New Theory Of National Audit Function

As an independent supervision, audit has characteristics that other economic supervision does not have. Under the conditions of the socialist market economy, the audit is to be given higher level and a board scope of function. Liu Jiayi, Auditor-General of National Audit Office of PRC, pointed out in the third session of the fifth China Auditing Society held in March 2008, that in accordance with the requirements of the goals of audit, its most important task is to safeguard national security, protect national interests, promote construction of democracy and laws, and stimulate comprehensive, coordinated and sustainable development. It is necessary to emphasize national audit as a watchdog in political system of China which becomes Immunity System in the economic and social operation in China. Therefore, from economic and managerial point of view, research on the functions and roles of national audit is an important theoretical and practical issue in the past, present and future.Performing audit supervision under the conditions of the socialist market economy is not only different from that in natural economy, but also distinguished from that in general commercial economy. If the current audit supervision in the socialist market economy is studied by using previous theories and ideas on some functions and roles of audit, it will result in decision-making errors as well as disorder of practical work. Therefore, rethinking the theory of audit function in China under the conditions of the socialist market economy, and discussing on the three functions and roles of national audit, has theoretical value and practical significance.This dissertation is composed of six chapters. It is generally divided into three main parts. The first part is composed of 3 chapters from Chapter 1 to Chapter 3, which systematically elaborates related knowledge of national audit function. The second part, that is Chapter 4, is a basic theoretical analysis of the national audit function. The third part is composed of 2 chapters from Chapter 5 to Chapter 6, as the core content of this dissertation, makes a concrete research on national audit functions, including analysis of its functions and roles in the socialist market economy, and analysis of how to play the roles of national audit as well as perform its function at this stage.Chapter 1 introduces the background and significance of selecting the subject for research, research methods and reasoning, the structure and contents, the main contributions, and follow-up researches, as well as the scope of this study, etc.Chapter 2 is about the definition of audit and review of its functions and roles. The definition of the audit, functions and roles, are to respectively solve the issues as follows:"what is the audit?", "what can audit do?" and "What has audit done?". This chapter firstly reviews the existing literature on the definition of audit, and summarizes the definition of audit, mainly including:1) audit is to look over the books; 2) audit is a systematic approach or process; 3) audit is an independent financial oversight or control activities;4) audit is a tool of construction of democracy and laws. This chapter believes the third view is more realistic through analysis. Then it discusses the different statements of audit function, and summarizes a single function and multi-function points of view. Under the conditions of the socialist market economy, the audit function should have different new interpretations. Finally, this chapter analyzes the point of view on the role of audit in the existing literature, which concludes that Two-role Theory or Three-role Theory for the roles of the audit are not significantly different. This dissertation presents that the role of audit is not only involving the static implementary effects of the audit function, but also taking the process the perspective into account.Chapter 3 is the general analysis of the scope of national audit. It discusses the definition and characteristics of national audit as well as the relationship of national audit and public finance. This chapter introduces the new definition of audit and national audit in the first place, and summarizes general characteristics. Then it explores the relationship of national audit and public, and finds out the consistency and diversity on object and linkage and independency on subject.Chapter 4 is about the relational theory of national audit functions and the fiduciary duties. This chapter makes theoretical preparation for the different reflections of national audit in the market economy in the next chapter. It considers that audit comes from the fiduciary duties, and national audit derives from public accountability. The distinction of national audit function in various stages of social and economic development is due to the changes of public accountability. It analyzes characteristics of changes in the national audit function, and explores constraints which influence the audit function.Chapter 5 is the core of this dissertation, which elaborates on the functions and roles of national audit. Firstly, this chapter makes depth analysis on the relationship of audit function and audit roles. It puts forwards that these two have close relationship, but are differentiated. The audit role is not only the objective effect and but also the changing functions of audit function under certain conditions. Then, it put forwards the three major national audit functions-auditing function, performance function and immunity function in socialist market economy. These three functions respectively reflects national audit ensuring economic activities authenticity and legality, paying attention to government performance and maintaining the national security demand. It discusses how to perform national audit corresponding functions. Furthermore, it advances national audit functions under the conditions of market economy includes:to safeguard national economic security; to supervise on the government's economic management; to promote the building of a harmonious socialist society; to support sustainable economic and social development; to enhance the level of socialist democracy and laws; to speed up effective construction of a clean government and so on.Chapter 6 probes into how to perform the functions of national audit on the basis of systematic and depth analysis of national audit functions and roles. This chapter starts with the current status and deficiencies of China's national audit, and brings forward the feasible audit approaches to further perform national audit, and explores the measures and recommendations on perfecting national audit and its functions.The main innovations of this article are as following:1. Expanding the knowledge of definition of audit and national auditIt is believed that the essence or definition of audit is looking over the books, or a systematic approach or process, or a democratic and political tool, or independent economic activities. According to these statements, the dissertation presented audit is a series of supervision including audit, evaluation and control on financial revenue, expenditure and other economic activities. Audit is supervision, and the essence of audit is the independent relationship of supervision.Accordingly, national audit is an independent nation-oriented supervision and the object of national audit is financial funds as well as all the users of other social public funds. It also points out that national audit is responsible for overseeing the fiscal and financial revenue and expenditure as well as other economic activities; moreover, it is higher level of economic supervision compared with private audit, social audit and other economic supervision.2. Exploring the relationship of national audit and public fiscal supervision on the foundation of public financial supervisionThis dissertation asserts that the national audit and public financial supervision have consistency and diversity on object, and linkage and independency on subject. Both supervise the fiscal funds handled by financial sectors, but the scope of national audit is much boarder, which covers all special audit investigations on social public funds and certain issues as well as auditing economic responsibilities of leading cadres. The subject of public funds including financial funds is diverse, and each subject is both independent and interactive. However, national audit is more detached and more independent.3. Propounding new audit functions in socialist market economyThe literature of audit functions at present is divided into two categories, including Single-function Theory and Multi-function Theory, of which the mainstream view prefers that audit has economic monitoring, evaluation and verification functions. Combined with the characteristics of changes in public accountability and requirements of the socialist economy in China, this dissertation put forwards three major functions of national audit in the socialist market economy:auditing function, performance function and immunity function. In China's socialist market economy, it analyzes public accountability evolved from public fiduciary financial and public administrative accountability in the past to public fiduciary social accountability, exercises supervision on fiduciary social accountability. The national audit is charged with more important missions: maintaining market integrity through auditing, promoting market efficiency which emphasizes on efficiency of audit, and making up for market imperfections that is immunity function. By these functions, national audit can effectively promote the healthy development of the socialist market economy, and fulfill the public social accountability.4. Deepening discussion on the concept of audit rolesThe existing literature interprets it from the perspective of the effect of performing audit function. In this dissertation, the role of audit should include two tiers of meaning:1) it is changing functions of audit in a given period under given environmental conditions; and 2) it refers to performing audit function as well as its objective effect, and its end-result characterized by effectiveness, benefit, effect and impact, etc. Therefore, it fully and deeply understands the roles of the audit.Although this research has made many achievements, because of the conditions and means of research and the author's capacity, there are still some shortcomings and deficiencies. For example, the topic is about the functions of audit, which is relatively theoretical. It adopts qualitative analysis method, thus is lack of quantitative analysis. There are three forms of audit divided by the subject of audit. In addition to the national audit, there are private audit and internal audit. The latter two also have the three functions mentioned above in the socialist market economy. However, it lacks of detailed elaboration on their audit functions, the realization of the functions and related methods of further improvement. These are to be further studied in the future.