Research On Audit Of Internal Control

Sound and effective internal controls can reasonably assure the efficiency and performance of corporation operation, the reliability of financial statements and the compliance with relevant laws and regulations. But in the early twentieth century, Enron, WorldCom and a series of astonishing financial fraud cases broke out in the United States and other countries, which brought great shock on the capital markets. One of the root causes is the failure of internal controls. In order to rectify the capital market order and rebuild public confidence in capital markets, Unite States enacted "Sarbanes - Oxley Act" in 2002. The bill requires the management section to make known the assessment of internal control over financial reporting along with the periodic reports. At the same time, the Act requires that the internal control be audited by registered CPA. Here the audit of internal control refers auditing procedure carried out by the registered CPA on internal control, auditing the validity of internal controls on specific dates and issuing their audit opinion. China also jointly issued "The Basic Norms of Corporation Internal Control" by five ministries in 2008, which indicates that China will soon start the engagements of internal control audit. Launching this new service will produce far-reaching impact on improving the information quality of the financial report, which is also the value of this paper which studies the audit of internal control.In this paper, based on study the domestic and international relevant literature about audit of internal control and its developmental history, we undertake theoretical argument on audit of internal control and clearly point out that the business should build implementation mechanism to achieve the goal of reasonable assurance. This paper centers on reasonable assurance of the financial reports and related information true and complete, we actively explore the implementation mechanism of audit of internal control and put forward three key points for solving this problem, which are: to develop appropriate standards for internal control evaluation,to design reasonable audit process for internal controls and determine the integrated implementation strategy which is an audit of internal control integrated with an audit of financial statements called integrated audit. We verify the theoretical results through the application of case and survey, whose results form some referential value for theoretical research and practical operation. The main innovation of this paper and its conclusions are as follows: Construct a conceptual framework for audit of internal controlFirst, based on studying the related concept of internal control in"Internal Control Framework"released by United States COSO and in our"basic norms of internal control", we further divide internal control down into: broad internal control and narrow internal control. Broad internal control uses the concept in COSO"Internal Control Framework"and our"basic norms of internal control". Narrow internal control refers the concept of internal control over financial reporting in the AS2 released by U.S. PCAOB. It is a process, implemented by board of directors, board of supervisors, managers and all staff, achieving the objectives of the internal control related with financial reporting. Its objective is to reasonably assure the corporation's financial report and its related information to be true and complete. The concepts of internal control used in this article are limited to narrow internal control.Second, the concept of narrow internal control makes clear the object for CPA to carry out the audit of internal control. They issue audit opinion specifically on effectiveness of internal control in the area of financial report.Finally, by in-depth studying the theory of audit of internal control, we obtain the implement mechanism for carrying out the objectives of audit of internal control, which is mainly through developing appropriate evaluation criteria, designing reasonable audit process and determining specific implement strategies.(2) By comparative study on the major international standards of internal control, we propose the establishment of evaluating standard system of internal control suitable to China's characteristics, which refers to improving our current assessment standard system of internal control and to establishing criteria for the implementation of internal control evaluation.(3) By studying the PCAOB standards of internal control over financial report and in conjunction with other research results, we design a set of audit processes for our internal controls, which can make CPA mainly focus on areas of greatest risk.(4) CPA can carry out the audit of internal control and the audit of financial statement at the same time for the same audited unit. There are many similarities between them. Thus, we can put forward specific implement strategy, called integrated audit whose objective is to carry out the goals for audit of internal control, and develop appropriate measures. We put the integrated implement process of the audit planning stage, the implementation phase and reporting phase used in a listed company to test its feasibility, for CPA specific routes in the practical operation.(5) By releasing investigation questionnaire to CPA, we consult advices for evaluation standard system of internal control, audit process of internal control, and integrated audit we have put forward and improved. We carry out descriptive statistical analysis on the obtained data and corroborate that the findings of the study in the implementation of audit of internal control is feasible.