Current Status and Development of Audit IT Application in China

Current Status and Development of Audit IT Application in China


By Mr. YUAN Ye, Deputy Auditor General of China

I. Government Auditing and IT Application

In recent years, the Chinese government has put forward that the overall goal of China’s reform and development is to improve and further develop the Chinese socialist system, promote the modernization of national governance system and governance capacity. Premier LI Keqiang stresses that government audit institutions must continually strengthen the supervision through auditing to maintain the order of national economy and public finance, and act as regulator of the society and economy. It is the comprehensiveness of sound social and economic operation that fundamentally brings about cross-cutting challenges to the government auditing in various areas.

IT application is one of the important features of modernization, and an intrinsic factor in modern national governance system. With the wide application of internet and mobile terminals, trends such as big data, social network, mobile internet, cloud computing, etc. have gradually emerged with the development of IT. Such development is not just a product of social progress, but a driver that pushes forward the social progress in an innovative way.

With the progress of IT application, great changes have happened in the external environment. In view of accounting computerization in the 1990s in China, the traditional mode of manual checking could not meet the auditing demand any more and many auditors were having difficulty opening the electronic accounts and adapting to the electronic age. Under this background, auditing without IT application as well as audit management without digitalization may be eliminated by the modernization drive.

In the modernization process of national governance system, with more and more extensive IT application, IT application in government auditing  faces the following four challenges.

Firstly, the conflict between insufficient human resource and increasing audit workloads is more and more prominent. The ratio of Chinese government auditors to the whole population is far below the international average of 0.01%. As a result, auditing coverage still stands relatively low although each auditor spends 200 days every year in average in field auditing.

Secondly, the fast-developing IT brings great challenges to government auditing. The audit data has changed from structured financial data and business data to semi-structured and non-structured dada, and auditors begin to explore ways to make integrated analysis and utilization of big data with complex structures from various sources in many areas.

Thirdly, the way government auditor’s work demands special requirements for IT support. Auditors always carry out on-site work, however, the IT resources available are in very short supply in the field and the assistance from cross-industry information and other audit specialists are much more insufficient. Besides, the physical dispersion of auditors also makes audit management difficult.

Lastly, the present auditing means need to be further enriched if government auditing is to function like an immune system for the economy and society at a higher level to disclose systemic problems. It is a major task for government auditors to make full advantage of big data on the social, economic operation which governmental departments at various levels have collected and to analyze the potential risks.

II. An Introduction to CNAO’s Golden Audit Project

1.    Overview of Golden Audit Project

The CNAO began to develop its IT application based on ‘Golden Audit Project’ since the 1990s. So far, the first and second stages of Golden Audit Project have been successfully completed and an integrated IT strategy of government auditing has taken shape. The Golden Audit Project has facilitated change in the focus of auditing from error identification and correction to regulating management, which has greatly enhanced the effectiveness of audit supervision.

The overall objectives of the Project are as follows: (1) to gradually develop an IT system that can perform effective supervision on the truthfulness, compliance and effectiveness of financial revenues and expenditures; (2) to change audit supervision from simple post-audit to the combination of post- and concurrent audit, from static audit to the conjunction of static and dynamic audit, and from field audit to the integration of field and remote audit; and (3) to enhance the capacity of audit institutions to detect and correct errors, regulate management, disclose corruption, fight against crimes, maintain sound economic order, and promote the development of a clean and efficient government.

2.     Achievements of Golden Audit Project

Up till now, the Golden Audit Project has developed an integrated framework including a Service Framework Platform (SOA), a Data Center and an Interchange Center and 3 systems (AO, OA and OLA) as a whole.

a. Development of auditing network

In order to achieve connectivity among audit institutions at various levels, the Project developed an audit network based on the e-government extranet, including the classified audit intranet at the central and provincial levels, the non-classified audit extranet at the CNAO, provincial, city and county levels, and the internet. With the development and improvement of two stages of the Project, the network infrastructure has been completed. CNAO headquarters has realized connectivity with 18 resident offices, 25 CNAO offices located in the ministries and 37 provincial audit offices. The audit consultation system has provided preliminary interconnection among the 4 levels of audit institutions, which effectively supports video conferencing and remote audit consultation.

b. Development of IT application system

The Office Automation (OA) system has become the main software of audit management in an IT environment by each audit institution at all levels nationwide, greatly improving audit administration and audit quality control.

