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TABLE OF CONTENTS CHAPTER I GENERAL PRINCIPLES CHAPTER II APPLICATION FOR VERIFICATION CHAPTER III CHECKING OF ACCOUNTS CHAPTER IV CHECKING OF ASSETS CHAPTER V REVALUATION OF VALUE CHAPTER VI DETERMINATION OF GAINS AND LOSSES CHAPTER VII PREPARATION OF STATEMENTS CHAPTER VIII INTERMEDIARY AUDITING CHAPTER IX REPORT ON RESULT OF VERIFICATION CHAPTER X VERIFICATION OF CAPITAL CHAPTER XI HANDLING OF ACCOUNTS CHAPTER XII BETTERMENT SYSTEM CHAPTER XIII SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PRINCIPLES Article 1. The present Procedures and Norms are hereby formulated in accordance with the "Measures for Assets and Capital Verification of State-owned Enterprises" and the relevant financial and accounting systems of the state, for the purpose of regulating the assets and capital verification of state-owned enterprises and state-owned share holding enterprises (hereinafter referred to the Enterprises), and ensuring the quality of this work, and improving the work efficiency. Article 2. The Enterprises shall organize and carry out assets and capital verification in accordance with the provisions of the "Measures for Assets and Capital Verification of State-owned Enterprises" and the procedures, methods, requirements and steps of working clarified in the present Procedures and Norms. Article 3. The Enterprises shall follow the relevant requirements of the present Procedures and Norms when carrying out assets and capital verification, namely, the application for the verification, checking of accounts and assets, revaluation of values, determination of asset gains and losses, compilation of statements, auditing by public intermediary agencies, declaration of results, verification of capital, handling of accounts, the improvement of systems, etc.. Article 4. The formulation of the Procedures and Norms for Assets and Capital Verification of Enterprises is for the purpose of establishing the basic procedures and standards for assets and capital verification of the Enterprises, to carry out the assets and capital verification in a legal, open and transparent way, and under supervision and balances. CHAPTER II APPLICATION FOR VERIFICATION Article 5. The Enterprises shall, when carrying out assets and capital verification, file an application for verification in light of the particular circumstances and the relevant requirements of the state on assets and capital verification, and organize the verification process after being approved, except when there are otherwise special prescriptions by the organs of state-owned assets supervision and administration. In case the assets and capital verification is carried out upon the demand of the organs of state-owned assets supervision and administration, the Enterprises shall organize the verification process pursuant to the notice or working scheme of the organs of state-owned assets supervision and administration. Article 6. In case the Enterprises have the relevant economic acts prescribed in Article 8 of the "Measures for Assets and Capital Verification of State-owned Enterprises", the parent company shall file an application to the organs of state-owned assets supervision and administration at the corresponding level uniformly for carrying out the assets and capital verification according to the relevant policies of the state on assets and capital verification and the needs of the economic acts of the Enterprises. Article 7. The application report for assets and capital verification of an Enterprise shall mainly include the following contents: (1) A brief introduction to the Enterprise; (2) The reasons for carrying out the assets and capital verification; (3) The starting date (the time for checking) for carrying out the assets and capital verification; (4) The scope for assets and capital verification; (5) The way of organization for the assets and capital verification; and (6) Other matters need to be explained. Article 8. The relevant documents or materials that can explain the reason for carrying out assets and capital verification shall be attached with the application report for assets and capital verification of the Enterprises. In case the state-owned share holding enterprises carry out or take part in assets and capital verification, the relevant resolutions of the board of directors or the shareholders' meeting shall be attached to the report. Article 9. The scope for carrying out assets and capital verification of an Enterprise shall include: the headquarters of the Enterprise and all the subsidiaries (including the subordinate institutions, branches, and overseas subsidiaries, the same hereinafter). Where a subsidiary is unable to participate in the assets and capital verification for special reasons, the Enterprise shall attach the relevant name lists to the report and explain the reason, and may take the amount shown in the account books as the results of assets and capital verification upon approval. Article 10. The following subsidiaries of an Enterprise may not be included in assets and capital verification, and the amount shown in the account books of the Enterprise may be deemed as the result of the assets and capital verification directly: (1) The subsidiaries are newly established, and have not reached one full year; (2) The subsidiaries have organized assets and capital verification due to certain special economic acts in the past one year; and (3) The assets and capital, and the financial status of the subsidiaries are in good conditions, and there are really no larger asset losses or potential losses on account after the financial auditing is made. Article 11. The organs of state-owned assets supervision and administration shall, after receiving the application report for assets and capital verification presented by an Enterprise, make examination and verification and give a reply in time according to the system of assets and capital verification: (1) In case the Enterprise meets the requirements for carrying out assets and capital verification, the organs of state-owned assets supervision and administration shall issue documents approving the Enterprise to carry out the assets and capital verification within the prescribed time limit; (2) In case the Enterprise does not meet the requirements for carrying out assets and capital verification, the organs of