Article 1    This Standards is formulated in accordance with the  Basic Government Auditing Standards of  the People's Republic of China for the purpose of standardizing evaluation of audit items and ensure the quality of such evaluation.

Article 2    The term "evaluation of audit items" mentioned herein refers to the comprehensive evaluation undertaken by audit institutions of the truthfulness, compliance and effectiveness of the revenues and expenditures disclosed in the accounting documents of the audited bodies.

Article 3     Audit institutions shall evaluate audit items in accordance with relevant laws, regulations and policies.

Article 4    While conducting evaluation of audit items, audit institutions shall stick to the principle of being practical, realistic, objective and fair.

Article 5    Evaluation of the truthfulness of audit items shall be conducted in the following manners:
(1) Where the data of accounts and statements provided by the audited bodies is consistent with the data confirmed through audit by audit institutions according to the prevailing accounting system and state stipulations on revenues and expenditures, the concerned accounting treatments may be regarded as conformable to the requirements of relevant accounting standards (the names of which shall be disclosed) while the accounting documents may be regarded as giving a true and fair view of the annual revenue and expenditure of the audited bodies;
(2)  Where the data of accounts and statements provided by the audited bodies is basically consistent with the data confirmed through audit by audit institutions in accordance with the prevailing accounting system and state stipulations on revenues and expenditures, the concerned accounting documents may be regarded as giving a basically true and fair view of the annual revenues and expenditures of the audited bodies;
(3)  Where there are great disparities between the data of accounts and statements provided by the audited bodies and the data confirmed through audit by audit institutions in accordance with the prevailing accounting system and state stipulations on revenues and expenditures, audit institutions shall point out the existing problems while the concerned accounting documents shall be regarded as failing to give a true and fair view of the annual revenues and expenditures of the audited bodies.

Article 6   Evaluation of the compliance of audit items shall be conducted in the following manners:
(1) Where no violations of relevant regulations are found in revenues and expenditures of the audited bodies, such revenues and expenditures of the audited bodies may be regarded as in conformity with the stipulations of financial and economic regulations;
(2) Where violations of relevant regulations are found in the revenues and expenditures of the audited bodies, which are, however, of small amounts and a minor nature, such violations shall be disclosed while the concerned revenues and expenditures may be regarded as basically in conformity with the stipulations of financial and economic regulations except that certain acts are in violation of relevant regulations;
(3) Where violations of relevant regulations are found in the revenues and expenditures of the audited bodies, such violations shall be disclosed while the determination of whether the related acts are in minor or serious violation of the financial and economic regulations shall be made in accordance with the nature of the violations.

Audit institutions shall order the audited bodies to correct their acts of revenues and expenditures which are in violation of relevant regulations.

Article 7    Provided that revenues and expenditures of the audited bodies are true and regular, audit institutions shall evaluate the performance of audit items by the following means:
(1) Comparison of actual performance (effectiveness and efficiency) with prediction of the current-year plan (targets and indicators);
(2) Comparison of current performance with previous records of the same period;
(3) Comparison of current performance with the advanced level of the industry.

While evaluating audit items, audit institutions shall point out the incomparable elements and produce objective and fair evaluation in combination with the results of the above comparisons.

Article 8    With regard to evaluation of internal control systems related to revenues and expenditures of the audited bodies, audit institutions shall produce opinions of evaluation in the following manners:
(1) Internal control systems shall be evaluated as sound, partially sound or unsound according to their establishment;
(2) Internal control systems shall be evaluated as effective, partially effective or ineffective according to their implementation.

Article 9    Evaluation of audit items concerning revenues and expenditures shall focus on the following aspects:
(1) Budgetary implementation and final accounts;
(2) Collection and management of tax revenues;
(3) Establishment and implementation of internal control systems related to revenues and expenditures;
(4) Other revenues and expenditures.

Article 10   Evaluation of audit items concerning banking and insurance shall focus on the following aspects:
(1) Implementation of state policies on interest rates, foreign exchange, loans, deposits and investments;
(2) Assets, liabilities, profits and losses;
(3) Establishment and implementation of internal control systems related to revenues and expenditures.

Article 11    Evaluation of audit items concerning state construction projects shall focus on the following aspects:
(1) Investment plans and realization of the sources of financing;
(2) Implementation of construction scales and standards as well as preparation and review of budgets (estimates) and final accounts;
(3) Revenues and expenditures and returns on investments.

Article 12    Evaluation of audit items related to special funds shall focus on the review and approval, sources of financing, utilization and management of the special funds as well as the consequent social and economic effects.

Article 13      Evaluation of audit items related to projects applying foreign funds shall focus on the following aspects:
(1) Implementation of  loan agreements for projects applying foreign funds;
(2) Utilization, value for money and repayment of principals with interests of foreign funds.

Article 14      Evaluation of audit items related to assets, liabilities, profits and losses of state enterprises shall focus on value preservation and appreciation of net assets, current liabilities, long-term liabilities, profits and losses as well as the establishment and implementation of the internal control systems.

Article 15    Audit institutions shall not evaluate the following items:
(1) Specific items uninvolved in the course of audit;
(2) Items about which evidence is insufficient and evaluation basis or standards are uncertain.

Article 16    Evaluation of audit items by audit institutions shall be disclosed in audit reports and audit opinions.

Article 17    The authority to interpret this Standard rests with the CNAO.

Article 18    This Standard shall come into effect as of January 1, 1997.