In the past six years since the establishment of Audit Administration of the People's Republic of China (AAPRC) in September 1983, audit institutions and vast numbers of auditors have been faithful to their duties and have taken painstaking efforts in their work, bringing about remarkable achievements, under the leadership of the State Council and people's governments at various levels.
The implementation of the system of auditing supervision is an objective requirement of the development of economy, the deepening of reforms and the establishment of clean governments, in China. This had been possible by planning the ascent carefully by designing the steps of the audit ladder. That development is described in this article.
In recent years, audit institutions have conducted audits of different trades and special funds and gradually introduced the system of regular audit. Audited units increased from over 13,000 in 1984 to 202,000 odd in the first 11 months of 1989, occupying 20% of the total units required to be audited. Towards the end of October 1989, audit institutions at different levels discovered, through auditing, acts which violated the financial laws and regulations, such as holding back or hiding financial income by deliberately expanding production and other costs or diverting special funds to other purposes, involving RMB 65 billion, of which RMB 13 billion should be turned over to the state. Severe penalties have been meted out in major cases and to persons responsible for violation of financial laws and regulations. Problems regarding macroscopic control, discovered in auditing, have been reported to governments concerned, thus accelerating management improvement. Supervision through audit has played a positive role in enforcing financial and economic laws and in increasing income and reducing expenses, ensuring normal economic life and smooth conduct of reforms.
In the past several years, audit institutions at various levels have introduced some systems of auditing supervision suited to China's conditions, through active exploration and continuous summarization of experience, such as systems of regular audit of the financial revenues and expenditures of administrative entities, audit on economic accountability of factory directors upon leaving their posts and regular audit on key units etc. Up to now, regular audit has been conducted on over 70,000 administrative units and undertakings, thus urging them to run their affairs honestly and thriftily. Nationwide Audit on economic accountability of factory directors upon leaving their posts has helped the implementation of the system of directors taking responsibility for their factories, the improvement of management and economic performance. AAPRC has recently decided that regular audit on the financial revenues and expenditures of 442 central administrative units and local finance should be carried out once a year and continued for several years to come. Local audit institutions are also introducing this sytem.
In line with the relevant stipulation of the contstitution concening the principle of auditing supervision, AAPRC drafted "Audit Regulations of the People's Republic of China", which was promulgated and put into effect in November, 1988 after being approved by the State Council. This document has served as a legal basis for audit. AAPRC also drew up "Interim Regulations on Penalties for Violation of Financial Laws and Decrees" which were promulgated by the State Council in 1987. Departments and entities all over the country have been required to implement the regulations by which, cases of violation of financial laws and decrees have been dealt with. Specific and local auditing rules and regulations have also been formulated by AAPRC and local audit institutions.
A preliminary audit system has been formed under the guidance and administration of state audit institutions. Up to September, 1989, internal audit organizations had been set up in'32,000 departments and units in China, with over 73,000 professional internal auditing staff members. To satisfy the needs of the growth of collective and private economic sectors as well as that of various joint economic entities, social audit organizations have been developing rapidly in the past three years. At present, there are over 2,000 audit firms and other social and other social audit organizations with total staff of more than 12,000. They have played an important role in entrusted certfication audit, consultancy service and the setting up of accounts and systems etc.
Audit institutions and Auditing Society of China have actively conducted research and academic activities and have put forward new views, centering around important audit theories regarding the status, role and functions of audit in the national economy and auditing methodolgies etc. Audit institutions at all levels have attached importance to and made efforts for training of audit personnel. So far, more than 20,000 existing audit personnel have undergone training of various forms. As a result, they are better qualified for audit work. For the purpose of training more and better audit staff, Nanjing Audit College was established in September, 1987. Audit speciality has been set up in some Universitites. TV and Corresponce Universities also offer audit classes.
AAPRC is a member of INTO-SAI, ASOSAI and IIA (the Institute of Internal Auditors). It has had friendly contacts and exchanges with audit institutions and organizations of over twenty countries. It has also established relations of cooperation with several countries in such fields as academic exchanges and training of audit personnel etc. and promoted mutual understanding with them.
Achievements in the past six years have proved that a new phase has been opened up for audit and a good basis laid down for its future development in China. The above mentioned facts have enabled us to understand the importance of exercising supervision through audit in Socialist China for the following reasons:
With the deepening of the economic structural reform and development of planned commodity economy, the state needs to strengthen macroscopic regulation and control as well as normal conduct of economic activities.
In the four modernization drive in China, shortage of funds is a long-term and conspicuous problem. Supervision through audit may help government departments, localities enterprises and undertakings to improve their management and performances as well as rational and effective utilization of state funds.
Under conditions of reforms and opening to the outside world and the planned commodity economy, the strengthening of regular auditing supervision on the financial revenues and expenditures of government departments can urge government officials and staff members to strictly follow the state financial system and regulation, remain faithful and hardworking to their duties, prevent or overcome occurrences of extravagance, waste and corruption. To sum up, the implementation of the system of auditing supervision is an objective requirement of the development of economy, the deepening of reforms and the establishment of clean governments. It should be further strengthened. We shall summarize our own experience and learn from good experience and methodologies of other countries with a view to pushing for ward audit work in China.