state-owned assets supervision and administration shall notify the Enterprise in time and explain the reason. Article 12. An Enterprise shall, after being approved to carry out assets and capital verification, designate organs such as the internal financial management organs or capital management organs etc., or set up a temporary organ consisting of several departments as the specific working body, which shall be responsible for organizing and coordinating the relevant work for assets and capital verification of the Enterprise, and shall also establish working contact with the organs of state-owned assets supervision and administration. Article 13. After being approved to carry out assets and capital verification, an Enterprise shall, within 15 working days after receiving the documents of approval, formulate the specific implementation schemes for assets and capital verification of the Enterprise in accordance with the relevant policies, systems and requirements of the state on assets and capital verification, and report them for record to the organs of state-owned assets supervision and administration at the corresponding level (of which one copy shall be sent to the supervisory board of the Enterprise). Article 14. The specific implementation scheme on assets and capital verification of the Enterprises shall mainly include the following contents: (1) The aim for carrying out assets and capital verification of the Enterprises; (2) The basic conditions of the working body for assets and capital verification of the Enterprises; (3) The ways of organization for assets and capital verification of the Enterprises; (4) The contents of assets and capital verification of the Enterprises; (5) The procedures and time for assets and capital verification of the Enterprises; (6) The requirements and discipline for assets and capital verification of the Enterprises; and (7) Other matters need to be explained. Article 15. An Enterprise shall, during the process of assets and capital verification, clean up the internal accounts number of the Enterprise carefully, determine the basic entities or items for checking, and clarify the scope of the work, as well as put into effect the system of liability for work. The basic entities for checking and the organizations for assets and capital verification shall be carved up and determined in accordance with the financial subordination relationship of the Enterprise in principle. CHAPTER III CHECKING OF ACCOUNTS Article 16. In order to ensure that the accounts of the Enterprises are in conformity with each other, and with the certificates, the Enterprises must carefully check the accounts in assets and capital verification, namely, check all the accounts of the parent company and the subsidiaries of the Enterprises, make overall verification and clean-up on the basic conditions of the accounts, such as the come-and-go of the various internal capital between the parent company and each subsidiary, the balance of deposit and loans, cash on hand, the securities, etc., so as to ensure that the various accounts of the Enterprises are complete and accurate. Article 17. The Enterprises shall take the starting date for assets and capital verification as the time for checking the accounts, and shall clean up the various accounts entirely by way of retroactive accounting, so as to carefully settle the internal accounts and verify the capital. The come-and-go relations and the capital relations among all the internal departments of the parent company, and between the parent company and the subsidiaries, as well as among the subsidiaries shall be clarified through checking the accounts. Article 18. The Enterprises shall clean up entirely the basic bank deposit accounts opened in the financial institutions, which are paid and settled in RMB, the ordinary deposit accounts, temporary deposit accounts, special deposit accounts, the foreign exchange account for current account transactions, the foreign exchange account for capital account transactions, etc. Article 19. An Enterprise shall, during the process of assets and capital verification, carefully clean up the various accounts of itself and its subsidiaries, namely, those in violation of regulations or out of book. It shall check up whether the bank accounts of the Enterprise opened in various financial institutions are in compliance with the regulations according to the existing provisions of the relevant system of financial and accounting management of the state, and shall firmly straighten out the bank accounts that are opened in violation of regulations. In case any off-the-book account is found out, it shall be corrected resolutely. Article 20. The Enterprises shall, during the process of assets and capital verification, carefully check the various off-the-book cash of the headquarters of the company and all the subsidiaries. The income seized and withheld in violation of the financial and economic laws and regulations and other relevant provisions of the state, or all kinds of cash privately deposited and kept (namely, "a private coffer") shall be cleaned up entirely, and shall be included into the accounts of the Enterprises in time after correction has been made. Article 21. An Enterprise shall, during the process of assets and capital verification, carefully clean up all the internal and external securities, the property mortgages and the judicial litigation of the headquarters of the Enterprise and its subsidiaries, etc., and shall classify them into sequence in light of particular circumstances, and take effective measures to prevent the risk. Article 22. The Enterprises shall, when the accounts are checked, make accounting adjustment independently on various errors of account checked out, which are caused due to technical accounting mistakes, according to the provisions of the accounting standards on adjustment of the accounting mistakes. CHAPTER IV CHECKING OF ASSETS Article 23. The Enterprises shall, during the process of assets and capital verification, earnestly organize the organs concerned to check the assets, and clean up and verify the various assets and capital. The public intermediary agencies shall make supervision over the checking of assets in accordance with the relevant provisions of the Independent Auditing Standards. Article 24. The Enterprises shall, when organizing the checking of