NOTICE OF THE MINISTRY OF FINANCE ON PRINTING AND DISTRIBUTING THE RULES FOR THE BID INVITATION OF ACCOUNTING FIRMS FOR THE AUDIT ENTRUSTMENT

Notice of the Ministry of Finance on Printing and Distributing the Rules for the Bid Invitation of Accounting Firms for the Audit Entrustment

To the departments (bureaus) of finance of all provinces, autonomous regions and municipalities directly under the Central Government, Shenzhen City Bureau of Finance, relevant ministries, commissions of and institutions directly under the State Council and enterprises under central administration,

For the purpose of regulating the activities relating to the bid invitation of accounting firms for the audit entrustment, promoting the fair competition in the industry of certified public accountants and protecting the lawful rights and interests of tenderees and bidding firms, the Ministry of Finance has formulate the Rules for the Bid Invitation of Accounting Firms for the Audit Entrustment, which are now printed and distributed to you. The Rules shall come into force as of the date of March 1, 2006.

Annex: Rules for the Bid Invitation of Accounting Firms for the Audit Entrustment

January 1, 2006 Annex:Rules for the Bid Invitation of Accounting Firms for the Audit Entrustment

For the purpose of regulating the activities relating to the bid invitation of accounting firms (hereinafter referred to as the firms) for the audit entrustment, promoting the fair competition in the industry of certified public accountants and protecting the lawful rights and interests of tenderees and bidding firms, these Rules are formulated according to the Bidding Law of the People's Republic of China, the Law of the People's Republic of China on Certified Public Accountants and other relevant laws.

The tenderees shall abide by the Bidding Law of the People's Republic of China for the audit entrustment of firms by way of bid invitation, which shall conform to these Rules.

The principles of openness, fairness, equity and good faith shall be followed for the bidding activities.

No entity or individual may violate the laws or administrative regulations, restrict or exclude firms from participating in the bidding or illegally interpose the bidding in any form.

When undertaking and conducting the audit work by way of bidding, a firm shall abide by the audit rules and professional ethics, fulfill obligations and accomplish the bid winning project in strict accordance with the agreement on the audit work.

The following procedures shall be observed when conducting the bid invitation of firms for the entrustment of audit work:

Bid invitation, which includes the determination of the way of bid invitation, the issuance of bid invitation announcements (in the case of public bid invitation) or issuance of bid invitation letters (in the case of selective bid invitation), the formulation of bid invitation documents and the delivery of bid invitation documents to potential bidding firms;

Determination of the bid winning firm, issuance of the bid winning notice and conclusion of the agreement on the audit work with the bid winning firm.

If a bid invitation project is under any of the following circumstances, the method of selective bid invitation may be adopted:

There is particularity , meaning the firm can only be chosen from a limited scope; or

There is an emergency, meaning the entrustment cannot be accomplished by the way of public bid invitation within the prescribed time limit.

Where the way of public bid invitation is adopted, a bid invitation announcement shall be publicized. Where the way of selective bid invitation is adopted, the bid invitation letters shall be sent out to at least three firms.

The bid invitation announcement and the bid invitation letters shall state the name and address of the tenderee, the quality, quantity, implementation site and time of the bid invitation project as well as the measures for obtaining bid invitation documents, etc.

A tenderee may request the potential firms to provide relevant qualification certificates and performance conditions in the bid invitation announcement or the bid invitation letters, and carry out the qualification examination of potential bidding firms according to the requirements of the project for bid invitation.

A tenderee shall make full use of the industrial information as publicized by the fiscal department and the association of certified public accountants, and implement the provisions of the Ministry of Finance on the audit administration during the process of qualification examination,.

A tenderee shall formulate bid invitation documents according to the characteristics of bid invitation project and the requirements. The bid invitation documents shall include:

A tenderee shall make explicit disclosure of the information about the bid invitation project in the bid invitation documents in order to facilitate the determination of the workload, the formulation of the work schemes, the presentation of reasonable quotes and the formulation of bidding documents by the bidding firms, which shall include the organizational structure, industry, operational type, distribution and financial information (such as the assets scale and structure, debts, annual revenues and other relevant financial indicators) of the entities to be audited.

