Audit to detect Fraud and Corruption: Evaluation of the Fight Against Corruption and money laundering Part V. Introduction of typical audit practices of China LIU Haiwen

Contents  Basic information: our SAI and its mandate  Practices in Anti-Corruption and Anti- Money-Laundering --- of Preventive Role --- of Detective Role --- of Reporting Role

Our SAI: About CNAO  SAI Model: CNAO is one of the ministries of the State Council, directly under the leadership of the premier  Staff: around around

Our mandate in fighting corruption and money laundering  Not explicitly defined in its mandate, but CNAO takes on responsibilities in Preventive: evaluating internal control system etc. Detective: suspected activities Reporting: to authorized departments and the public

Better practices in preventive role( anti- corruption)  Whole Process Tracking Audit/ Interim Audit that intervene early in audited activities Case study: Audit after the Great Earthquake

Better practices in preventive role( anti- corruption)  E-Audit system Collecting financial information of all agencies within CNAO’s audit scope, thus enables auditors to perform preliminary analysis for the upcoming auditing. Data of some agencies update at real time, thus irregularities could be detected at first time, reducing the risk of corruption

Better practices in preventive role( anti- corruption)  Economic Accountability Audit Regulations on economic accountability audit of major leaders of the Party, Government and SOEs(State-owned enterprises). Major leaders sense that they will be audited within or after their expiration, so they’d be careful in utilizing their power, not to abuse it

Better practices in preventive role( anti- corruption)  Releasing Audit Results Find our announcements of audit results at: Article.ArtID_14.htm

Better practices in preventive role( anti- money-laundering)  Deliver an opinion on the performance of anti-money-laundering systems of financial entities. e.g. one information letter of CNAO pointed out that some provincial financial institutions lacking competent experts and knowledge to fully accomplish the responsibility of reporting doubtful and large transactions timely and completely to the central bank.

Better practices in detective role( anti- corruption)  Applying computer audit techniques Case study: Audit of Affordable housing project

Better practices in detective role( anti- corruption)  Communicating fully with judicial institutions MOU signed with the Supreme People’s Procuratorate and MPS Projects Co-training auditors Seminars held regularly

Better practices in detective role( anti- corruption)  Enhance knowledge sharing and training of auditors Selecting outstanding project Case study: audit of construction in Yangtze River Selecting outstanding case Seminars held often

Better practices in detective role( anti- money-laundering)  Applying quantitative/qualitative analysis to locate suspected transactions/institutions  Determine the types of activities which require special attention and in-depth investigation.  Delivering an audit information letter and transferred to responsible institutions of AML or judicial organs.

Better practices in reporting and following up role( anti-corruption)  Transfer suspicious cases to authorized institutions  Report to the State Council illegal cases in large scale or amount

Better practices in reporting and following up role( anti-money-laundering)  CNAO is not the administrative agency of AML, it performs its responsibility of helping crack down financial crimes by reporting and transferring suspected cases identified to these agencies in the form of audit information letter. In addition, for all the transferred cases, CNAO requires to be informed of the further information or investigation result of the cases from responsible agencies.

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