By referring to international performance assessment methods and related indicators of CNAOs performance reporting, audit performance of Chinas local audit institutions are defined from such aspects as “problemrecognition performance”, “audit reports and newsletters adoption performance”, and “rectification performance”. Using a sample of Chinas 31 provinces from year 2001—2010, the effects of market development and financial condition on audit performance are investigated. This research provides empirical evidence for understanding the performance variance in Chinas local provinces, and can enrich literatures both in government audit and institutional performance.