Accounting report audit and special audit required materials

General Accounting Report Audit -- Audit of mid-year and annual accounting reports for various enterprises, assessing whether they comply with the provisions of corporate accounting standards and systems in all major aspects. It is a routine audit service. Typically provided to the company's shareholders, superior units, and administrative authorities.

General Audit Required Main Document List:

1. Unaudited financial statements and notes, all accounting vouchers, ledgers, and financial statements of each period.

2. Cash Count Sheet, all bank reconciliation statements, and balance adjustment sheets.

3. Correspondence Letter of Inquiry for Mutual Account Response

4. Inventory, Fixed Asset Inventory List, Depreciation Calculation Sheet, and ownership certificates for fixed assets and intangible assets.

5. Long-term and short-term investments/lending, investment/lending agreement contracts, business license of the invested entity, accounting statements of the invested entity, audited accounting statements of the invested entity as of the date of the accounting statements, and mortgage/guarantee documents.

6. All year-round tax payment documents, tax declarations, payment receipts, tax preferential approval documents, and tax assessment files.

7. Business License, Business Filing, National and Local Tax Registration Certificates, Organization Code Certificate, Permits, Company Articles of Association, Agreements.

8. Establishment and amendment of capital verification reports, and audit reports from previous years.

Foreign-Invested Enterprise Financial Statement Audit -- Annual financial statement audit for foreign-invested enterprises, provided to administrative departments such as the Foreign Economic Cooperation and Trade Commission, Foreign Exchange Administration Bureau, Administration for Market Regulation, Tax Bureau, Finance Bureau, Customs, and Statistics Bureau. The content of concern varies among different units, but all can be summarized in a single report. In addition to the general documents required for an audit, foreign-invested enterprise audits also require a list of documents, including approval letters from the Foreign Economic Cooperation and Trade Bureau, approval certificates for foreign-invested enterprises, foreign exchange registration certificates, foreign debt registration certificates, foreign debt feedback forms, approval documents for opening foreign exchange accounts, and related foreign exchange registration certificates.

Annual Foreign Exchange Audit -- A specialized review of enterprises, institutions, and overseas entities' foreign exchange income and expenditure, account usage, and compliance with foreign exchange regulations, submitted to the Foreign Exchange Administration. Includes: all entities, such as corporate units, institutional units, and representative offices of overseas institutions, that have opened foreign exchange accounts.

List of Main Documents Required for Foreign Exchange Audit:

1. Foreign currency bank deposit reconciliation statements, balance adjustment sheets.

2. Foreign exchange registration certificate, foreign debt registration certificate, foreign debt feedback form, all foreign exchange account approval documents.

3. Foreign exchange funds and accounting records of transactions.

Representative Office Expenditure Audit -- For representative offices engaging in taxable businesses or taxed based on expenditure conversion to income, an annual audit of the entire year's expenditure and tax payment status is required to be submitted to the tax bureau. The office will review the accuracy of the expenditure calculations, ensure full tax payments, and timely submissions, and issue an audit report.

List of main documents required for audit of foreign enterprises/institutions' permanent representative offices in Dongguan:

1. Approval Certificate for Permanent Representative Office, Registration Certificate, National and Local Tax Registration Certificate, Organization Code Certificate, Business License of the Dispatching Company (copy), Previous Audit Report.

2. Key economic contracts, agreements, and explanations of significant business changes.

3. Tax return forms and tax payment certificates, tax incentives and permits, and tax assessment documents.

4. Expense breakdown sheet (itemized, listed by month), all original invoices and account books for expense categories.

5. Cash Count Sheet, End-of-Period Bank Reconciliation Statement, and Balance Reconciliation Sheet.

6. List of Fixed Assets and Depreciation Calculation, proof of ownership of fixed assets, and relevant appraisal reports.

Institution Audit -- Units that follow the <Institution Accounting System> are also required to audit their year-end financial reports to verify the authenticity of their financial statements, typically providing the audit report to their superior units.

Special Audits primarily include departure audits, liquidation audits, reform audits, net asset audits, fixed asset depreciation special audits, judicial appraisal audits, property transfer audits, loan audits, immigration audits, property management fee audits, and review of accounting statements.

Leaving Office Audit – Refers to the review, verification, and overall evaluation of the legal representative's fulfillment of economic responsibilities throughout their entire tenure. It is an effective method to assess the performance of the responsible person during their tenure and clearly delineate the economic responsibilities between predecessors and successors.

In addition to the general audit documents required, the outgoing audit also necessitates the provision of:

1. The outgoing person's position report and work summary during the term of office.

2. Introduction of the outgoing person's basic information.

3. Documents and notifications regarding the handling of company inspections by the superior department.

Liquidation Audit -- An audit conducted on a company's liquidation period, covering the settlement of its debts and claims, asset realization, and the income, loss, and expenses during the liquidation period. Typically includes bankruptcy liquidation audit and contractually agreed termination liquidation audit. This audit report is required by the tax authorities before issuing a tax clearance certificate and by the industry and commerce department before the company's deregistration.