The Auditor’s Office (AO) system was developed with an aim to help auditors conduct financial audit in the field by opening electronic accounts and adapting to the electronic age. Over 100,000 copies of AO have been distributed for free among audit institutions and widely applied in every specific field of auditing. Through continuous adaptation to new environment, CNAO has also launched editions of AO for United Nations and AO for Macau in succession.

The On-line Auditing (OLA) system has been applied in the audits of departmental budget implementation, social security, customs, taxation, government investment, state-owned enterprises, etc. attaining prominent outcomes in the change from traditional to modern audit mode.

c. Audit Data Center

The construction of server rooms of National Audit Data Center has been completed and the Data Center has already collected massive industry-specific audit data covering 55 budget units at the central level and 40 large-scale state-owned enterprises, data of national social security from 2009 to 2011, data of local debt investigation in 2011, etc, with a total volume of 500 TB. Moreover, the storage and analysis of these data have been highly efficient, and the integrated analyses of big data in various fields are well underway.

3.     The future development of audit IT application in China

In the face of higher demand posed by national governance to government auditing and the emerging opportunities provided by the new information technologies, the CNAO will take full advantage of new information technologies including big data, cloud computing, mobile calculating, etc., to promote the future development of IT application with a view to facilitating a greater role of government auditing in national governance.

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Diagram 1: The Overall Idea of the Third Stage of Golden Audit Project

As illustrated in Diagram 1, the third stage of Golden Audit Project, based on the outcomes of the first and second stages, will utilize modern information technologies, such as cloud computing and big data, to further improve IT systems of government auditing. It will develop the platform for comprehensive audit operation, digital control center of government auditing, audit simulation laboratory and supporting system of comprehensive audit services, with a view to improving the capacity for leading and decision-making, quality management, data collection and sharing, comprehensive data analysis, etc. Focusing on the safe operation and performance evaluation of public finance, the Golden Audit Project will develop a national e-audit system for the regular audit supervision of national economic security, so as to boost government audit institutions’ ability to function like an immune system in safeguarding the healthy operation of the society and economy, and effectively facilitating the improvement of national governance.

In the near future, CNAO will finish the following tasks during the third stage of Golden Audit Project.

1. System of Big Data Analysis

At present, the audited data has changed from structured data to semi-structured and non-structured data, and auditors begin to explore the integrated analysis and utilization of big data.

As for the analysis system of audit of big data which is under development, the major objectives are to conduct audit evaluation in certain areas and integrated audit assessment relating to national economic security, and to disclose institutional problems and potential risks in the operation of society and economy, based on the big data nationwide which is closely related to the national economic security, using such means as indicator for audit evaluating, simulating and modeling, social computing. This system is expected to consist of six components, i.e. infrastructure administration, data preparation modules, analysis tools modules, model analysis modules, business analysis modules and information presentation modules.

2. Platform of Cloud Computing

Compared with traditional technologies, cloud computing can greatly reduce the cost of IT application, and protect the current investment of IT application by transferring the present outcomes. It can help share audit information and facilitate the dissemination of audit knowledge. It also contributes to centralized management of auditors by pooling resources at the cloud platform, and improves audit quality.

A platform of audit cloud computing will be developed to provide diverse IT services, customized or not, to the CNAO and audit institutions at the provincial, city and county levels with the technology of cloud computing. IT infrastructure service will be provided to those audit institutions which are in lack of resources or weak in both software and hardware. CNAO also aims to provide basic IT platform service, featured by heterogeneous data collection and massive data management, to those audit institutions which is short of human resources, and provide fundamental software service to those audit institutions which is in need of professional IT support, including audit knowledge support and IT audit software. Meanwhile, CNAO can also provide such services as OA, AO field support, on-line auditing, dynamic monitoring and early warning on the cloud platform, based on the outcomes of the first and second stages of the Golden Audit Project.

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Diagram 2: Audit Cloud Services Platform





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