Study on the Auditing System of Socialism with Chinese Characteristics

JIAYI LIU, PHD, (Economics), has been Auditor General of China since 2008. From 2011 to 2012, he served as Chairman of the United Nations Board of Auditors. In 2013, he took over as Chairman of the INTOSAI Governing Board, which expires in December 2016. In addition, he won the United Nations Peace Prize in recognition of his auditing work for UN peacekeeping operations (2013). In 2016, he was awarded the Grand Decoration of Honour in Gold with Sash for Services to the Republic of Austria.

• Preface xvIntroduction 11. About the Systems 12. About the Auditing System 33. About the Auditing System of Socialism with Chinese Characteristics 94. About the Significance of Studying the Auditing System of Socialism with Chinese Characteristics 12Chapter 1: The Birth and Development of the Auditing System of Socialism with Chinese Characteristics 151. History of the Chinese Auditing System 15(1) Official Auditing System during the Shang and Zhou Dynasties 16(2) Censorate Auditing System during the Qin and Han Dynasties 19(3) Bibu (Court of Auditors) Auditing System during the Tang and Song Dynasties 21(4) Kedao Audit Supervising System during the Ming and Qing Dynasties 24(5) Auditing System in the Early Days of the Republic of China and Nanjing KMT Government Period 262. Auditing System during the New Democratic Revolution Led by the Communist Party of China 28(1) Auditing Exploration during the Establishment of the Communist Party of China and the Great Revolution Period 28(2) Auditing during the Agrarian Revolutionary War Period 29(3) Auditing during the Period of the National War of Resistance against Japanese Aggression 31(4) Auditing during the Liberation War of China 323. Establishment and Development of the Auditing System of Socialism with Chinese Characteristics 35(1) Establishment of the Auditing System in the Early Days of the Reform and Opening-up Period 361) Government Audit System Established Stipulated by the Constitution 362) Establishment of audit institutions 373) Thereafter, Audit Work Was Positively Explored and Carried Out 384) Standardization of Audit Work 39(2) Auditing System in the Period of Transition from the Planned Economy to Socialist Market Economy 401) Continuous Improvement of the Audit Institution System 412) Establishing Professional Auditing System of Various Industries 423) Promoting Framework Building of Audit Laws and Regulations 45(3) Auditing System at the Establishment of the Socialist Market Economic System 471) Adjusting the Institutional Setting and Reinforcing Audit Independence 482) Preliminary Establishment of the Audit Law System 483) Continuously Enhancing Audit Supervision 51(4) Auditing System during Improvement of the Socialist Market Economic System 531) Defining Guidelines for Audit Work 542) Building the “3 + 1” Audit Pattern 553) Improving Talents Capacity, Legal Framework, and Technologies 574) Building the System of Announcement of Audit Findings 59(5) Auditing System during the Overall Building of a Well-Off Society in the New Period 601) Improving the Government Audit Pattern 622) Exploring and Innovating the Audit Methods and Ways 633) Improving the Audit Law System 664. Conclusion and Enlightenment 67Chapter 2: Foundation of the Auditing System of Socialism with Chinese Characteristics 731. Theoretical Foundation of the Auditing System of Socialism with Chinese Characteristics 73(1) The Theoretical System of Socialism with Chinese Characteristics Provides the Ideological Foundation for the Establishment and Development of the Auditing System of Socialism with Chinese Characteristics 78(2) The Theoretical System of Socialism with Chinese Characteristics Guides the Establishment and Development of the Auditing System of Socialism with Chinese Characteristics 79(3) The Theoretical System of Socialism with Chinese Characteristics Provides the Practical and Theoretical Foundation for the Contents and Arrangements of the Auditing System of Socialism with Chinese Characteristics 80(4) The Theoretical System of Socialism with Chinese Characteristics Leads the Continuous Exploration and Innovation of the Auditing System of Socialism with Chinese Characteristics, and Guides and Promotes the Development and Improvement of the Auditing System 802. Institutional Foundation of the Auditing System of Socialism with Chinese Characteristics 84(1) State Political System Determines the Political Nature of the Auditing System 861) CPC Leadership is the Primary Political Precondition for the Establishment and Improvement of the Audit System of Socialism with Chinese Characteristics 862) The System of People’s Congresses is an Institutional Guarantee of the Establishment and Improvement of the Auditing System of Socialism with Chinese Characteristics 923) The Unitary