In addition to the general audit documents required, the liquidation audit also necessitates the provision of:

1. Opening Balance Sheet and Notes, Full Accounting Records for the Past Three Years, and Accounting Vouchers for the Past Three Years

2. Bank reconciliation statements and balance adjustment sheets for all bank deposits for each of the past three years.

3. All tax types, annual tax documents, tax returns, and payment receipts for the past three years.

4. Liquidation Notice (three times), liquidation resolutions and approvals, property list confirmed by the liquidation committee

Reform Audit -- Audit required when a state-owned or collective-owned enterprise changes its ownership nature, typically when transitioning to a limited liability company established under the <Company Law>. Includes initial investment identification audit, property loss identification audit, and financial status identification audit. The audit report can be provided to the Finance Bureau, Administration for Market Regulation, superior units of the enterprise, and other relevant departments.

Perform agreed-upon procedures on financial information – Refers to executing audit procedures agreed upon with a specific entity on certain financial data, a specific financial statement, or a complete set of financial statements, and reporting the execution and results to the client. Such as net assets audit, special audit of fixed asset depreciation.

Legal Appraisal Audit -- A specialized audit conducted on behalf of the court, procuratorate, public security authorities, or the parties involved in a lawsuit, focusing on the facts, formation process, causes, and outcomes of economic issues related to the lawsuit. Typically, we employ special audit procedures for such audits, and their results carry legal efficacy.

In addition to the general audit materials, the judicial appraisal audit requires the following: the plaintiff's statement, mediation document, and judgment document of the entity under audit.

Asset Transfer Audit – A special audit to verify whether tangible assets invested by shareholders have been transferred to the company, properly recorded, and related transfer procedures have been completed. This audit report is usually a required document for the Administration for Market Regulation to handle registration.

Loan Audit – Provided to banks for reviewing a company's eligibility for bank loan requirements and for a specialized audit of loan usage. In the audit report, we not only issue an opinion on the financial statements but also comment on the company's management, financial condition, and loan usage. It is an indispensable basis for banks to mitigate loan risks and for companies to demonstrate their business conditions.

Immigration Audit -- A specialized audit provided to embassies to reflect the operational results of the business owned by the applicant for immigration. Typically includes financial statements for the past three years, as well as financial indicator analysis. Additionally, an English report translated by a professional is provided.

Cautionary Notes for Publicly Traded Companies on Auditing Financial Statements

1. Certified Public Accountants (CPAs) must, in accordance with audit risk standards, identify and evaluate the risks of material misstatement in financial statements. They should implement overall responses to the assessed risks at the financial statement level and further audit procedures for assessed risks at the assertion level to reduce audit risk to an acceptable low level. 2. CPAs should plan and perform audit work throughout the audit process with a professional skepticism, considering the likelihood of material misstatement in financial statements due to fraud. CPAs should assume a fraud risk in the revenue recognition process of the entity being audited and consider which revenue categories, as well as transactions or assertions related to revenue, may lead to fraud risks.

Thirdly, when a Certified Public Accountant issues an audit report on the financial statements of a listed company, they must adhere to the requirements of the audit report standards and issue the report in the new format. Since the financial statements of listed companies are still prepared in accordance with the original accounting standards and corporate accounting systems, the CPA must mention the relevant corporate accounting system used in preparing the financial statements of the listed company, but need not mention the "Statement of Changes in Equity (or Shareholder's Equity)." The CPA should obtain sufficient and appropriate audit evidence as required by the standards to determine whether the comparative data is correctly presented.

Fourthly, Certified Public Accountants (CPAs) should, in accordance with the requirements of the auditing working papers standards, establish clear audit work records. CPAs are required to promptly organize the audit working papers into the final audit file within 60 days after the audit report date. If a CPA fails to complete the audit engagement, the working papers should be archived within 60 days of the engagement's termination. Accounting firms should establish policies and procedures to ensure that the retention of working papers complies with the standards. For audit working papers created, accounting firms must retain them for at least 10 years from the date of the business report. For enduring files prepared under the previous standards, accounting firms may retain them in accordance with the new auditing standards, for a period not less than 10 years, or indefinitely as needed by the business.

Fifthly, Certified Public Accountants should directly communicate with the governing body of the entity being audited regarding their responsibilities, independence, planned audit scope and time, and issues discovered during the audit, in accordance with the requirements of communication standards with the governing body.

Sixthly, accounting firms should revise and implement the quality control system in accordance with the requirements of quality control standards to ensure professional quality and prevent professional risks. Accounting firms should select an independent internal body or personnel to conduct project quality control reviews for the audit of listed companies. Certified public accountants can only issue an audit report after the project quality control review is completed and major issues are resolved in accordance with the firm's procedures for handling disagreements.

Introduction to Accounting Report Audit

Accounting report audits involve the auditing of the accounting statements (such as balance sheets, income statements, and cash flow statements) of the audited entity, as well as the accompanying notes and related schedules. In the West, this is known as financial statement auditing. The purpose of such audits is to ascertain whether the accounting statements of the audited entity comply with Generally Accepted Accounting Principles (in China, these are the Enterprise Accounting Standards and other relevant financial accounting regulations), and fairly reflect its financial position, operating results, and cash flow. Accounting report audits have gradually developed as a result of the separation of ownership and management in corporations, as well as the socialization of shares. In Western countries, while accounting report audits are ostensibly a means to protect shareholder rights, in practice, they encompass various aspects related to the financial connections of the audited entity. For example, the American Institute of Certified Public Accountants' "Auditing Standards Statement" specifies in detail the matters auditors should consider. Accounting report audits are a type of audit with a more comprehensive theory in modern auditing.