Government auditors will keep a close eye on the drain of State assets when scrutinizing the accounts of key State firms and banks, Li Jinhua, auditor-in-chief of the National Audit Office, promised Tuesday.

Li said his office will "pay special attention to ensuring the safety and effectiveness of State assets and preventing losses of State properties" after the reform of the State asset-management system.

China is considering a major reform of this system, under which ownership rights would be divided among the central and local governments. Specialized entities would be set up and would take over State asset-management functions from various ministries.

Li said that the experience of last year's auditing showed that mistakes in decision-making and poor management of State firms had led to huge losses of State property.

The National Audit Office reviewed 12 key State firms last year. They lost 7.23 billion yuan (US$871 million) worth of State property through malpractice when providing financial guarantees to other firms, making blind investment or lending to other companies. One of the State companies, which Li refused to name, lost 984 million yuan (US$118.6 million).

To better protect State assets, the auditing will focus on checking the authenticity of accounting information provided by State firms, Li said.

Li's office discovered that 32 per cent of the 12 audited State firms' claimed profits for 2001 were falsified. Overall, government auditors reviewed 104,000 institutions in the first 11 months of last year. They spotted malpractice involving 205.2 billion yuan (US$24.7 billion).

Last year, auditors scrutinized the balance sheets of the China Construction Bank and Agricultural Development Bank of China and their branches nationwide.

Auditing of the two banks uncovered evidences used in the prosecution of 51 economic crime cases, which involved 74 bank officials and 2.274 billion yuan (US$274 million).

The National Audit Office picks one or two of the major State banks for auditing every year. This year, it will review the books of the Industrial and Commercial Bank of China and China Life Insurance Co.

The State Administration of Taxation and the General Customs Administration will also be examined by the National Audit Office this year, Li added.

Li also said that economic responsibility auditing on officials retiring or moving to new posts will be deepened this year.

(China Daily January 22, 2003)