assets, combine the checking of in-kind assets with the verification of accounts, and check the assets according to accounts, and verify accounts according to assets in the process of checking, and the verification shall be done carefully to ensure the conformity of the accounts with the facts: (1) The Enterprises shall combine the clean-up of assets with the verification and examination of the liabilities and the rights and interests of the owners in checking the assets, and carefully clean up the liabilities and the rights and interests of the Enterprises, discover the false creditor's rights and liabilities caused due to the technical accounting errors and correct them in time. The non-ledger equity and the out-of-book liability checked out shall be brought into an account in time, so as to ensure the truthfulness and accuracy of the assets and liabilities, as well as the rights and interests of the Enterprises; (2) The Enterprises shall, when checking the assets, lay emphasis on cleaning up all kinds of accounts receivable and accounts prepaid, all kinds of foreign investment and non-ledger assets, so as to check and verify whether the creditor's rights of the accounts receivable exist, and verify the actual value of the original cost of the foreign investment in existence. Article 25. The scope and contents for the checking and verification of the current assets of the Enterprises shall include: cash, various deposits, accounts receivable or prepaid, short-term investment, inventories, etc.. Article 26. The verification of cash aims at determining whether the monetary fund exists; whether the records on the income and expenses of the monetary fund are complete; and whether the cash on hand, the bank deposit and the balance of other monetary fund accounts are correct. Article 27. The checking of the cash in treasury shall include: examining whether the cash in treasury has exceeded the quota verified and ratified, and whether the income and expenses of the cash are in conformity with the provisions on cash management; checking whether the actual amount of cash in treasury is in conformity with the balance of the cash journal day book; and working out the Statement on Checking of the Cash in Treasury. The foreign currencies in treasury shall be verified on the basis of the type of the currency, and converted according to the exchange rate for buying the foreign currency by the bank at the day of verification. The balance of the excess reserves plus the amount of various outlay instruments shall equal the amount of excess reserves originally allocated. The balance of the cash journal day book of an Enterprise shall be verified so as to determine whether it is in conformity with the verified amount of cash in treasury at the time of checking; in case there is any difference between them, the reasons shall be explained. Article 28. The checking of other monetary fund shall mainly include: the deposit in other cities, bank draft deposit, bank check deposit, monetary fund in transit, deposit of credit card, deposit of L/C, etc., which shall be checked one by one according to other monetary fund accounts and the subsidiary ledgers thereof. Article 29. The checking of the bank deposit shall mainly include: whether the book balance of various deposits of an Enterprises in the opening bank and other financial institutions is in conformity with the book balance of the account of the Enterprise in the bank and other financial institutions, which shall be checked and verified one by one according to the statement of account of the bank deposit, the kind of deposit and currency; the truthfulness of the account in transit in the Form for Adjustment of Balance; whether the conversion rate of the conversion of the non-bookkeeping base currency into the bookkeeping base currency is accurate, and whether the conversion margin has been handled in the account prescribed. (1) The detailed statement of deposit shall be listed separately in detail according to the different bank accounts, and shall distinguish Renminbi from the various foreign currencies; (2) For the fixed deposit, the certificate of fixed deposit of the bank shall be provided; (3) The bank shall issue certification documents for all kinds of deposits; (4) The foreign currency deposit shall be listed separately according to the type of foreign currency and the bank; and (5) In case the bank deposit account has listed the interest revenue, it shall be indicated in detail. Article 30. The verification of the accounts receivable and paid in advance shall include the documents receivable, accounts receivable, other accounts receivable, advance payment, and the prepaid and deferred expenses£º (1) The Enterprises shall verify and check the documents receivable one by one with the ordering entities or banks according to their categories; (2) The Enterprises shall verify one by one the accounts receivable, other accounts receivable and accounts paid in advance with the opposite entities, and keep in the accounts the amount consistent in the two parties. The disputed creditor's right shall be carefully cleaned up, checked and verified so as to clarify the relations of the creditor's right. The Enterprise shall find out the reasons for the long-term back money and demand to collect it on its own initiatives; in case the money is difficult to be recovered after confirmation, the liabilities for which shall be clarified and the relevant work for evidence taking shall be done properly; and (3) The personal loans of the employees of the Enterprises shall be cleaned up carefully and recovered within a prescribed time limit. Article 31. The checking of the short-term investment shall mainly include: cleaning up the state treasury, various special bonds, stocks and other short-term investment, obtaining the statement of account of the stocks, bonds, and fund accounts to check against the balance of the subsidiary ledger; checking the securities in stock against the relevant account balance. Article 32. The checking of inventory shall mainly include: raw and processed materials, auxiliary materials, fuel, spare parts for repair use, packing articles, low cost and short lived articles; unfinished products; semi finished articles, finished goods, merchandise purchased, and products cooperatively produced, as well as materials (merchandise) kept by an