The Performance Audit Evaluation upon the Central SOEs —— with the Use of KNI under the IT Environment

Today’s Topic: SOE Gong

Mexico Accords  Performance Assessment Systems Based on Key Indicators Entity/Government Agency Indicators Global Indicators National Indicators State/Public Sector Indicators Service, Program or Policy Indicators The CNAO is carrying out pilot audits over the central SOEs with the use of Key Indicators under the IT Environment

 Part Ⅰ Scope of Audit: the Central SOEs Part Ⅰ Scope of Audit: the Central SOEs

SOE’s Performance – Problem Input- Output Risks Operation Sustainable Development

SOE’s Performance – solution On-line Audit Performance Audit Real Time Audit KI

 Part II Key Indicators used in the Audit: the Integrated Performance Evaluation Indicators for the Central SOEs (IPEI) Part II Key Indicators used in the Audit: the Integrated Performance Evaluation Indicators for the Central SOEs (IPEI)

KI for Management Performance Qualitative indicators in the fields of Strategic Planning, Decision- making, Social Contribution, Impacts, Innovations, Risk Control, etc. KI for Financial Performance 22 Quantitative Indicators in the fields of Profitability, Quality of Assets, Debt Risk and Business Growth IPEI Framework

A Profitability B Quality of Assets C Debt Risk D Business Growth

KI for Financial Performance …  …Return on Total Assets …  …Assets Turnover Rate …  …Debt Burden …  …Cost Control …  …Operation of Assets …  …Cash Flow …  …Structure of Assets …  …Contingent Liability …  …Cash Flow Solvency....Growth of Sales....Capital Surplus....Change of Profits....R&D Input 12 34

KI for Management Performance  Risk Control  Performance  Innovations  Impacts  Social Contribution  Management  Human Resources  Decision-making  Strategic Planning

AverageMarginalExcellentGoodPoor Evaluation Criteria IPEI

 Part III IT Software used in the Audit: Audit Analysis and Early Warning System of the Central SOEs (AAEWS) Part III IT Software used in the Audit: Audit Analysis and Early Warning System of the Central SOEs (AAEWS)

IPEI:2006 Criteria: :AAEWS 2012 Development of AAEWS Based on the IPEI and the related criteria developed by SASAC, the CNAO is working on the development of a smart IT software: AAEWS for the audit over the central SOEs.

Data Resources Calculating Tool Evaluation Criteria Key Indicators The Central SOEs CNAO Listed Corp. SASAC The Composition of AAEWS

Functions of AAEWS AAEWS Data Management Material Risks Review of Accounting Documents Reporting Management Integrated Data Statistics and Analysis Business Performance Data InputOverall Evaluation

Audit Analysis and Early Warning Report Cash Flows Income Liabilities Guarantee Accounts Receivable Investment & Risks Business Contingencies Balance Sheet Key Indicators Evaluation Criteria Accounting Information Reliability Report Early Warning of Material Risks OverallAssessment Functions of AAEWS

Values of AAEWS 123 Analysis and Early Warning for a certain type of the Central SOE Analysis and Early Warning for Each Central SOE Analysis of the Impact of the Central SOE on Economic Development and Social Progress

Values of AAEWS 1234 Real Time Audit over SOE Internal Audit Field Audit over SOE Planning of Enterprise Audit

 Part IV Audit Practice: Performance Audit Evaluation with the Use of KI of the Central SOEs under AAEWS Part IV Audit Practice: Performance Audit Evaluation with the Use of KI of the Central SOEs under AAEWS

A Case Study: Audit over Harbin Electric Corporation  Which should be paid attention to How to punish those violators When to give early warning Where to get evidence

A Case Study: Audit over Harbin Electric Corporation The Audit Process Financial Documents in Financial Documents in Data Input 10 minutes for Producing Reports 10 minutes for Producing Reports Professional Judgment

Two Reports Key Findings Accounting Information Reliability Report Audit Analysis and Early Warning Report Multiple-perspective Financial Performance Evaluation and Conclusion Review over Original Data Business Performance Evaluation Overall Assessment Early Warning for Fraud and Financial Crisis Marking of Abnormal Data Analysis for Business Development Trend Disclosure of Irregularities

Plus/minus  Audit results fully supported with audit evidence;  Saving Time  Plus Points  Moduels in the AAEWS are yet to be improved;  More indicators (social responsibility, policy,etc.) are yet to be added  Minus Points + –

Any Questions?

The End Thank you