The Emerging Power of China's Auditors

Cracking down on corruption is critical to China's growth.
by | January 31, 2013 AT 12:00 PM

November’s 18th National Congress of the Communist Party of China marked not only a key power transition for the nation but also signaled a new determination to go after the country’s endemic corruption. “Party organizations should become more transparent to the public and be supervised by the people,” party officials declared at the opening of the congress.

They have good reason to ramp up the fight. Malfeasance among government officials, especially among high-level officials and their family members, has become such a social problem that it endangers the party’s power status. As a result, the Chinese National Audit Office (CNAO) already had been given powers that go well beyond those of most government audit organizations. The CNAO, along with other Chinese audit organizations, has the authority not only to expose wrongdoing but also “to deal with or punish” violations.

Liu Jiayi, auditor general of the CNAO, moved quickly to embrace the party’s new stance on transparency. His department became the first to broadcast its party committee’s conference live online. Eight audit officials introduced their working plans, and Liu promised that his office not only would ramp up investigation and punishment of crimes but also would scrutinize the exercise of official power; expand the use of performance auditing and performance evaluation; boost transparency by opening up audit information to the public; and promote government reform and innovation by evaluating systems and analyzing their barriers, flaws and loopholes.

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It might seem surprising to find that an audit agency is a significant force in China, given the differences between it and Western democracies. But China’s leaders have come to understand that managing their country’s phenomenal economic growth -- some observers expect that China will surpass the United States in nominal GDP in the next 10 to 20 years -- requires an effective legal and regulatory structure.

Auditing is an important part of such a structure. The need for auditing is inherent in the human condition, and the concept spans millennia and cultures. Tiny marks made more than 5,500 years ago beside numbers in the records of the Mesopotamian civilization are evidence of a system of verification: One scribe prepared summaries of transactions, and another verified the assertions. In today’s increasingly complex world, effective government auditing strengthens societal outcomes by limiting waste resulting from corruption and improving organizational learning, thereby increasing citizen trust and confidence.

The CNAO, which was created in 1983 by a constitutional amendment, has been working for years to meet the challenge it has been given by China’s ruling party. It has been aggressively training staff, participating in conferences, submitting articles to professional journals and taking a big role in organizations such as the International Organization of Supreme Audit Institutions. This October in Beijing, for example, the CNAO will host the organization’s international congress, at which new international audit standards will be adopted.

Gene Dodaro, head of the U.S. Government Accountability Office, even visited the CNAO in Beijing in November and signed a memorandum of understanding to encourage and promote technical cooperation between the two agencies.

These are all impressive developments. It remains to be seen whether China’s newly empowered auditors really will play a major role in combating corruption and establishing a more democratic system, but the country and its leaders certainly seem to be moving in the right direction.