With a view to consolidating government auditors with the enforcement of strict discipline and keeping audit institutions independent of auditees financially, in early 2000, the National Audit Office of China (hereinafter as CNAO) formulated Rule Governing the Intensification of Efforts to Implement Audit Disciplines (to be abbreviated as Eight Forbidden Acts) which goes into effect as of March 1, 2000 within CNAO s headquarter, resident offices and dispatched audit offices. Ever since its enforcement eight years ago, this Rule has been proven to be very effective. Especially it closed the door of audit institutions on all economic and benefit terms from auditees and all audit activities were carried out on a strict self-financing basis. Consequently the independence of auditing work, objectiveness and fairness of audit findings has been guaranteed and the benign image of clean audit institutions in conducting auditing has been known by the people.
But after years execution, this Rule also represented itself in a way that some of the contents were not catering to the actual conditions and yet to be improved. So from March 2008, CNAO started its consideration upon the revision of this well-known Eight Forbidden Acts. Based on the research results and opinions in all respects, CNAO s Eight Rules Governing the Intensification of Efforts to Implement Audit Disciplines was promulgated. This new audit discipline concerning Eight Forbidden Acts has been approved at Top Management meeting within CNAO and endorsed by leaders of State Council of China. On December 5 2008, CNAO issued a notice, stating that CNAO s headquarter, resident offices and dispatched audit offices shall implement the new audit discipline concerning Eight Forbidden Acts as of January 1 2009.
Three important revisions made so far could be seen through the comparison between the original and new Eight Forbidden Acts:
l In the original rule, there are two articles concerning lodging and boarding, which are to read, It is forbidden for auditors to receive lodging arranged by auditees. and It is forbidden for auditors to receive boarding and banquet arranged by auditees. In the new rule, these two articles are incorporated into one, which is to read, It is forbidden for auditors to receive lodging and boarding paid or subsidized by auditees.
The new rule is rich in content and succinct in style. Moreover it has clearly pointed out that it is forbidden for auditors to receive subsidies about lodging and boarding from auditees, making it complete with regard to the self-financing requirement for field audits.
l In the original rule, there are several articles regulating the forbidden acts in the use of working conditions provided by auditees without compensation, which are to read, It is forbidden for auditors to use transportation vehicles provided by auditees without compensation. and It is forbidden for auditors to use communication tools and office stationary provided by auditees on a free basis. In the new rule, these articles are incorporated into one, which is to read, It is forbidden for auditors to use transportation vehicles, communication tools and other working conditions provided by auditees for issues other than auditing work. The revised article has stated a condition for the rational use of working conditions provided by auditees, separating the act on duty and the personal use. The new stipulation is not only in line with Article 38 of Audit Law of the People s Republic of China, which is to read, The auditee shall cooperate with the audit institution in its work and provide necessary working conditions. but also strictly defines the forbidden act of using working conditions provided by auditees for auditors personal use.
l Article governing the forbidden acts of abusing his audit powers and divulging business secrets and interior information for personal gains are added to the new rule. In order to ensure the independence of auditing work, objectiveness and fairness of audit findings as well as the probity of auditors in conducting auditing work, the new rule concerning Eight Forbidden Acts adds two more articles for upholding integrity, which are to read, It is forbidden for auditors to abuse audit powers and divulge business secrets and interior information of auditees for personal gains of auditors or other parties. And It is forbidden for auditors to market goods or introduce business to auditees. These stipulations are promulgated with a view to catering to the needs of upgrading probity and self-discipline of auditors under the socialist marketing economy. They are calling for higher standards of auditors and shall be conducive to the better regulation and supervision upon the use of audit powers as well as the strengthening of building clean audit institutions.
The new audit discipline concerning Eight Forbidden Acts is as follows:
CNAO s Eight Rules Governing the Intensification of Efforts to Implement Audit Disciplines
With a view to consolidating government auditors with the enforcement of strict discipline, maintaining the independence of auditing work and ensuring the probity of auditors in conducting auditing work, CNAO s headquarter, resident offices and dispatched audit offices shall continue to execute self-financing policy for field audits. Audit teams and auditors shall strictly follow the following eight audit disciplines:
Article 1 It is forbidden for auditors to receive lodging and boarding paid or subsidized by auditees.
Article 2 It is forbidden for auditors to use transportation vehicles, communication tools and other working conditions provided by auditees for issues other than auditing work.
Article 3 It is forbidden for auditors to participate in the banquet, trip, entertainment and parties arranged by auditees.
Article 4 It is forbidden for auditors to receive any souvenirs, gifts, grants, consumption cards with pre-deposits and securities.
Article 5 It is forbidden for auditors to ask auditees to reimburse auditors for public and personal expenses.
Article 6 It is forbidden for auditors to market goods or introduce business to auditees.
Article 7 It is forbidden for auditors to abuse audit powers and divulge business secrets and interior information of auditees for personal gains of auditors or other parties.
Article 8 It is forbidden for auditors to propose any requirements to auditees concerning issues other than auditing work.
The above stipulations shall, along with audit notification (or investigation notification), be served on the auditee. The implementation of the audit disciplines by audit teams and auditors shall be supervised by auditees.
The above stipulations, as well as telephones for dealing with violation complaints shall be made public, giving rise to the supervision by the society.
The following measures shall be adopted in dealing with the acts committed in violation of the provisions in the preceding paragraphs: the persons responsible should be given such sanctions as criticism and education, persuasion and admonition, circulation of a notice of criticism, and organizational sanctions in accordance with the seriousness of the cases or disciplinary sanctions with the pertinent provisions; If such acts are suspected to constitute a crime, cases shall be referred to judicial organs and criminal responsibility shall be investigated according to law; If such acts led to the conversion of auditees property or other economic benefits, they should be returned in full and heads of the units where the persons responsible belong shall pay a door-to-door visit to the aggrieved party for apology.
If such violation occurs, principal heads of pertinent units of CNAO (Departments, institutions and dispatched offices) as well as leaders of Disciplinary Inspection Group stationed in the corresponding units, shall seriously analyze the causes, bear leader s responsibility for poor supervision or other responsibilities, and be held accountable to competent top management of CNAO.
For units with more than 2 violations within one year, principal heads and leaders of Disciplinary Inspection Group shall make profound analysis and self-criticism to leading Party members' group of CNAO, receive circulation of a notice of criticism, and leader s responsibilities and other responsibilities be investigated on the merits of each case.
If principal heads and leaders of Disciplinary Inspection Group fail to deal with or report or are even over tolerant and overindulgent towards such violations, giving rise to baneful influence, they shall be criticized by a circulation, given organizational sanction or with the pertinent provisions, dealt with by disciplinary sanctions.
