Study on the Auditing Theory of Socialism with Chinese Characteristics

A comprehensive guide to China's public, private, and internal audit system

Study on the Auditing Theory of Socialism with Chinese Characteristics provides a comprehensive overview of China's auditing practices. Recent years have seen the National Audit Office of China (CNAO) making remarkable headway not only in China by guaranteeing the healthy operation of the economy and society and improving national governance through government auditing, but also in the international arena by carrying out audits with the United Nations. With constant development in the practice, an audit theory with socialist Chinese characteristics has taken shape, centering on the premise that government auditing serves as the cornerstone and safeguard of national governance. At the XXI INCOSAI held in 2013 in Beijing, the theme of “national audit and national governance” proposed and chaired by CNAO, was met with widespread approval by participants from over 160 countries, and led to the endorsement of the Beijing Declaration, which makes it a priority and target for audit institutions to promote good national governance.

To explore the nature and development of government auditing, this book probes into the history and reality, and theories and practices of auditing in various countries, and puts forward the assertion that, “as a cornerstone and important safeguard for national governance, government auditing is an ‘immune system’ endogenous within the synthetical system of national governance, with functions of precaution, revelation and defense.” Furthermore, China’s socialist auditing theory has been elaborated in nine aspects, nature, functions, goals, features, methods, management, framework of regulations and standards, IT application and culture, covering the new concepts, methodologies, techniques and achievements of China's government auditing. This book is highly relevant, practical, and readable. Jiayi Liu, the chief author, is the Auditor General of China and the current Chairman of INTOSAI Governing Board. In 2013 he won the United Nations Peace Prize in recognition of his auditing work for UN peacekeeping operations.

Prologue ix

Acknowledgments xiii

Chapter 1 The Nature of Auditing 1

I. Several Viewpoints on the Nature of Auditing 1

II. Understanding the Nature of Government Auditing from the Perspective of National Governance 6

III. Evolution of Government Auditing for National Governance 21

IV. Core View of the Nature of Auditing from the National Governance Perspective 35

Bibliography 37

Notes 37

Chapter 2 Audit Function 41

I. General Cognition of the Government Audit Function 41

II. “Immune System” Function of Government Auditing 43

III. Connotation of Audit “Immune System” Function 47

IV. Relationship among the Three Major Functions of the Audit Immune System 55

V. Specific Embodiment of the Government Audit Function 59

Bibliography 68

Notes 69

Chapter 3 Research on the Government Audit Objective 71

I. Concept of Government Audit Objectives 71

II. Fundamental Objective of Government Auditing 75

III. Realistic Objective of Government Auditing 77

IV. Primary Task of Government Auditing at the Present Stage 82

V. Focus of Government Audit Work at the Present Stage 87

Bibliography 90

Notes 90

Chapter 4 Research on the Features of Government Auditing 91

I. General Features of Government Auditing 91

II. Operating Features of Government Auditing 97

III. Work Policy of Government Auditing 105

Bibliography 106

Note 106

Chapter 5 Audit Modes 107

I. Special Audit Investigation 107

II. Real-Time Auditing 120

III. Grand Pattern of Financial Auditing 128

IV. Unifi ed Organization of a Large-Scale Audit Project 135

V. Organizational Mode of Auditing in an IT Environment 148

Bibliography 156

Notes 156

Chapter 6 Study of Audit Management 159

I. Defi nition of Audit Management 160

II. Principles of Audit Management 167

III. Audit Strategy Management 170

IV. Audit Plan Management 177

V. Audit Quality Management 183

VI. Audit Results Management 193

VII. Audit Cost Management 199

VIII. Audit Human Resource Management 206

Bibliography 212

Notes 214

Chapter 7 Research on Audit Standardization 215

I. Meaning and Significance of Audit Standardization 215

II. Audit Standardization Process 218

III. System Structure and Main Content of Audit Standardization 224

IV. Problems and Affecting Factors in Chinese Audit Standardization 231

V. Principle and Way of Chinese Audit Standardization 234

Bibliography 239

Chapter 8 Research on Audit Informatization 241

I. Development Course of State Audit Informatization 242

II. Main Forms of Audit Informatization 247

III. Future Development Ideas about Audit Informatization 253

Bibliography 265

Notes 266

Chapter 9 Audit Culture 267

I. Concept and Function of Audit Culture 267

II. Core of Audit Culture 271

III. Characteristics of Audit Culture 276

IV. Audit Cultural Development 281

Bibliography 288

Notes 288

Index 291

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 2016. In 2013, he won the United Nations Peace Prize in recognition of his auditing work for UN peacekeeping operations.

Government auditing in China has been continually developing and evolving for more than thirty years. Thoroughly updated, the Study on the Auditing Theory of Socialism with Chinese Characteristics, Revised Edition offers a guide for conducting audit supervision in accordance with the rule of law in order to maintain fiscal and economic order, safeguard national economic security, combat corruption, and promote deeper levels of reform.

Since government audit institutions were established in 1983, there has been no end to the development of practice and the innovation of audit theory with Chinese socialist characteristics. Written in accessible terms and based on in-depth research, Study on the Auditing Theory of Socialism with Chinese Characteristics, Revised Edition offers insights from practitioners and outlines effective approaches for conducting audits.

This important resource includes a summary of China's updated national audit theory that is being applied to meet the growing demands of a new reality. This revised edition highlights three vital aspects. First, it addresses the demands of the modernization of the national governance system and governance ability and the promotion of the rule of law in an all-inclusive manner. Second, this edition presents new developments in government auditing in China with a view to matching theoretical development with practical development. Innovative developments in auditing methods, management, standardization, and computerization are included. Third, this edition contains a deeper understanding of the law that governs government auditing.

To keep pace with the times, the author summarizes the fruits of past research, and explains the essence of government auditing and the role it plays as a guarantee of national governance on the basis of the "immune system" theory. The book also provides information on the nature and functions of government auditing and reveals how the modernization of a national governance system was achieved.

Study on the Auditing Theory of Socialism with Chinese Characteristics, Revised Edition contains theoretical perspectives and practical case studies from different viewpoints and is filled with qualitative, accurate, and profound content.

A COMPREHENSIVE AND CURRENT REVIEW OF CHINA'S AUDITING PRACTICES

"As Friedrich Engels (1820–1895) once said, "Our theory is a theory of development, rather than dogma that has to be learned and mechanically repeated." This is certainly the case with China'audit theory, which is still in the process of being enriched and improved."
—From the Prologue

Written in understandable terms, Study on the Auditing Theory of Socialism with Chinese Characteristics, Revised Edition offers a hands-on resource for conducting audit supervision in China. This new edition is closely linked to the national political system, economic operations, democracy and the rule of law, the market, history and culture, and the distinct characteristics of the times. It reflects how Chinese government audit theory has been continuously innovated and upgraded to suit today's reality and to better promote and guide audit practices.

Comprehensive in scope, Study on the Auditing Theory of Socialism with Chinese Characteristics, Revised Edition contains information on the very nature of an audit and includes an understanding of the national governance perspective. The author explains the "immune system" function of government audit and reveals the fundamental objective of an audit. Real-time audits, special investigation audits, and the grand pattern of financial audits are also explored. In addition, this revised edition contains the basic principles, strategies, and cost management theories of a government audit.

This updated edition includes in-depth research conducted over several decades and draws on a wealth of practical experience, commonly used approaches, and the knowledge of experienced audit practitioners.