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Order no. 4 of the audit office of the People's Republic of China

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The provisions of the audit commission on internal audit work adopted at the meeting of the auditor-general of the audit commission on 10 February 2003 are hereby promulgated and shall come into force as of 1 May 2003.

Auditor-general li jinhua

March 4, 2003

Provisions of the audit office on internal audit work

Article 1 these provisions are formulated in accordance with the audit law of the People's Republic of China and other relevant laws with a view to strengthening the work of internal audit and establishing and improving the system of internal audit.

Article 2 internal audit is an act of independent supervision and evaluation of the financial revenues and expenditures, financial revenues and expenditures and economic activities of the unit and its subordinate units, which is true, lawful and beneficial, so as to promote the strengthening of economic management and the realization of economic objectives.

Article 3 state organs, financial institutions, enterprises, institutions, public organizations and other units shall establish and improve the internal audit system in accordance with the relevant provisions of the state.

Units that are prescribed by laws or administrative regulations to establish internal audit institutions must establish independent internal audit institutions.

Where there is no explicit provision in laws or administrative regulations for the establishment of internal audit institutions, units may, as required, establish internal audit institutions and staff themselves with internal auditors.

A state organ that needs internal auditing and does not have the conditions and staffing to establish an independent internal auditing institution may authorize its own internal institution to perform the duties of internal auditing.

Units that establish internal audit institutions may, as required, establish audit committees with chief auditors.

Article 4 an internal audit institution shall carry out its work under the leadership of the principal person-in-charge or the authority.

Article 5 the unit shall support and guarantee the post qualification and follow-up education system for internal auditors.

Article 6 principal heads of units or power organs shall protect internal auditors from performing their duties according to law, and no unit or individual may retaliate against them.

Article 7 in handling audit matters, internal auditors shall strictly observe the professional standards of internal audit, be devoted to their duties, and be independent, objective, fair and confidential.

Article 8 funds necessary for the performance of functions and duties of internal audit institutions shall be included in the financial budget and guaranteed by the unit.

Article 9 an internal audit institution shall perform the following duties as required by the principal person-in-charge or the power organ of the unit:

(1) to audit the financial revenues and expenditures, financial revenues and expenditures and related economic activities of the entity to which it belongs (including the holding or dominant units, the same hereinafter);

(2) audit the management and use of budgetary and extrabudgetary funds of the unit and its subordinate units;

(3) to audit the term economic responsibilities of the leaders of the internal institutions and subordinate units;

(4) audit the fixed asset investment projects of the unit and its subordinate units;

(v) review the soundness and effectiveness of the internal control system and risk management of the unit and its subordinate units;

(6) to audit the economic management and efficiency of the unit and its subordinate units;

(7) other audit matters as required by laws and regulations and as required by the principal person-in-charge or the power organ of the unit.

Article 10 an internal audit institution shall submit a report on its internal audit work to the principal person-in-charge or the power organ of the unit each year.

Article 11 the principal person in charge of the unit or the organ of authority shall formulate relevant provisions to ensure that the internal audit institution has the necessary authority to perform its functions and duties, mainly as follows:

(1) requiring the auditees to submit on time plans for production, business operations, financial revenues and expenditures, budget implementation, final accounts, accounting statements and other relevant documents and materials;

(2) to attend relevant meetings of the unit and convene meetings related to audit matters;

(3) to participate in the study and formulation of relevant rules and regulations, propose rules and regulations of internal audit, which shall be implemented after examination and promulgation by the unit;

(4) to inspect the materials and documents relating to production, business operations and financial activities and the objects of on-the-spot investigation;

(5) to inspect relevant computer systems and their electronic data and data;

(6) to investigate the problems related to audit matters to the units or individuals concerned and obtain evidentiary materials;

(7) to make a provisional decision to stop the ongoing ACTS of serious violations of laws and regulations, serious losses and waste;

(8) having the right to temporarily seal up accounting documents, accounting books, accounting statements and materials related to economic activities that may be transferred, concealed, tampered with or destroyed;

(9) to put forward opinions on correcting and dealing with violations of laws and regulations, and Suggestions on improving economic management and improving economic efficiency;

(10) to circulate a notice of criticism on units and personnel that violate laws and regulations or cause losses and waste, or to suggest that they be investigated for responsibility.

Article 12 within the scope of its administrative authority, the principal person in charge of the unit or the power organ shall grant the internal audit institution the power of necessary handling and punishment.

Article 13 an internal audit institution may make recommendations of praise and reward to the principal person-in-charge or the power organ of the unit for the units concerned and the subordinate units that strictly abide by financial and economic laws and regulations and for the collectives and individuals that have remarkable economic returns and outstanding contributions.

Article 14 internal audit institutions shall abide by the standards and provisions of internal audit and conduct audit as required by the principal heads of the units or the power organs.

Article 15 the association of internal auditing shall be a self-disciplinary organization and a social organization as a legal person in the internal auditing profession.China internal audit association shall be established nationwide, and local internal audit associations with independent legal person status shall be established according to needs and legal procedures.

Article 16 the internal audit association shall perform its functions and duties in accordance with laws and articles of association and accept the guidance, supervision and management of audit institutions.

Article 17 internal audit institutions shall continuously improve the quality of their internal audit services and accept the inspection and assessment of the quality of their internal audit services by audit institutions in accordance with law.

Article 18 where an auditee does not cooperate with internal audit work, refuses to conduct audit, provides materials, provides false materials, refuses to implement audit conclusions or retaliates against internal auditors, the principal person-in-charge or the power organ shall promptly deal with the matter.If the case constitutes a crime, it shall be transferred to the judicial organ for investigation of criminal responsibility.

Article 19 internal auditors who conscientiously perform their duties, are loyal to their duties, adhere to principles and have made remarkable achievements shall be given spiritual or material rewards by the units to which they belong.

Internal auditors who abuse their powers, practice malpractice for personal gain, neglect their duties or divulge secrets shall be dealt with by the units to which they belong in accordance with the relevant provisions;If the case constitutes a crime, it shall be transferred to the judicial organ for investigation of criminal responsibility.

Article 20 the nao shall be responsible for the interpretation of these provisions.

Article 21 these provisions shall enter into force as of May 1, 2003.The provisions of the audit office on internal audit work promulgated by the audit office on 14 July 1995 (order no. 1 of 1995) shall be repealed simultaneously.

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