The Performance Audit Evaluation

upon the Central SOEs

—— with the Use of KNI under the IT Environment

Today’s Topic: SOE

GongGong

Mexico Accords

Performance Assessment Systems Based on Key Indicators

Entity/Government Agency Indicators

Global Indicators National Indicators State/Public Sector Indicators Service, Program or Policy Indicators

The CNAO is carrying out pilot

audits over the central SOEswith the use of Key Indicatorsunder the IT Environment

The CNAO is carrying out pilot

audits over the central SOEswith the use of Key Indicatorsunder the IT Environment

Part Scope of Audit: the Central SOEs Ⅰ

SOE’s Performance – Problem

Input-Output

Risks Operation

Sustainable Development

SOE’s Performance – solution

On-line Audit

Performance Audit Real Time

Audit

KI

Part II Key Indicators used in the Audit: the Integrated Performance Evaluation Indicators for the Central SOEs (IPEI)

KI for Management Performance Qualitative indicators in the fields of Strategic Planning, Decision-making, Social Contribution, Impacts, Innovations, Risk Control, etc.

KI for Financial Performance

22 Quantitative Indicators in the fields of Profitability, Quality of Assets, Debt Risk and Business Growth

IPEI Framework

AAProfitability

BBQuality of Assets

CCDebt Risk

DDBusiness Growth

KI for Financial Performance

•… …Return on Total Assets •… …Assets Turnover Rate

•… …Debt Burden

•… …Cost Control •… …Operation of Assets

•… …Cash Flow •… …Structure of Assets

•… …Contingent Liability

•… …Cash Flow Solvency

....Growth of Sales

....Capital Surplus

....Change of Profits

....R&D Input

1 2

3 4

KI for Management Performance

Risk ControlPerformance

Innovations

Impacts

Social Contribution

ManagementHuman Resources

Decision-makingStrategic Planning

Average MarginalExcellent Good Poor

Evaluation Criteria

IPEI

Part III IT Software used in the Audit: Audit Analysis and Early Warning System of the Central SOEs (AAEWS)

IPEI:2006

Criteria: 2009

2011:AAEWS

2012

Development of AAEWS

Based on the IPEI and the related criteria developed by SASAC, the CNAO is working on the development of a smart IT software: AAEWS for the audit over the central SOEs.

Data Resources

Calculating Tool

Evaluation Criteria

Key Indicators

The Central SOEs

CNAO

Listed Corp.

SASAC

The Composition of AAEWS

Functions of AAEWS

AAEWS

Data Management

Material Risks

Review of Accounting Documents

Reporting Management

Integrated Data Statistics and Analysis

Business Performance

Data Input Overall Evaluation

Audit Analysis and Early Warning Report

Cash Flows

Income

Liabilities Guarantee

Accounts Receivable

Investment & Risks

Business

Contingencies

Balance Sheet

Key Indicators

Evaluation Criteria

Accounting Information Reliability

Report

Early Warning of Material

Risks

OverallOverall

AssessmentAssessment

Functions of AAEWS

Values of AAEWS

1 2 3

Analysis and Early Warning for a certain type of the Central SOE

Analysis and Early Warning for Each Central SOE

Analysis of the Impact of the Central SOE on Economic Development and

Social Progress

Values of AAEWS

1 2 3 4

Real Time Audit over SOE

Internal Audit

Field Audit over SOE

Planning of Enterprise Audit

Part IV Audit Practice: Performance Audit Evaluation with the Use of KI of the Central SOEs under AAEWS

A Case Study: Audit over Harbin Electric Corporation

Which should be

paid attention to

How to punish

those violators

When to give

early warning

Where to get

evidence

A Case Study: Audit over Harbin Electric Corporation

The Audit Process

Financial Documents in 2007-2010

Data Input

10 minutes for Producing Reports

Professional Judgment

Two ReportsKey Findings

Accounting Information Reliability Report

Audit Analysis and Early Warning Report

Multiple-perspective Financial Performance Evaluation and Conclusion

Review over Original Data Business Performance Evaluation

Overall Assessment Early Warning for Fraud and Financial Crisis

Marking of Abnormal Data Analysis for Business Development Trend

Disclosure of Irregularities

Plus/minus

Audit results fully supported with audit evidence;

Saving Time

Plus Points Plus Points

Moduels in the AAEWS are yet to be improved;

More indicators (social responsibility, policy,etc.) are yet to be added

Minus Points Minus Points

+ –

Any

Questions?

The End

Thank you