Research On Regulation Of Internal Control Information Disclosure

The United States Enron, WorldCom, Xerox，Singapore Branch Corporation ofCAO(China Aviation Oil) and a series of financial fraud cases have exposed since the21st century, From these events we discover easily that the corporation internal controlweakness is the important affecting factor of corporation fraud. Such fraud events led tothe capital market distrusts the listed company accounting information quality, hit theconfidence of the investors, creditors and other stakeholders of the capital marketseriously, and affect the healthy development of capital markets. Based on this, AmericanCongress enacted the Sarbanes-Oxley Act (Briefly referred to Sarbanes Act) in July2002,which strengthens the internal control and information disclosure regulation, requiresmanagement to evaluate the effectiveness of internal control and report, and the auditor toattest the internal control report. Since then, the other countries of the world haveincreased the detailed requirements of internal control information disclosure in therevised and promulgated capital markets regulations. In June of2008and April of2010,China’s Ministry of Finance with other five ministries promulgated “The EnterprisesInternal Control Basic Norms” and “The Enterprise Internal Control SupportingGuidelines”. Which requires the board of directors of the listed company should makedisclosure of the self assessment report of the effectiveness of the internal control and theinternal control audit report of the certified public accountants. After that the internalcontrol information disclosure in our country has entered the stage from voluntarydisclosure to mandatory disclosure. Internal control information as a kind of importantnon-financial information affects the stakeholders’ judgment and decision makingdirectly. Therefore, the internal control information disclosure regulation research hasbecome the common topic of the government regulators, the theoretic and practicalrealms, the study about this subject not only has important theoretical value, but alsohas important practical significance.Based on analyzing domestic and overseas research literature of internal controlinformation disclosure regulation, this paper makes research mainly on the following aspects through using normative research methods, such as deductive, inductive,comparative analysis, citation and empirical research methods, such as statistical analysisetc.First of all, this paper analyses the supply and demand of internal controlinformation disclosure regulation. In the analysis of the demand of the internal controlinformation disclosure regulation, mainly analyses the demand characteristics of theinvestors, creditors, auditors, enterprise management authorities and the government andother stakeholders; In the supply of internal control information disclosure regulationanalysis, it founds that the supply of our country’s internal control information disclosureregulation shows the characteristics of dominated by government; Internal controlinformation disclosure regulation process is essentially the game process between listedcompany and the government, then analyzes the game balance between listed companyand the government, and discovers that the detailed level of internal control informationdisclosure of listed company is closely related to the government regulation; Finallydiscusses the formation process of an effective internal control information disclosureregulation.Secondly, this paper analyses the current situation of internal control informationdisclosure regulation. On the one hand, it combs the development course of our country’sinternal control information disclosure regulation policies, on this basis, it sums up thecharacteristics of internal control information disclosure regulation in our country andfounds the problems; On the other hand it analyses the predicament of the internal controlinformation disclosure regulation in practice, and founds that the regulation subject,content and other aspects should be improved, all of these can provides help to constructthe internal control information disclosure regulation system in our country.Once again, This paper tests the quality of internal control information disclosure oflisted companies that list at home and abroad at the same time in the five years from2007to2011using the internal control information disclosure quality index which is calculatedwith information entropy model. Test results found that characteristics of comparablequality index is low among the level indicators characteristics of internal controlinformation disclosure quality, the importance quality characteristics index andauthenticity quality characteristics index are both low among the internal control information disclosure quality secondary indicators characteristics. Results shows thatinternal control standard compliance level is low, the lack of criteria for recognition ofthe internal control defects and the internal governance structure of listed companies isdefective. The research conclusion provides an empirical basis for this paper to design theinternal control information disclosure regulatory framework system and to optimize theregulation institution.Fourthly, this paper carries on the comparative study of the internal controlinformation disclosure regulation policies of the market economy developed countriesand regions. Especially to discuss the changes after the Sarbanes-Oxley Act promulgatedand evaluate and analyse the characteristics. Based on the comparative analysis ofinternal control information disclosure regulation system of listed companies in the maincountries, this paper concludes several enlightenment about the internal controlinformation disclosure regulation to our country, which will be heipful to construct andoptimize China’s internal control information disclosure regulation system.Fifthly, this paper constructs the internal control information disclosure regulatoryframework system and supplies the policy recommendations in our country. On the basisof theoretical analysis and practical analysis of internal control information disclosureregulation in the front, it constructs the internal control information disclosure regulationframework system in our country according to external environment of our country, thenstates the elements of internal control information disclosure regulatory frameworksystem in detail, and finally puts forward some policy recommendations to optimize theinternal control information disclosure regulation system of our country.Based on reference to predecessors’ research results, this paper aims to makeresearch on internal control information disclosure regulation systematically, and strivesto innovate. The main contributions of this study involve four aspects below: firstly, putforward the view of the objective level of internal control information disclosureregulation. Internal control information disclosure regulation target structural systemincludes three levels: ultimate objective, intermediate objective and specific objective.Ultimate objective is to protect the stakeholders’ interests, ensuring fair market;Intermediate objective is "to avoid market failure" and "to avoid government failure";Specific objective is to ensure the quality of internal control information disclosure in accordance with the corresponding standards. Three objectives connect with each other,complement each other, and layer-layer progressive, have formed a complete organicsystem. Secondly, in terms of regulation subject design, considering the actual regulationmode in our country, this paper puts forward to set up an internal control regulationcommittee of the listed company, which takes charge to coordinate and supervise theduties of the various functional departments among the existing internal controlinformation disclosure regulation subject, and to establish the coordination andcooperation mechanism among the communication of various government regulatoryfunctions departments. Thirdly, this paper builds the internal control informationdisclosure quality index evaluation system based on the protection of the stakeholders’rights and interests. Internal control information disclosure regulation objective is toeliminate the externality of the internal control information disclosure, and to protect therights and interests of each stakeholder, High quality of internal control information tomeet stakeholders’ rights and interests protection objective should have the followingthree basic characteristics: full disclosure, fair and comparable. On this basis, This paperconstructs internal control information disclosure quality index evaluation systemincluding3level indicators and7secondary indicators and22tertiary indicators.Fourthly, this paper builds internal control information disclosure regulation frameworksystem in our country. On the basis of theoretical analysis and practical analysis ofinternal control information disclosure regulation, according to China’s nationalconditions, drawing lessons from foreign particularly American experience of internalcontrol information disclosure regulation, This paper puts forward the construction ofinternal control information disclosure regulatory framework in our country. Thisframework includes the internal control information disclosure regulation objective,regulation subject, regulation object, regulation content and regulation means and otherbasic elements.