China Amends Audit Law to Expand Coverage

What’s new: A State Council executive meeting Thursday approved a draft revision of China’s audit law that aims to expand coverage and strengthen supervision.

The draft amendment retains the basic audit system and adds provisions on audit supervision of major public works projects, state-owned resources, state-owned assets, public funds and local banks.

The draft also calls for strengthening audit supervision and enhancing the independence and credibility of auditors. Auditors are required to follow up and inspect progress in rectifying problems found in audits within a prescribed time.

The State Council executive meeting decided to submit the draft to the National People’s Congress Standing Committee for approval.

The background: Improvement of the audit system is related to a long-running anti-corruption drive and is linked to many high-profile corruption cases, said He Daixin, director of the Financial Research Office of the Chinese Academy of Social Sciences’ Institute of Financial Strategy.

Many clues in big corruption cases are often uncovered in the audit process. For example, the fall of Jiang Jiemin, the former top state-owned asset manager, started with an audit. The former head of the State-owned Assets Supervision and Administration Commission (SASAC) was ousted in 2014 for corruption. Sources close to the situation said a routine post-promotion audit of Jiang exposed his problematic relationship with four executives of China National Petroleum Corp. who had been investigated.

In another high-profile anti-graft case, former railways minister Liu Zhijun was sentenced to life in prison in 2013 for taking 64.6 million yuan of bribes and abusing his power. The investigation came after an audit of high-speed railway projects found suspicious transactions.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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