Bank of China yesterday said irregularities uncovered in a regular government audit will not affect its financial results.

"The audit findings have no impact on the bank's overall operational results and do not affect its financial statements that have been issued," the bank said in a statement to the Shanghai Stock Exchange.

According to the statement, the National Audit Office conducted an inspection between April and September 2006 of the 2005 accounting books of the bank's head office and certain branches.

The audit found evidence of a failure of branches to adhere to the central government's macroeconomic controls and the bank's own credit approval policies, the bank said.

The investigation also uncovered management problems such as improper recording of income or expenses in certain branches and sub-branches that need to be rectified.

Risks were identified in a small number of highway construction loans and the disposal of non-performing assets, the statement said, without giving any detail. It said the National Audit Office will release its major findings after July.

The government has been urging domestic banks to improve internal controls and risk management to root out fraud, scandals and embezzlement, to boost their competitiveness.

A year ago, the National Audit Office released its audit report on the Agricultural Bank of China. The report said irregularities to the tune of 8.68 billion yuan (US$1.14 billion) were uncovered in the bank's 2004 accounts.

It has also audited the Industrial and Commercial Bank of China, China Construction Bank and the four State-owned asset management companies over the past few years. It also plans to audit some other listed banks.

Many banks themselves are also making efforts and comply with stricter regulations to improve their management after they sold shares to the public.

"Most problems found during the audit occurred before the bank's joint-stock reform in 2004," said Bank of China, adding the bank's executives have attached great importance to these issues, many of which have been effectively rectified and the persons responsible punished.

The bank has recovered or settled the non-complying loans and made adequate provisions vis-a-vis the unrecovered non-performing loans.

As for the accounting issues, the bank made the necessary adjustments last year.