agent, or in transit, in external stock, lent, processed on consignment, etc: (1) All the Enterprises shall carefully organize the clearance and check all the inventories entirely; and find out the reasons for the inventories overstocked, damaged or need to be rejected, and organize the relevant technical appraisement and propose handling opinions; (2) The Enterprises shall find out the reasons for the inventories lent for a long time and haven't been recovered, and recover them on their own initiatives or transfer them after evaluation prescribed; and (3) The depositary shall assist the Enterprises to check the materials held in custody and notify the result of the verification to the entities with property rights. Article 33. The scope of verification on the fixed assets shall mainly include: houses and buildings, machinery equipment, transport equipment, tools and apparatus, the land, etc.. (1) The checking of the fixed assets shall focus on the original value and net value of the fixed assets, the amount of depreciation having been deducted, the fixed assets from which the depreciation has been fully deducted, the amount of fixed assets to be discarded or having been discarded in advance, the losses of fixed assets, the amount to be cancelled after verification, etc.; (2) The lessor shall be responsible for checking the leased fixed assets, in case the leased fixed assets fail to be registered in the account, the lessor shall check the result of verification with the lessee, and register it in the account; (3) In case the assets and capital are lent or transferred without going through the approval formalities prescribed, the Enterprises shall make careful verification to recover them or go through the formalities they failed to go through; (4) The reasons for the various book inventory overage (including the inventory overage out of accounts), and the fixed assets of inventory shortage shall be earnestly found out. The responsibilities thereof shall be clarified, and the handling opinions shall be proposed; (5) The various fixed assets shall, after being checked, be re-registered according to their purposes (the productive assets or non-productive assets) and the conditions of use (in use, unused or no need to be used, etc.). The real account and card shall be established and improved; (6) The verification of the various fixed assets, which fail to be used, or need not to be used, shall mainly focus on their date of purchasing and building, time for their use, their technical status, the main parameters thereof, etc.. And the opinions for handling them shall be proposed concerning their allocation (the value shall be transferred into the entity allocated), the transfer of their use to production, sale, conditions to be discarded, etc.; and (7) The checking of land shall include: the land occupied by the Enterprises according to law, or leased or lent to other Enterprises, the land whose right of use being evaluated as the investment in or shares to the internal affiliated enterprises or joint ventures established by the Enterprises, the land whose right of use being evaluated as shares of the Sino-foreign equity joint ventures or contractual joint ventures established by the Enterprises and foreign parties. Article 34. The checking of the long-term investment shall mainly include: the various kinds of investments made by the parent company and its subsidiaries in the forms of circulating assets, fixed assets, intangible assets, etc.: (1) The checking of external long-term investment, in which the Enterprise has actual controlling rights so long as the stocks or share of capital is concerned, shall be made by equity method in general; in case the Enterprise has no actual controlling rights, the verification shall be made through the business accounting method for foreign investment of the Enterprise at present. The coverage of the verification shall include: the contract, agreement or articles of association in relation to the long-term investment, documents of approval of the relevant authoritative departments, determination of the actual share rights, original investment, stock share composition, the dividends currently owned, etc.; and (2) The verification of the overseas long-term investment of the Enterprise shall mainly include: the various assets and capital in all kinds of sole proprietorship, joint ventures, affiliated companies or share companies established overseas and invested in capital, in-kind assets, intangible assets, etc., of which the management and investment benefits shall be checked carefully by the Chinese investment enterprises. Article 35. The verification of projects under construction (including capital construction project) shall mainly include: the state capital construction projects under construction, stopped or postponed; technical renovation projects, including projects completed but fail to be put into use (including project whose initial operation has been made), projects put into use but fail to be checked and accepted to enter an account, and projects on account for a long time but actually having been shutdown and discarded. The construction entities shall be responsible for checking the projects under construction according to items one by one, the focus of which shall be laid on the registration of the character of the project under construction, sources of investment, total investment, actual outlay, and progress of the project actually completed, as well as the management conditions. The reasons for the damage and discard of the projects under construction shall be specified in detail, and the certification documents proving its compliance with the regulations shall be provided. The Enterprise shall enter an account in time for the projects checked out, which have been completed but fail to be put into use or have been put into use but fail to be checked and accepted and brought into an account. Article 36. The verification of the intangible assets shall include: the various patent rights, trademark rights, chartered rights, copy rights, commercial goodwill, land use rights, right to use housing, etc.. The intangible assets shall be verified entirely after checking so as to determine their true value and full content, and verify the certification documents of ownership, as well as check the conditions of actual amortization. Article 