State Structure is the Organizational Foundation of the Establishment and Improvement of Auditing System of Socialism with Chinese Characteristics 93(2) State Economic System Determines the Duties and Responsibilities of the Auditing System 941) The Basic Economic System with Public Ownership as the Mainstay Determines the Audit Scope and Audited Entities 952) Government Functions under the Socialist Market Economy System Determine Audit Functions 963. Cultural Foundation of the Auditing System of Socialism with Chinese Characteristics 100(1) Excellent Chinese Traditional Culture Constitutes the Cultural Source of the Auditing System of Socialism with Chinese Characteristics 100(2) Socialist Core Value System Determines the Value Orientation of the Auditing System of Socialism with Chinese Characteristics 104(3) The Socialist Core Value is the Ideological Force Propelling the Development of the Auditing of Socialism with Chinese Characteristics 106(4) Core Values of Auditors Are the Dynamic Force for the Improvement of the Auditing System of Socialism with Chinese Characteristics 110Chapter 3: Basic Framework of the Auditing System of Socialism with Chinese Characteristics 1131. Audit Law and Regulations 113(1) The Constitution of the People’s Republic of China 114(2) The Audit Law and Other Relevant Laws 116(3) Regulations for the Implementation of the Audit Law and Other Relevant Administrative Regulations 118(4) Local Audit Regulations 119(5) Audit Rules 1202. Audit Organization System 123(1) Establishment of Audit Institutions 124(2) Relationship between Upper- and Lower-Level Audit institutions 125(3) Audit Institutionalization Framework 1263. Duties and Powers of Audit Institutions 128(1) Duties of Audit Institutions 1311) Supervision through Auditing Over the Statutory Subject Matters 1312) Special Audit Investigation in Terms of Specific Matters Relating to State Financial Revenues and Expenditures 1383) Guidance and Supervision Over the Internal Audit Work of Units that are Subject to Supervision through Auditing by Audit Institutions in Accordance with Law 1384) Verifying the Audit Reports Issued by Public Audit Institutions for Units that are Subject to Supervision through Auditing by Audit Institutions in Accordance with Law 139(2) Audit Jurisdiction System 1391) General Principles of Audit Jurisdiction 1402) Accountability Audit Jurisdiction System 1403) Authorized Audit, Direct Auditing System, and Settlement Mechanism of Disputes Over Audit Jurisdiction 141(3) Powers of Audit Institutions 1411) Right to Request the Submission of Materials 1422) Right to Examine 1423) Right to Investigate and Obtain Evidence 1434) Right to Adopt Administrative Compulsory Measures 1435) Right to Seek Assistance 1436) Right to Transfer and Recommend 1447) Right to Dispose and Punish 1448) Right to Notify or Publish Auditing Results 1444. Auditor Management System 145(1) Professional Requirements for Auditors 146(2) System for Employment, Appointment, and Dismissal of Auditors 148(3) Professional Qualification System of Auditors 149(4) Professional Education System for Auditors 149(5) Performance Evaluation System for Auditors 1505. Audit Operation Mechanism 151(1) Audit Work Plan 1511) System of Strategic Plan on Audit Work 151(2) Execution of Audit Assignments 1521) System of Audit Notification 1522) System of Audit Program 1533) System of Audit Evidence 1544) System of Audit Documentation 1545) System of Audit Field Management 154(3) Audit Results Reporting and Publication 1551) System of Audit Report 1552) System of Audit Disposal and Punishment and Audit Transfer 1563) System of Audit Newsletter, Specific Report, and Comprehensive Report 1574) System of “Two Reports” 1585) System of Announcement of Audit Results 1596) System of Disclosure of Government Information 159(4) Audit Quality Control 1601) Hierarchical Audit Quality Control 1612) Mechanism of “Control Review-Assurance Review-Approval” for Audit Report 1613) System of Registration and Reporting of Intervention in Audit Work 1624) System of audit Quality Check 1625) System of Excellent Audit Project Selection 163(5) Rectification of Problems Disclosed by the Audit 1641) System of Rectification by Auditees 1642) System of Government Supervision Over Rectification 1643) System of Supervising and Assisting Rectification by Relevant Authorities 1654) System of Follow-up of Rectification by Audit Institutions 165(6) Settlement of Audit Disputes 1661) System of Applying for Government Ruling 1672) System of Applying for Administrative Reconsideration or Instituting Any Administrative Litigation 1673) System of Complaint, Review, and Reexamination 167(7) Coordination and Cooperation with Parties Concerned 1681) Coordination and Cooperation at the Stage of Audit Planning, Implementation, and Utilization of Audit Results 