A tenderee shall conform to the requirements of the bid invitation project and reasonably determine the evaluation items, set down the standards for evaluation and design the weight of the score of each evaluation item in the total score by the way of comprehensively considering the work schemes, personnel situation, relevant work experiences, records of professional ethics and quality control level, degree of commercial responses and quotes of bidding firms. The weight of the score as reported by any bidding firm shall not be more than 20%.

The specific design of bid evaluation standards may be determined by referring to the attached Reference Table for the Evaluation Items and the Design of their Weights.

Where the time limit to complete the corresponding work for a bid invitation project needs to be determined, the tenderee shall reasonably determine the time limit by taking into account the particularity of the industrial services of certified public accountants, and state it in the bid invitation documents.

A tenderee may organize the potential bidding firms for discussions and answering questions according to the specific conditions of the bid invitation project. Where the potential bidding firms need to consult the detailed materials about the bid invitation project, the tenderee shall offer convenience if possible.

A tenderee shall consider the particularity of the industrial services of certified public accountants when determining the time limit for the bidding firms to formulate bidding documents, and the time limit shall generally be not less than 20 days from the day when the bid invitation documents are sent out to the expiry date for the bidding firms to submit bidding documents.

A tenderee shall open the bids publicly and invite all the bidding firms to participate in the bid opening.

A tenderee shall organize a bid appraisal committee to be responsible for bid appraisal.

The bid appraisal committee shall be composed of representatives of the tenderee and experts familiar with the industry of certified public accountants Anyone that has interests with a tenderer shall not be a member of the bid appraisal committee for the relevant project.

The members of a bid appraisal committee (hereinafter referred to as the judges) shall be an odd number of 5 persons or more, of which the experts familiar with the industry of certified public accountants shall be no less than two thirds of all the members generally.

The name list of judges shall be kept unannounced before the bid winning results are determined.

A tenderee shall take measures necessary to guarantee that the bids are evaluated under a strictly confidential circumstance. No entity or individual may illegally intervene in or influence the process or result of bid appraisal.

The judges shall give scores for bidding firms according to the standards for bid appraisal.

The bid appraisal committee shall rank all the bidding firms according to their scores and recommend the bid winning candidate firms according to the ranking.

The bid appraisal committee shall work out a written bid appraisal report to the tenderee after completing the bid appraisal,.

The tenderee shall determine the bid winning firm according to the written bid appraisal report as worked out and the bid winning candidate firms as recommended by the bid appraisal committee, or may authorize the bid appraisal committee to directly determine the bid winning firm.

After the bid winning firm is determined, the tenderee shall send out a bid winning notice to the bid winning firm, and notify the bid winning result to all the bidding firms that fail the bidding.

A tenderee shall conclude an agreement on the audit work with the bid winning firm on the basis of the bid invitation documents and the bidding documents of the bid winning firm within 30 days after the bid winning notice is sent out.

The tenderee shall not require the bid winning firm to alter the substantial contents of the bid invitation project, enhance the technical requirements of the bid invitation project, reduce the fees for the entrusted matter or seek for commissions from the bid winning firm for any excuse.

The tenderee shall not conclude any other agreement with the bid winning firm that is contrary to the substantial contents of the agreement on the audit work.

The Ministry of Finance and the fiscal departments of all the provinces, autonomous regions and municipalities directly under the Central Government shall supervise the audit-related bidding activities and deter and deal with illegal and irregular acts during the course of audit-related bidding activities according to the law.

The entrustment of firms for other authentication and relevant services by the tenderees by way of bid invitation shall be conducted by reference to these Rules.

Annex: Reference Table for the Appraisal Items and the Design of Their Weights htm/e04794.htmAnnex

Appraisal Items	Weight Scope
Work Plan	20%-30%
Personnel Situation	20%-30%
Relevant Work Experiences	15%-25%
Records of Professional Ethics and Quality Control Level	10%-15%
Degree of Commercial Responses	5%
Quote	10%-20%

ĄĄĄĄAnnotation: As to the appraisal of quotes, the standards for appraisal shall be the absolute value of the discrepancy between the quote and average quote, and the lower the absolute value of the discrepancy is, the higher the score will be.

Laws of the People's Republic of China

NOTICE OF THE MINISTRY OF FINANCE ON PRINTING AND DISTRIBUTING THE RULES FOR THE BID INVITATION OF ACCOUNTING FIRMS FOR THE AUDIT ENTRUSTMENT