37. The verification of the deferred assets and other assets shall include: the organization fees, outlays for leasing the fixed assets for improvement, and the reserve materials specially granted, which shall be cleaned up one by one, and the balance of amortization shall be carefully checked and verified. Article 38. The verification of liabilities shall include all kinds of current liabilities and long-term liabilities. The verification of the current liabilities shall cover: all kinds of short-term loans, accounts payable and paid in advance, accrued expenses, the payable welfare expenses, etc.. The verification of the long-term liabilities shall include: all kinds of long-term loans, debentures payable, long-term accounts payable, housing revolving funds, etc. The Enterprises and entities shall, when making verification on liabilities, together with the entities of creditor's right, verify the accounts one by one to attain the conformity of book balance of the two parties. Article 39. The Enterprises shall, on the basis of the complete verification on the above-mentioned assets and capital, in light of the relevant provisions of the state on determination of the losses in assets and capital verification, and with the cooperation of the public intermediary agencies, collect the relevant evidences, and make preparations for the determination of the asset losses and capital. CHAPTER V REVALUATION OF VALUE Article 40. The Enterprises shall, in principle, not make revaluation again on the value of the assets and capital, if revaluation has been made on its assets and capital before in assets and capital verification (including the fifth assets and capital verification of the country, the assets and capital verification carried out for the purpose of coordinating with the army troops, the armed police troops and organs of politics and law to hand over the Enterprises, of separating the Enterprises from the Central Party and government organizations, and of restructuring the scientific and research institutions wholly, as well as the routine assets and capital verification), or if the valuation has been made on the assets and capital due to the need for special economic acts. Article 41. In the case of Enterprises directly under the Central Government, if the assets and capital verification thereof not falling within the scope prescribed in Article 40, and the major fixed assets and current assets of the Enterprises whose book value deviates far from the actual value, need to be revaluated, the Enterprises shall make special statements on the relevant matters concerned and the reasons thereof in the report of application for assets and capital verification, which shall be examined and approved by the State-owned Assets Supervision and Administration Commission of the State Council. Article 42. Where the Enterprises invested by the local governments need to make revaluation on the value of assets and capital in assets and capital verification, it shall be verified and approved by the organs of state-owned assets supervision and administration at the provincial level. Article 43. Where an Enterprise has been approved for making revaluation on the value of assets and capital in assets and capital verification, the revaluation shall be made through the method of index of price. The revaluation may also be made through the replacement cost method after being approved under special circumstances. Article 44. The "index of price" method refers to the method of revaluation, in which the value of assets and capital is uniformly adjusted and revaluated on the basis of the base price in the year of purchasing and building the assets, and in accordance with the price index listed in the "Catalogue of the Uniform Standard for Revaluation on the Value of Assets and Capital Verification " (1995) formulated by the relevant departments of the state. CHAPTER VI DETERMINATION OF GAINS AND LOSSES Article 45. The Enterprises shall, on the basis of checking the accounts and assets, and in accordance with policies of the state on assets and capital verification and the relevant financial and accounting systems, determine the various asset gains and losses, and capital carefully and earnestly. Article 46. The Enterprises shall verify and determine the various asset gains and losses, and capital checked out in assets and capital verification in accordance with the relevant provisions of the "Working Rules for Determination of Asset Losses of State-owned Enterprises". Article 47. The Enterprises shall obtain legal evidences for the verification and determination of the various assets gains and losses, and capital. The legal evidences shall include: (1) The external evidences with legal effect; (2) The economic appraisal certification by the public intermediary agencies; and (3) The internal evidences of the Enterprises for special economic acts. Article 48. The Enterprises shall, when making assets and capital verification, carefully organize the organs concerned to obtain and screen the relevant evidences on asset gains and losses, and capital. After obtaining the various evidences and documents concerned, the Enterprises shall carefully screen them on their reliability and rationality. The public intermediary agencies undertaking the special financial auditing of assets and capital verification shall make verification and confirmation on the truthfulness and reliability of the various evidences provided by the Enterprises. Article 49. The Enterprises shall, on the basis of careful analysis, make elaboration on conditions of various non-ledger assets, and the creditor's rights and liabilities out of book, which are checked out in assets and capital verification, and make adjustment and enter an account for them in time after reporting to and being examined and approved by the organs of state-owned assets supervision and administration. Article 50. The Enterprises shall, in assets and capital verification, declare to the organs of state-owned assets supervision and administration the various asset losses and capital with sufficient evidences and accurate facts, on which special financial auditing has been made by the public intermediary agencies, and verify and write off them according to the policies of the state on assets and capital verification. Article 51. The Enterprises shall, in assets and capital