Study On The Internal Control Problem Of Rural Credit Cooperative In China

Internal control is the basic system of normal operation in the organizations and institutions. It is the control system, which can guarantee the quality of accounting information, safeguard the security and integrity of assets, and ensure that all relevant legislations and laws can be carried out. Internal control is the basis of management and the guaranty of continuous and good development in enterprise. Management practice proves that management of enterprise starts from the construction and improvement of internal control; the decisions of enterprise should be controlled under the perfect system of internal control; all activities of enterprise should be controlled by the internal control. Management practices also prove that being controlled would be better, being out of control would be worse, and no control would be out of order.Rural credit cooperatives are the special financial concerns that have high risk and high debt. Internal control is the self-discipline and self-management behavior. Also internal control is an important and indispensable management form that can guarantee operation security, guard against and control financial risk, and can achieve the operation goal.The paper makes researches on the internal control system of rural credit cooperatives in China, mainly based on standard theories, built on the basic knowledge of system theory, cybernetics and game theory. It is the main research contents on reform backgrounds, influence factors and the exist problems in operating. Though investigating intensively, the paper makes an objective assessment of current situation of internal control in the rural credit cooperatives. The influence factors of internal control of rural credit cooperatives have been analyzed by the quality identification and quantification. And the paper presents advices and countermeasures to build the internal control system of rural credit cooperative. There are seven chapters. Chapter one is introduction, including the meaning of topic, the current situation of domestic and foreign research, the panorama of researches, the main content of research, basic structure, main research methods and so on; Chapter two is the elaboration of internal control system theories of rural credit cooperative from the basic assumptions of internal control and perspective of system theory, cybernetics and game theory; Chapter three is empirical study on influence factors of rural credit cooperative by using element analysis model and software SPSS 11.5 to conclude the seven common factors that can influent the internal control of rural credit cooperative; Chapter four presents the new design ideas, characteristics, design standards and contents to establish the internal control system of rural credit cooperative from analysis of above problems and reasons; Chapter five summarizes the problems that exist in the system design and operation of internal control, and analyzes the effect of financing developing in rural from seven factors that influent the rural credit cooperative; Chapter six analyzes the reason of weak internal control of rural credit cooperative. The reasons include the poor environment base, weak budget control, weak accounting control, low quality of staff and high operating risk; Chapter seven studies on internal control of rural credit cooperative to build and improve subsystem of environment control, subsystem of risk control, subsystem of internal budget control, subsystem of internal accounting control, subsystem of information communication and feedback, subsystem of internal audit and subsystem of internal control evaluation.Internal control system of rural credit cooperatives implements some goals, which includethe truth and integrity of financial information and record, the enforcement of state laws and internal regulation of rural credit cooperatives, the comprehensively implementing of developing strategy and operation goals of rural credit cooperatives, and the effectiveness of risk management.Internal control system of rural credit cooperatives consists of seven subsystems, which includes subsystem of environment control, subsystem of risk control, subsystem of internal budget control, subsystem of internal accounting control, subsystem of information communication and feedback, subsystem of internal audit, subsystem of internal control evaluation. All functions of internal control system of rural credit cooperatives as follows.The subsystem of environmental control is some environmental factors that largely influence the enforcement effectiveness of internal control system of rural credit cooperatives. The factors include: (1) Property right system of rural credit cooperatives (2) management structure of rural credit cooperatives (3) organization structure of rural credit cooperatives (4) operation system of rural credit cooperatives (5) enterprise culture of rural credit cooperatives.The subsystem of risk control is an abbreviation of method, measure and technique of risk control. Bank industry is the high-risk industry, and gets high reward by drinking in the risk. Risk control is the first step in the internal control of rural credit cooperatives. It is the one of main aims in the internal control system and also is the first subsystem that can play its function chiefly in the seven subsystems.The subsystem of internal budget control is the core part of management control system and also is the main part to build the financial control system in the rural credit cooperatives. Budget planning and using is the process of participating for all staff, with environment changing inside and outside rural credit cooperatives. The responsibility center of rural credit cooperatives should evaluate and assessment the results of budget planning to implement the incentive and restraining for administers. Meanwhile it is the basis of budget for the next term.The subsystem of internal accounting control is a generic term of control method, procedure, and measure and risk control technique, based on the accounting information control of rural credit cooperatives. It is the kernel and key of internal control system of rural credit cooperatives, and is the process of implementation of internal control. Accounting control activities can carry out efficiently under the recognition of board of directors and senior management level. When board of director, high management level and all clerks consider accounting activities as the indispensable components in bank routine, not as appendix, accounting control activities can be effective.The subsystem of information communication and feedback is the medium of securing internal control of rural credit cooperatives, and is the indispensable part of internal control of rural credit cooperatives. Information includes internal financial information, operation information and coincidence information, and external market information related to the decision. After collection and processing and storage of information, information must be transmitted quickly and truly, and then information can exert their functions. If effective information didn't be transmitted and communicated, information would be useless.The subsystem of internal audit of rural credit cooperatives is a subsystem, which can supervise and appraise the internal control of rural credit cooperatives and correct the existing problems. The internal audit department of rural credit cooperatives normally finishes internal audit of rural credit cooperatives. Internal audit is the last shelter of avoiding risk and is to inspect and supervise bank routine for board of director. Meantime, internal audit has responsible for the evaluation of internal control of rural credit cooperatives and is the re-control of internal control. Internal audit would discover problems of internal management and lack of internal control inside bank, and internal audit department should report it to the highest level of management and propose some advices, so all institutions of rural credit cooperatives can correct mistakes, improve regulation, strengthen management, and guarantee operation of rural credit cooperatives.The subsystem of internal control overall evaluation is the activity to combine with the internal control environment, internal control system, internal control organization, internal control staff and internal control planning factors for checking, auditing analyze, evaluation and recognize. Though the effectiveness, cautious, fullness and timeliness evaluation of internal control, it can get the information of every system inside the internal control, then it can be back on time to efficiently improve the internal control.The relationship of internal control subsystems in Rural credit cooperatives as follows: environment control subsystem is the basis, risk control subsystem is the kernel, internal accounting control subsystem and budget control subsystem are means, and management information subsystem is the medium. Internal audit subsystem and internal control evaluation subsystem are the guaranty. Seven subsystems not only are independent but also are connected, and construct an integral internal control system of rural credit cooperatives.