1682) Coordination and Cooperation in the Accountability Audit 1683) Coordination and Cooperation in Investigating the Major Irregularities 169Chapter 4: Features, Effects, and Experience of the Auditing System of Socialism with Chinese Characteristics 1711. Features of the Auditing System of Socialism with Chinese Characteristics 172(1) Features of the Auditing System 1721) Audit Institutions Belong to Administrative Institutions 1722) Local Audit Institutions Are Responsible to the Governments at Corresponding Levels and Audit Institutions at the Next Higher Level 1733) Reporting to the Standing Committee of the National People’s Congress upon Entrustment by the Government 176(2) Features of Auditing Duties and Authorities 1791) Supervision Scope of Government Auditing Reflects Chinese Characteristics 1792) Economic Accountability Audit of Leading Officials 1813) Follow-up Audit of Implementation of Policies and Measures 1854) Authority in Regard to Audit Disposal and Punishment and Taking Coercive Measures 188(3) Features of the Auditor Management System 1891) High Professional Requirements 1892) Strict Disciplinary Requirements 1903) Comprehensive Examination and Evaluation 191(4) Features of the Audit Operating Mechanism 1921) Integrating Audit Resources to Realize Interaction between Higher and Lower Levels 1922) Follow-up Audit on Major Matters 1943) Stress on Revealing and Investigating Major Violations of Laws and Rules 1974) Focus on the Role of Trial Mechanism in the Audit Quality Control 2005) Publish the Auditing Findings to the Public 2012. Practical Effects of Auditing System of Socialism with Chinese Characteristics 205(1) Improve Economic Benefits 205(2) Ensure Smooth Policy Implementation 210(3) Safeguard National Security 216(4) Promote Administration According to Law 218(5) Promote Anti-corruption 219(6) Safeguard the Interests of the People 223(7) Promote the Deepening of Reform 228(8) Promote Openness and Transparency 2323. Experience of Building the Socialist System with Chinese Characteristics 233Chapter 5: Future Development of the Auditing System of Socialism with Chinese Characteristics 2471. General Goal and Requirement for Further Improvement of the Auditing System of Socialism with Chinese Characteristics 247(1) General Goal 247(2) General Requirement 2482. Principles Indispensable for Development and Further Improvement of the Auditing System of Socialism with Chinese Characteristics 2553. Key to Development and Further Improvement of the Auditing System of Socialism with Chinese Characteristics 257(1) About the Auditing Arrangement 258(2) About the Scope of Audit Duty and Authority 2631) Improving the Working Mechanism Commensurate with Full Coverage of Auditing 2632) Establishing and Improving the Real-Time Auditing System on the Implementation of National Major Policies and Measures and Macro-control Deployments 2683) Improving the Auditing System of Budget Implementation and Final Accounts Drafting 2714) Establishing and Improving the Auditing System of State Capitals of State-Owned Enterprises 2735) Establishing the Auditing System of Off-Term Officials regarding Natural Resources and Assets 275(3) About the Audit Operation Mechanism 2761) Improving the Audit Plan and Program Systems 2762) Improving the Organizational Way of Joint Auditing from Multidimensional and Multiple Angles 2773) Creating an Audit Work Pattern of Big Data 2774) Improving the Audit Reporting System, the System of Government Information Disclosure, and the Rectification and Examination Mechanism 2785) Improving the Performance Report System of Audit institutions 2786) Improving the System of Purchasing Social Audit Services 279(4) About the Audit Professionalization 2791) Establishing a Classified Management System for Auditors 2802) Establishing a Post Order of Professional and Technical Civil Servants of Auditing 2803) Improving the Selection and Appointment Mechanism for Auditors 2804) Improving the Responsibility Investigation Mechanism for Auditing Posts 2815) Improving the Occupational Guarantee Mechanism of Auditing 281(5) About Supervision of Audit institutions 2811) Strengthening the Supervision of Higher-Level Audit institutions Over Lower-Level Audit institutions 2822) Improving the Accountability Audit System for Main Leading Officials of Local Audit institutions 2823) Creating a List of Powers and Responsibilities of Audit institutions 2824) Improving the System of Special Auditors 2835) Exploring and Establishing an External Auditing System for Audit institutions 2836) Strengthening the Supervision of Society and Public Opinion 283(6) About the Audit Law System 283Appendix A: Information on Development of China’s Auditing System 285Appendix B: Brief Introduction to the Auditing Systems of 12 Major Countries 297Major References 313Postscript 319Index 321