Cover Story


International Journal of Auditing – July 2010

Liu Jiayi - Auditing: An Immune System to Protect Society and the Economy

Liu Jiayi
Auditor General, National Audit Office of the People’s Republic of China

In China, audit is considered an indispensable part of the national political system. It is a product of, and a means of promoting, democracy and the rule of law. It is also an important tool for upholding the security of the national economy. It functions like an immune system for the economy and society. The body’s immune system recognizes foreign and abnormal cells and destroys them. In the same way, audits reveal existing problems, proactively prevent others, and promote resistance throughout the entire system of government by ensuring that taxpayers’ monies are managed and spent properly. On behalf of the general public and in accordance with the law, auditors (1) monitor the performance of various levels of government and their respective departments, along with other organizations that have access to taxpayer money, and (2) report audit results to the general public. During this process, auditors detect wrongdoing and make corrective recommendations, investigate and deal with serious violations, promote efforts to combat corruption, and safeguard the orderly operation of the economy. They also reveal institutional problems and systematic deficiencies, promote reasonable deployment and efficient utilization of public resources, ensure effective implementation of important government economic policies and measures, and safeguard national economic security.

The National Audit Office of the People’s Republic of China (CNAO) has more than 20 years’ experience and has also learned from and drawn on the experience of other countries. Based on tangible conditions in China, the CNAO has set up an audit system with Chinese characteristics.

  • The fundamental goal of audit in China is to safeguard the vital interests of the general public. At this time, the intent and purpose of audit can be defined as promoting the rule of law, upholding the people’s livelihood, promoting reform, and stimulating development. The primary and utmost task of auditing is upholding national security, which is carried out by promoting national economic security, safeguarding national interests, giving impetus to democracy and the rule of law, and carrying sustainable development forward in a coordinated way. The basic guideline is “conducting audits on the basis of law, serving the overall public interest, giving priority to key issues of government and public concern, seeking truth, and being realistic and pragmatic.”

  • A legal mandate for audit has been established based on the constitution, consisting of the Audit Law and its implementation and supported by audit standards.

  • A framework for audit work has been set up, comprising audits of public finance, financial institutions, state-owned enterprises, accountability, the environment, and foreign issues.

  • The CNAO has established a preliminary comprehensive audit pattern with Chinese characteristics. Based on financial audit, with a focus on performance and accountability, our audits integrate compliance and performance audits; focus on disclosing, investigating, and dealing with serious violations and evidence of economic crimes; identify institutional obstacles and systematic deficiencies; and propose relevant reforms and improvements.

  • The CNAO has expended significant efforts to explore information technology auditing and shift from traditional to modern audit approaches. As a result, we have enhanced the quality, efficiency, internal controls, and management level of our audits.

In accordance with these guidelines, the CNAO has been actively addressing the international financial crisis since 2008 while at the same time responding to the government’s key task of ensuring stable and rapid economic growth, making every effort to track the flow of public funds. We have concentrated on real time audits covering the life cycle of projects such as (1) the relief, rehabilitation, and reconstruction in Wenchuan and Yushu, which were stuck by two serious earthquakes, (2) the Beijing Olympics, and (3) the implementation of policies and measures to address the financial crisis. These efforts have brought into play the “immune system” function of audit for ensuring the healthy operation of society and the economy. As China emerges from the financial crisis, it still faces the challenge of maintaining stable and rapid economic growth and speeding up the transition of economic development modes. In accordance with the provisions of law, Chinese audit institutions are focusing their attention on the government’s performance of this central task. The audit institutions are strengthening their audits to protect the livelihood of the people and sound economic growth with a view to effectively implementing the government’s proactive financial and monetary policies. By doing so, government audit in China will play a positive role in achieving China’s macro-policies for sustaining economic growth, ensuring its people’s well-being, and maintaining social stability.