting documents. The relevant entities and individuals shall cooperate with and assist the audit institution by truthfully providing it with the information and supporting documents.

An audit institution shall, upon approval by the leading person of the audit institution of the local people’s government at or above the county level, have the authority to inquire about an auditee’s account with a financial institution.

Where there is evidence proving that an auditee has, in violation of the state regulations, transferred public funds to an account opened with a financial institution by any other entity or individual, an audit institution shall have the authority to inquire about the deposits of the relevant entity or individual related to the audited matter upon approval of the principal leading person of the audit institution of the local people’s government at or above the county level.

Article 38 When an audit institution is conducting an audit, the auditee shall not transfer, conceal, falsify, or destroy the financial or accounting information, and the business, management, or other information relating to its revenue and expenditure, and  shall not transfer, conceal, or intentionally damage the assets in its possession that are obtained in violation of the state regulations.

An audit institution shall have the authority to stop an ongoing act carried out by an auditee in violation of the provisions in the preceding paragraph; when necessary, upon approval of the leading person of the audit institution of the people’s government at or above the county level, the audit institution has the authority to seal up the relevant documents and the assets obtained in violation of the state regulations. Where it is necessary to freeze the relevant funds deposited into the account of the auditee with a financial institution, the audit institution shall submit such an application to a people’s court.

An audit institution shall have the authority to stop an ongoing act carried out by an auditee in violation of the state regulations governing the revenue and expenditure; if such an effort fails, it shall, upon approval of the leading person of the audit institution of the people’s government at or above the county level, notify the department of finance and the competent organs or entities to suspend allocation of funds directly related to the violation or, if the funds have already been allocated, to suspend the use thereof.

The measures taken by an audit institution as specified in the preceding two paragraphs shall not adversely affect the lawful business, production, or operation activities of the auditee.

Article 39 Where an audit institution considers that the rules made by a competent organ or entity at a higher level governing the relevant revenue and expenditure, which are followed by an auditee, are against the laws or administrative regulations, the audit institution shall recommend the relevant organ or entity to revise such rules. If the said organ or entity fails to do so, the audit institution shall refer the matter to the organ or entity with the authority over such matters to handle it in accordance with law.

Article 40 An audit institution may inform the relevant government departments of audit results or announce them to the public.

When informing the relevant entities of or announcing the audit results, the audit institution shall keep confidential the state secrets, work-related secrets, trade secrets, and  personal privacy and personal information, and observe the laws, administrative regulations, and the relevant regulations of the State Council.

Article 41 When performing its duties and responsibilities of auditing oversight, an audit institution may request competent organs of public security, public finance, natural resources, ecology and environment, customs, taxation, market regulation, etc. for assistance. The relevant organs shall cooperate therewith in accordance with law.

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.

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