Article 1    These Practice Directions are formulated in accordance with Article 8 of the Audit Law of the People's Republic of China (hereinafter referred to as the Audit Law) for the purpose of standardizing financial audit of the Central Bank and ensuring the quality of such audit.

Article 2    The term "Central Bank" mentioned herein refers to the People's Bank of P. R. China and its branches.

Article 3    The term "financial audit of the Central Bank" mentioned herein refers to auditing supervision conducted by the CNAO over the truthfulness, compliance and effectiveness of the revenues and expenditures of the Central Bank (including the State Administration of Foreign Exchanges) and its subordinate enterprises and undertakings.

Article 4    The CNAO shall conduct financial audit of the Central Bank in a manner that will facilitate sufficient play of  the role of the Central Bank in the macroscopic monetary readjustment and maintenance of the monetary order, promote strict implementation by the Central Bank of state financial laws and regulations and the building of clean and honest governments and help the Central Bank ensure sustainable, speedy and healthy development of the national economy.

Article 5    Audit of the Central Bank shall be organized uniformly by the CNAO and conducted by the CNAO together with its resident offices.

Article 6    Audit of the accounting vouchers, books and statements of the Central Bank shall mainly cover the following aspects:
(1) Consistency of amounts disclosed in self-prepared account vouchers with those recorded in the attached historical vouchers;
(2) Compliance of various transacts disclosed in the books of account with the consistency principle of mutual agreement between related accounts, accounts corresponding to vouchers, account records corresponding to physical existence, accounted amounts corresponding to actual amounts, accounts corresponding to statements and non-published accounts corresponding to published ones;
(3) Observation of the principle of consistency in preparing consolidated accounts;
(4) Truthfulness of the consolidated final accounts.

Article 7    Tests and evaluation of the internal management and control system of the Central Bank shall focus on the following aspects:
(1) Completeness, relevance, restraint and effectiveness of the overall internal control system and the departmental management control systems;
(2) Implementation of various internal management and control systems.

Article 8    Financial audit of the Central Bank shall cover the following major aspects:
(1) Review of and reply to financial plans prepared by subordinate branches according to the financial plans approved by the Ministry of Finance, plan adjustments and variations of revenues and expenditures in the implementation of such plans;  
(2) Computation, disclosure and posting of various transaction incomes and interest incomes;
(3) Computation scopes, interest rates and factual disclosure of various  costs of interest;  expenditure scopes and standards of various transaction expenses;  expenditure scopes and withdrawing standards of various management expenses;  expenditure of various special funds within the fixed quotas and according to the designated purposes.  Whether there is fraudulent disclosure of expenses in the name of advanced withdrawal and apportionment;
(4) Withdrawal and utilization of general reserves;
(5) Consolidation of year-end profits of subordinate undertakings into the final accounts of the Central Bank;
(6) Implementation of financial plans disclosed in the consolidated final accounts;
(7) Turn over of profits or additional appropriations to make up losses.

Article 9    Audit of other revenues and expenditures of the Central Bank shall cover the following major items:
(1) Revenues and expenditures of special loans;
(2) Revenues and expenditures of special funds or foundations;
(3) Items of subordinate enterprises such as formation and utilization of various assets, formation and utilization of various liabilities, increase and decrease of items under owner's equity as well as revenues and expenditures arising thereof;
(4) Revenues and expenditures of subordinate undertakings.

Article 10    The CNAO shall conduct audit according to the stipulated audit procedures and shall impose sanctions according to relevant laws and regulations against discovered acts of revenues and expenditures in violation of state stipulations.

Article 11    Where it is found in the course of audit that the accounting regulations, systems and methods formulated by the Central Bank are in conflict with relevant laws and administrative regulations or are inappropriate in certain aspects, the CNAO shall put forward recommendations for correction or improvement to the Central Bank.

Article 12     When auditing revenues and expenditures of the Central Bank, the CNAO shall mainly adopt the approach of inter-sector audit with special audit conducted for significant audit item

Such audit shall be conducted mainly by means of sampling together with the use of Computer Assisted Audit Techniques.

Article 13    The CNAO shall require the Central Bank to provide the following documents and materials according to relevant stipulations:
(1) Documents recording approval by financial departments of the annual financial plans prepared by the Central Bank together with documents recording the adjustments made to such plans;  documents recording the Central Bank's approval of annual financial plans at its corresponding level and those prepared by its branches together with documents recording the Central Bank's approval of the adjustments made to such plans;
(2) Consolidated and the Central Bank's own annual financial reports;
(3) Monthly statistical statements of credit  and cash as well as bulletins on monetary operations;
(4) Regulations, systems and methods for credit, foreign exchanges, finance and accounting;
(5) Books, vouchers and other relevant accounting documents;

Article 14    Where the Central Bank violates the Audit Law by refusing or delaying the provision of documents related to the audit items, or rejecting and obstructing the performance of audit, the CNAO shall order it to make relevant corrections, may issue a warning or circulate a notice of criticism where appropriate, or affix responsibility on the Central Bank when the latter resists the order to make corrections.

Article 15   The authority to interpret these Practice Directions rests with the CNAO.

Article 16   These Practice Directions shall come into effect as of January 1, 1997.