Whether the government monitoring, the so-called “the visible hand”, can promote firms’ innovation is an important research question. This paper studies the impact of government auditing on central state owned enterprises’ innovation with the setting of audits of CSOEs by the National Audit Office of China (CNAO) during 2009 to 2015. We find that government auditing increases the SOEs’ R&D expenditure and applied patents. However, the increasing applied patents only include utility models but not include inventions. It indicates that government auditing can promote SOEs’ innovation but may only inspire strategic innovation. In addition, it is government auditing’s monitoring effect, incentive effect and spillover effect that promote SOEs’ innovation. Overall, our finding is of great theoretical and practical significance to the perfection of government monitoring in China.