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Provisions of Audit Institutions on Audit Sanctions and Penalties


(Promulgated on December 16, 1996 )
 
Article 1    These Provisions are formulated in accordance with the Audit Law of the People's Republic of China (hereinafter referred to as the Audit Law) and the Law of the People's Republic of China on Administrative Sanctions and Penalties (hereinafter referred to as the Law on Administrative Sanctions and Penalties) for the purpose of standardizing acts of audit sanction and penalty, ensuring quality of audit and promoting effective exercise of the power of imposing audit sanctions and penalties by audit institutions.

Article 2    The term "provisions on audit sanctions and penalties" mentioned herein refers to the codes of conduct to be observed by the audit institutions in their evaluation of audit items, production of audit opinions and making of audit decisions for imposing audit sanctions and penalties on the audited bodies against their acts of revenues and expenditures in violation of state stipulations and acts violating the Audit Law.

Article 3    Audit institutions shall make decisions on audit sanctions and penalties according to relevant laws and regulations.

While making decision on audit sanctions and penalties, the audit institutions shall observe the principle of being fair, open and reasonable and maintain a rigorous and responsible working attitude.

Article 4    Audit sanctions and penalties shall be imposed by audit institutions within their statutory duties and powers.

Article 5    Audit sanctions refer to corrective measures against acts of revenues and expenditures in violation of state stipulations.

Article 6    Categories of audit sanctions are as follows:
(1) Orders issued for the audited bodies to turn over within the prescribed time limits revenues of public finance that should be turned over;
(2) Orders issued for the audited bodies to refund illegal incomes within the prescribed time limits;
(3) Orders issued for the audited bodies to return seized state assets within the prescribed time limits;
(4) Writing-offs or adjustments made to relevant accounts;
(5) Other sanctions to be adopted according to the law.

Article 7    Audit penalties are administrative measures of punishment adopted by audit institutions against acts of revenues and expenditures in violation of state stipulations and acts violating the Audit Law.

Article 8     Categories of audit penalties are as follows:
(1) Warnings, circulation of notices of criticism;
(2) Fines;
(3) Confiscation of illegal gains;
(4) Other penalties to be adopted according to the law.

Article 9    Where acts of revenues and expenditures in violation of state stipulations are committed under one of the following circumstances, they shall be penalized on the severe side but only to the extent permitted by laws and regulations:
(1) Heads of the audited bodies force their subordinates to violate financial and economic regulations;
(2) The audited bodies abuse or embezzle special funds and physical articles designated for disaster relief and prevention, pensions, public relief and support for poverty-stricken areas and education;
(3) Acts of revenues and expenditures in violation of state stipulations are of substantial amounts and a serious nature;
(4) The audited bodies obstruct or reject audit or refuse to make relevant corrections;
(5) The audited bodies continuously commit the same violations despite their frequent discovery by the auditors;
(6) Other acts that should be penalized on the severe side according to the law.

Article 10    Where acts of revenues and expenditures in violation of state stipulations are committed under one of the following circumstances, they shall be penalized on the lenient side, to a reduced extent or be exempted from penalty but only to the extent permitted by laws and regulations:
(1) The audited bodies keenly check their errors and make timely correction thereof after audit discovery of the acts of revenues and expenditures in violation of state stipulations;
(2) Where acts of revenues and expenditures in violation of state stipulations are of insignificant amounts and a minor nature and are corrected by the audited bodies in time;
(3) The audited bodies keenly conduct self-examination and actively eliminate or reduce the damaging results of their acts of revenues and expenditures in violation of state stipulations;
(4) Acts of revenues and expenditures in violation of state stipulations are committed because of coercion from other people;
(5) Other violations that may be penalized on the lenient side, to a reduced extent or be exempted from penalty according to the law.

Article 11    Where acts of revenues and expenditures in violation of state stipulations committed by the audited bodies remain undiscovered for a period of two years, the audit institutions shall no longer impose relevant audit penalties.  However, the above stipulation bears no effect on the audit sanctions to be imposed by the audit institutions on the audited bodies against the above-mentioned acts of revenues and expenditures in violation of state stipulations.

Article 12    Fining decisions made by the audit institutions and the system of separating collection of fines from turn-over of fines shall be implemented according to the detailed practice directions formulated by the State Council.

Article 13    Where the audited bodies commit acts of revenues and expenditures in violation of state stipulations which require audit sanctions or penalties, the audit institutions shall produce audit opinions or make audit decisions according to Article 40 of the Audit Law.

Where the audited bodies commit acts in violation of the Audit Law which require audit penalties, the audit institutions shall make penalizing audit decisions.

Article 14    When making penalizing audit decisions, the audit institutions shall inform the audited bodies and relevant responsible individuals of the facts, causes and basis for such decisions as well as the legal rights the latter is entitled to.

Article 15    When imposing sanctions or penalties, the audit institutions shall pay sufficient attention to statements and defenses made by the audited bodies and relevant responsible individuals.  Where facts, causes or evidence provided by the audited bodies and relevant responsible individuals are well-grounded, the audit institution shall accept such facts, causes or evidence.

Audit institutions shall not impose sanctions or penalties on the severe side because the audited bodies and relevant responsible individuals defend themselves.

Article 16    Audit institutions shall impose in accordance with the law administrative sanctions on individuals held directly responsible for acts violating the Audit Law or put forward recommendations for imposing such sanctions and may impose administrative penalties according to the law.

Article 17     When imposing on the audited bodies fines each of which exceeds not only 100,000 RMB but also 5% of the amount of revenues and expenditures in violation of state stipulations, audit institutions shall inform the audited bodies of their rights to hold hearings.  Where the audited bodies require hearings to be held, audit institutions shall organize such hearings.

When imposing fines each exceeding 2,000 RMB on individuals held directly responsible for acts of revenues and expenditures in violation of state stipulations, audit institutions shall inform the concerned individuals of their rights to hold hearings.  Where the responsible individuals require hearings to be held, audit institutions shall organize such hearings.

Article 18    Hearings shall be held prior to the finalization of audit reports and the making of audit decisions by audit institutions.

Procedures for hearings shall be implemented according to the stipulations of the Law on Administrative Sanctions and Penalties.

Article 19    Hearings held by audit institutions shall be presided by the legal departments of the audit institutions.  Where audit institutions have not established such departments, the hearings shall be presided by departments other than those which have conducted the audit.

Article 20    Where audit sanctions and penalties by audit institutions are imposed under one of the following circumstances, the audit institutions at   higher levels shall order the concerned audit institutions to make relevant corrections and may impose administrative sanctions on responsible individuals according to the law:
(1) Lack of statutory basis for audit sanctions and penalties;
(2) Unauthorized alteration of the categories and extents of  audit sanctions and penalties;
(3) Violation of statutory procedures for imposing audit sanctions and penalties.

Article 21    Other legal responsibilities of audit institutions and their auditors shall be fulfilled in accordance with the Audit Law and the Law
on Administrative Sanctions and Penalties as well as stipulations of other relevant laws and regulations.

Article 22   The authority to interpret these Provisions rests with the CNAO.

Article 23    These Provisions shall come into effect as of January 1, 1997.