verification, strictly distinguish the losses between the internal come-and-go and the internal affiliated transactions, which shall not be determined as the losses by the parent company any more, in case the asset losses of the subsidiaries have been verified and calculated by the investors through the equity method when reporting the asset losses. CHAPTER VII PREPARATION OF STATEMENTS Article 52. The "Statement of Assets and Capital Verification of Enterprises" is the report document worked out on the basis of the various work for assets and capital verification by cleaning up, classifying, collecting and analyzing the data and documents obtained in each phase of work, which reflects the assets and capital status of the Enterprises at the starting date of the assets and capital verification, the result of verification, and verification of capital. The State-owned Assets Supervision and Administration Commission of the State Council shall be responsible for formulating and distributing the format of the "Statement of Assets and Capital Verification of Enterprises" uniformly. Article 53. The Enterprises shall fill out separately the "Statement of Assets and Capital Verification of Enterprises" carefully and according to the facts in assets and capital verification, on the basis of checking the accounts and assets and filling out the "Basic Form for Assets and Capital Verification". Article 54. The "Basic Form for Assets and Capital Verification" is the basic record form for Enterprises to carry out assets and capital verification. The Enterprises shall, during the process of assets and capital verification, make necessary modification on or adjustment in the "Basic Form for Assets and Capital Verification" in light of the circumstances of the Enterprises themselves. Article 55. The "Statement of Assets and Capital Verification of Enterprises" shall be divided into two parts, namely, the Form for Conditions of Assets and Capital Verification and the Itemized List of Suspense Account for Losses in Assets and Capital Verification: (1) The "Form for Conditions of Assets and Capital Verification" shall mainly include: Form for Checking Capital, Form for Basic Information, Application Form for Verification of Capital, Form for Separate Account of Capital Verification, and Form for Conditions of the Losses on Account; and (2) The "Itemized List of Suspense Account for Losses in Assets and Capital Verification" reflects the detailed items of the asset gains and losses, and capital applied for verification by the Enterprises, which shall be listed specifically according to the different entities and sort of losses. Article 56. The Statement of Assets and Capital Verification of Enterprises shall be worked out by dividing the work clearly, organizing it carefully, and coordinating and cooperating the relevant internal business organs actively, so as to ensure the truthfulness, legality and completion of the data of the Statements, which shall then be bound into volumes in turn, and signed and affixed with the official seal of the Enterprise. Article 57. The Statement of Assets and Capital Verification and the Basic Form for Assets and Capital Verification worked out by an Enterprise in assets and capital verification, shall be regarded as one part of the working archives, and shall be kept properly in accordance with the relevant requirements on archive management. CHAPTER VIII INTERMEDIARY AUDITING Article 58. A special financial auditing shall be made on the result of assets and capital verification of an Enterprise by a qualified public intermediary agency entrusted. For the special Enterprises involving national security, the assets and capital verification thereof shall be carried out by the Enterprises independently. Article 59. The public intermediary agencies shall, according to the principle of independence, impersonality and justice, perform the necessary auditing procedures, and pursuant to the relevant provisions of the Independent Auditing Standards, etc., carefully verify the various documents of the Enterprises on assets and capital verification, and participating in checking the amount of in-kind assets and making supervision over the checking prescribed. Article 60. The Enterprise shall clarify the functions and duties of the public intermediary agencies and the functions and duties of itself in assets and capital verification, clarify the working relations, and specify working procedures, and nail down the working liabilities. In case several public intermediary agencies are selected, the Enterprise shall designate one of them as the leading agency to be responsible for the work, and clarify the work responsibility and duty of the leading agency and the cooperative agencies. Article 61. The public intermediary agencies shall enjoy legal rights and bear legal obligations in the special financial auditing of the assets and capital verification or economic appraisal. No enterprise or individual shall interfere with the normal professional acts of the public intermediary agencies. The public intermediary agencies shall keep the various commercial secrets of the Enterprise in assets and capital verification. Article 62. The public intermediary agencies shall, on the basis of sufficient investigation, research, and reasoning, make professional conclusion and objective judgment on asset losses and gains of the Enterprise, and issue the economic appraisal certification, and shall also be responsible for the truthfulness and reliability thereof. The public intermediary agencies shall, on the basis of careful verification and analysis, and in light of the principle of independence, impersonality and justice, issue special financial auditing report on the result of assets and capital verification of the Enterprises, and shall be responsible for the accuracy and reliability thereof. Article 63. The public intermediary agencies shall, after finishing the special financial auditing on assets and capital verification, and on the basis of examination and verification on the internal control mechanism of the Enterprises, etc., provide proposal for management, and put forward the specific measures and suggestions on bettering the relevant management of the Enterprises. CHAPTER IX REPORT ON RESULT OF VERIFICATION Article 64. The Enterprises shall propose specific handling opinions separately