Article 1   These Practice Directions are formulated in accordance with Article 23 of the Audit Law of the People's Republic of China for the purpose of standardizing auditing supervision over final accounts at the completion of state construction projects (hereinafter referred to as construction projects) and improving the quality of such audit.

Article 2    The term "construction projects" mentioned herein refers to capital construction projects and technological renovation projects with state asset investments or funds as their major sources of financing.

Article 3     The term "audit of final accounts at the completion of construction projects" mentioned herein refers to audit conducted by audit institutions of the truthfulness, compliance and effectiveness of final accounts at the completion of construction projects prior to the formal completion inspection and acceptance of such projects.  The objective of such audit is to ensure rational and legitimate utilization of construction funds, correctly evaluate value for money of investment, promote accumulation and summarization of construction experiences and upgrade the standard of construction project management.

Article 4    Audit shall be conducted according to the law by audit institutions of incomes and expenses that are related to construction projects and are generated and incurred by units responsible for the designing, construction and supervision and management of such projects.

Audit of incomes and expenses related to construction projects which are generated and incurred by the above units shall not be subject to the restrictions of audit jurisdiction.

Article 5    Audit conducted by audit institutions of final accounts at the completion of construction projects shall cover the following major aspects:
(1) Truthfulness and compliance of the  "Summary Statement of the Completed Project", "Final Accounts of the Completed Project", "Overall Statement of Assets Transferred for Utilization" and "Ledgers of Assets Transferred for Utilization";
(2) Truthfulness and accuracy of statements to the final accounts of the completed project.

Article 6    Audit conducted by audit institutions of investment and estimate implementation of construction projects shall include the following major items:
(1) Actual amounts of inputs from various financing channels;
(2) Amounts, reasons and effects of funds no longer available;
(3) Amounts of investment actually realized;
(4) Principles for adjusting estimates, various adjustment indicators, expenses for design alteration and increase of estimates, confirmation of estimated overall investment;
(5) Confirmation of amounts in excess of estimates, analysis of the underlying reasons and detection of causes for expansion of construction scales, upgrading of relevant standards and approval of investments beyond original designs.

Article 7   Audit institutions shall carry out audit of the truthfulness, compliance and effectiveness of the accounting treatments of construction and installation works and equipment investment as well as the apportionment of apportionable investments and the disclosure of apportionable and other investments as expenses.

Article 8   When auditing assets of construction projects transferred for final utilization, audit institutions shall focus on the following aspects:
(1) Whether the transferred fixed asset really exist;  whether relevant  inspection and acceptance procedures have been carried out;    
(2) Truthfulness and compliance of the transfer of current assets and guaranteed current capital;
(3) Transfer of intangible assets;
(4) Transfer of deferred assets.

Article 9    Audit institutions shall conduct audit of the amount of uncompleted work of tail projects and its required investment thereof, the purpose of which is to find out whether there is sufficient investment remaining or whether there are new additions to the projects.

Article 10   When auditing balances of funds for construction projects, audit institutions shall focus on the following major items:
(1) Bank deposits, cash in hand and other funds in the form of currency;
(2) Truthfulness of the amount of existing stock, i.e., whether there are problems of overstocking, concealment, transfer and appropriation;
(3) Current items of account, i.e., verification of creditors and debtors.   Whether there exist the problems of transferring or appropriating construction funds or untimely settlement of creditors and debtors.

Article 11    Audit institutions shall audit the truthfulness and compliance of the sources, distribution, turn-over as well as retaining and utilization of construction incomes.      

Article 12    Audit institutions shall audit balances of the contracted investment of construction projects with priorities placed on fulfillment of contracted targets and compliance of the distribution of contracted balances.

Article 13    When reviewing and evaluating value for money of investment in construction projects, audit institutions shall focus on the following aspects:
(1) Effect of the duration of construction on the value for money of  investment;
(2) Analysis of project pricing;
(3) Calculation of such technical and economic indicators as payback period of investment (static and mobile ones), net present value and internal rate of return;
(4) Analysis of the ability to repay loans and evaluation of the economic, social and environmental effect of construction projects.

Article 14    To have their final accounts audited by audit institutions, construction projects must meet the following conditions:
(1) Completion of preliminary inspection and acceptance tests;
(2)  Production of final accounts at project completion.

Article 15    The audited bodies shall provide the following materials in accordance with the time limits and other requirements put forward by the audit institutions:
(1) Documents related to approval, designing and each estimate adjustment of  the construction projects;
(2) Report on preliminary inspection and acceptance tests at completion of the projects;
(3) Contracts and documents for settlement of accounts, contracts related to discretionary purchases of equipment and essential materials by the project contractors and lists of the purchases, records of receipts and deliveries as well as documents concerning material alteration of designs;
(4) Statement of project progress and financial statements since the commencement of construction as well as final accounts at the completion of the projects and other documents related to incomes and expenses.

Article 16    While auditing final accounts at the completion of construction projects, audit institutions shall plan and manage audit in accordance with the Provisions of Audit Institutions on Management of Audit Planning.  Plans concerning audit of final accounts at the completion of key construction projects of the state shall be issued by the CNAO.

Article 17    Division of duties among audit institutions concerning audit of final accounts at the completion of construction projects shall be carried out in accordance with the Interim Provisions of Audit Institutions on Determination of Audit Jurisdiction.  Audit of final accounts at the completion of construction projects shall be conducted in general by the audit institutions responsible for auditing the projects during their course of construction.

Article 18    Audit institutions shall conduct audit according to relevant audit procedures.  Audit notifications, audit opinions and audit decisions shall be issued to units respectively in charge of project designing, construction and supervision and management where the audited construction projects involve the above units.  Where acts of revenues and expenditures in violation of state stipulations are found in the audit of construction projects, measures of sanction shall be metered out according to relevant laws and regulations.

Article 19    The authority to interpret these Practice Directions rests with the CNAO.

Article 20   These Practice Directions shall come into effect as of January 1, 1997.