General Independent Auditing Standard

General Independent Auditing Standard Chapter 1 General provisions Article 1 This standard is prepared in accordance with the Law of PRC on CPAs to establish standards for, to define the responsibility of and to ensure a high standard of professional work by Certified Public Accountants ( "CPAs") in the course of performing an independent audit. Article 2 The term "independent audit" in this standard refers to the CPA’s independent examination of the entity’s financial statements and relevant information and the expression of an audit opinion, following the CPA’s acceptance of the engagement in accordance with relevant laws and regulations. Article 3 This standard applies to the CPA’s independent audit of any entities’ financial statements and relevant information for the purposes of expressing an audit opinion. CPAs may refer to this standard in the course of other relevant practices. Chapter 2 General principles Article 4 The purpose of an independent audit is to express an audit opinion on the legitimacy and fairness of the entity’s financial statements and the consistency of the accounting treatments. Article 5 Any CPA performing independent audit work should possess professional knowledge and experience, receive appropriate professional training and possess adequate analytical capability and judgement. Article 6 The CPA should comply with the standard on professional ethics, observe the principles of independence, objectivity and integrity and maintain an attitude of professional scepticism when performing audit work and expressing an audit opinion. Article 7 The CPA should treat confidential business information acquired in the course of the audit as classified and should not use it to his personal advantage or to the advantage of a third party. Ariicle 8 It is the CPA’s audit responsibility to issue an audit report in accordance with the requirements of the Independent Auditing Standards and to ensure the truthfulness and legitimacy of the audit report. It is the entity’s accounting responsibility to establish a sound internal control system, to safeguard the assets and to ensure the truthfulness, legitimacy and completeness of the accounting information. The CPA’s audit responsibility cannot substitute, alleviate or eliminate the entity’s accounting responsibility. Article 9 The CPA’s audit opinion should provide reasonable assurance on the reliability of the audited financial statements to the users of the financial statements. However, this opinion should not be seen as a guarantee of the entity’s ability to continue as a going concern or to operate efficiently and effectively. Chapter 3 Standards of the field work Article 10 The accounting firm should sign an audit engagement letter following the accounting firm’s acceptance of the engagement based on the CPA’s understanding of the entity’s background. Article 11 When performing an audit. the CPA should prepare an audit plan to make appropriate arrangements for the audit work. Article 12 The CPA should study and evaluate the entity’s relevant internal control systems to determine the nature, timing and exient of the substantive tests. If the CPA discovers material weaknesses in the internal control systems during the audit, he should report them to the entity, if needed, a management letter may be issued. Article 13 When performing compliance tests and substantive tests, the CPA should generally apply audit sampling technique. Article 14 The CPA may use methods such as inspection, supervision of counting, observation, enquiry and confirmation, computation, analytical procedures etc. to obtain sufficient appropriate audit evidence. Article 15 The CPA should document the audit plan, its implementation process and results, as well as other important matters where judgement is required in the audit working papers. Article 16 The CPA may, according to his needs, employ relevant assistants and engage experts to assist in his work. However, the CPA is responsible for the results of their work. Article 17 The CPA should pay attention to important matters such as the entity’s subsequent events, contingent losses, ability to continue as a going concern etc. If necessary, the CPA should reflect these matters in the audit report. Article 18 The use of computer-assisted audit techniques to perform audit procedures in an electronic data processing environment should not alter the audit objectives or the scope of the audit, Article 19 The CPA should adequately consider audit materiality and audit risk during the audit. Chapter 4 Reporting standards Article 20 After performing the necessary audit procedures, the CPA should form an audit opinion and issue an audit report based on the verified audit evidence. Article 21 The audit report should specify matters such as the scope of the audit, accounting responsibility and audit responsibility, the basis of the audit, the major audit procedures performed etc. Article 22 The audit report should specify whether the preparation of the entity’s financial statements complies with the requirements of the relevant financial and accounting laws and regulations promulgated by the State, whether the financial Statements present fairly, in all material respects, the financial position, operating results and changes in the funds of the entity and whether the accounting treatments are consistently applied. Article 23 The CPA may issue an audit report with an unqualified opinion, a qualified opinion, an adverse opinion or a disclaimer of opinion. When a qualified opinion, an adverse opinion or a disclaimer of opinion is expressed, the CPA should clearly state the reasons and, if possible, indicate the extent of their impact on the financial statements. Chapter 5 Supplementary provisions Article 24 The Chinese Institute of Certified Public Accountants is responsible for the interpretation of this standard. Article 25 This standard takes effect from 1 January 1996.