for the various asset gains (including non-ledger assets) and losses and capital checked out according to their different circumstances and in compliance with the relevant provisions of the policies of the state on assets and capital verification, and submit the report on the result of verification to the organs of the state-owned assets supervision and administration in time. Article 65. The Enterprise shall finish the major work for assets and capital verification within 6 months from the date of receiving the documents of official reply for carrying out assets and capital verification, and shall submit the report of assets and capital verification to the organs of state-owned assets supervision and administration. If the Enterprise cannot finish the work within the prescribed time limit, it shall report to the organs of state-owned assets supervision and administration for approval. Article 66. The report on the result of assets and capital verification shall include: the report for assets and capital verification, the statement of assets and capital verification, the report for special financial auditing, and the relevant documents for future reference. Article 67. The report for assets and capital verification of the Enterprises shall mainly include the following contents: (1) A brief introduction to the basic information of the assets and capital verification of the Enterprises; (2) The result of the assets and capital verification; and (3) An analysis on problems concerning the assets and capital and financial management of the Enterprises, which are discovered in assets and capital verification, and on the reasons thereof, and proposing betterment measures, etc. Article 68. The Statement of Assets and Capital Verification of an Enterprise shall include the assets and capital status of the headquarters of the Enterprise and all its subsidiaries, so as to reflect the overall management capability of the Enterprise, and shall be worked out uniformly as a whole. The statement of assets and capital verification of the subsidiaries shall be attached and reported in the format of electric documents. Article 69. The public intermediary agencies shall be responsible for issuing the special financial auditing report, which shall mainly include: the scope and content of assets and capital verification, the basis of assets and capital verification and the merits thereof; the organization and implementation of assets and capital verification; opinions on examination and verification of assets and capital verification; major matters that need to be stated particularly regarded by public intermediary agencies; specification on the scope of use of the report, etc.. Additionally, the Itemized List of Asset Losses, the specification on the declaration and writing off of the items of asset losses and the relevant working documents, etc., shall also be attached and reported. Article 70. In case there are too many original documents of various asset losses and capital of the Enterprises, and photocopies of the certification documents with legal effect, they shall be compiled into volumes separately with indicated page number and listed catalogues. The assets and capital verification enterprises and the relevant public intermediary agencies shall be responsible for the conformity of the photocopy of the certification documents with the original copy provided by them. CHAPTER X VERIFICATION OF CAPITAL Article 71. The organs of state-owned assets supervision and administration shall make determination on the various asset gains and losses, and capital, etc., which are reported by the Enterprises on the basis of the elementary work including checking accounts and assets, etc., and re-verify the total legal assets and state capital actually possessed by the Enterprises. Article 72. The organs of state-owned assets supervision and administration shall, after receiving the report of assets and capital verification of the Enterprises, make examination and verification on the reported documents in accordance with the relevant policies of the state on assets and capital verification, and the existing financial and accounting systems of the state as well as the relevant provisions. In the case of a state-owned share holding enterprise, the relevant resolutions of the board of directors or shareholders' meeting shall be attached and reported to the organs of state-owned assets supervision and administration. Article 73. In case there are sufficient evidences for the various asset losses and capital reported by the Enterprises, the organs of state-owned assets supervision and administration shall, on the basis of the handling opinions reported by the assets and capital verification Enterprises and the special financial auditing opinions issued by the public intermediary agencies, and according to the particular circumstances of the Enterprises such as the bearing capability, propose the corresponding opinions on handling the losses on account. If the Enterprises are able to offset them, it shall be set off by the Enterprises mainly. If the Enterprises are really unable to offset them, the rights and interests of the proprietors may be deducted according to the relevant provisions. Article 74. In case the evidences for the relevant asset losses and capital are not sufficient enough due to objective reasons when the Enterprises are reporting the result of assets and capital verification, and the organs of state-owned assets supervision and administration is unable to examine and verify the result, the Enterprises may continue to collect the evidences after being approved, and make up the report (once) separately within one year. CHAPTER XI HANDLING OF ACCOUNTS Article 75. The Enterprises shall, after receiving the documents of official reply for capital verification of assets and capital verification, handle the accounts of the parent company and the subsidiaries according to the existing provisions of financial and accounting systems of the state required by the documents of official reply. Article 76. An Enterprise shall adjust the relevant title of account according to the provisions of accounting system at the same time after canceling the long-term investment losses after verification upon approval, which are caused by the writing off of losses of its subsidiaries due to the verification and calculation through equity method. Article 77. An Enterprise shall, within 60 working days after receiving the official reply for assets and capital verification, report the result of account handling to the organs of state-owned assets supervision and administration at the corresponding level, and send (a copy) to the supervisory board of the Enterprise. The main contents thereof shall include: (1) The official reply for the account adjustment issued to all the subsidiary enterprises, which have been included in assets and capital verification, by the parent company in light of the result of capital verification of assets and capital verification approved and replied officially by the organs of state-owned assets supervision and administration; (2) The Enterprises shall elaborate on the reasons for the part of account failing to be adjusted according to the result of capital verification of assets and capital verification, which have been approved and replied officially by the organs of state-owned assets supervision and administration, and attach the relevant certification documents concerned; and (3) The share holding and share subsidiaries subject to the Enterprises shall make amortization according to the proportion of the amount of losses, etc., approved by the official reply. Article 78. The Enterprises shall establish the management system of records of written-off accounts for the bad loans and bad investments, and set up the relevant bodies to actively sort out and recover the assets, and organize the organs concerned to actively dispose and reclaim the salvage value, so as to avoid the losses of state-owned assets. Article 79. The Enterprises shall, within 30 working days after receiving the official reply for assets and capital verification, go through the relevant registration formalities for alteration of ownership at the organs of state-owned assets supervision and administration at the corresponding level pursuant to the prescribed procedures. In case of alteration of the registered capital, the Enterprise shall, after receiving the official reply for assets and capital verification, go through the registration formalities for alteration of industry and commerce at the department of industry and commerce administration pursuant to the prescribed procedures within the prescribed time limit. CHAPTER XII BETTERMENT SYSTEM Article 80. The Enterprises shall, on the basis of assets and capital verification, and with regard to the problems concerning the capital and financial management discovered in assets and capital verification, etc., make a careful analysis on the reasons for the asset gains and losses, and capital, etc., and make clear the management liabilities, as well as put forward the relevant measures for rectification and improvement, so as to consolidate the achievement of assets and capital verification and prevent the situation of clarity at first, and confusion afterwards. Article 81. The Enterprises shall, on the basis of assets and capital verification, and according to the existing financial, accounting and capital management systems of the state, and in combination with the reality of the Enterprises, establish and improve the management systems on the various assets and capital, including the fixed assets, current assets, intangible assets, deferred assets, the projects under construction, etc., and improve measures for the internal assets and financial management. Article 82. The Enterprises shall, on the basis of assets and capital verification, further strengthen the accounting verification and calculation, improve the various internal control mechanism, strengthen the internal financial supervision of all ranks and levels of the Enterprises. They shall establish liability systems for asset losses, and improve the system of economic liability auditing and auditing on the responsible person of the subsidiaries when he leaves his post. Article 83. The Enterprises shall, on the basis of assets and capital verification, carefully investigate the various risk control and management systems, and put forward feasible measures for risk control concerning the issues of enterprise guarantee, and capital of loan by mandate, so as to strengthen the management and control on the guaranteed and the entrusted capital. Article 84. The Enterprises shall, on the basis of assets and capital verification, establish and improve the system of financial information disclosure, and disclose the major events of the Enterprises in investment, management, and finance, and in the operation of the Enterprises to the investors, the board of directors, and shareholders in time pursuant to the requirements of laws and regulations of the state, so as to regulate the disclosure of financial information. Article 85. An Enterprise shall, on the basis of the result of assets and capital verification, make a careful analysis on the capital and financial status of its subsidiaries. In case the subsidiaries are in deed unable to offset debts with assets or unable to operate continuously, the Enterprise shall, according to the particular circumstances, propose measures for the work of merger, division, dissolution, and liquidation, or closedown and bankruptcy, so as to promote the adjustment of internal structure of the Enterprise, and improve the assets operating benefit of the Enterprise. Article 86. The internal departments of discipline inspection and supervision of an Enterprise shall intervene in the assets and capital verification of the Enterprise, and shall hand over to the relevant departments for investigation and disposal the problems seriously in violation of discipline and regulations. The matters suspected to be in violation of laws shall be handed over to the department of justice for handling. CHAPTER XIII SUPPLEMENTARY PROVISIONS Article 87. The Enterprises shall, pursuant to the provisions of the Measures for Accounting Archives Management, keep in good conditions the archives for assets and capital verification. The various manuscripts of assets and capital verification, and the basic accounting documents including the original copies of various certification documents shall be bound into volumes, and kept in the archives prescribed. Article 88. The present Procedures and Norms shall come into force as of promulgation. |
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