New Mode Of Internal Control:from Ancient Chinese Philosophy Perspective

Organization or society is a group of people that are brought together for the accomplishment of a common objectives.Due to the different interests,the behavior of the individual may deviates from the overall objectives of the society/organization.How to guaranteeing the direction as well as the magnitude of deviation within a relatively reasonable size and level,is the fundamental issues of internal control.To solve this issue,the western modern internal control is designed to strengthen defense and emphasize on the importance of building rigorous behavioral rules.This model of internal control relies on highly instrumental rationality and is characterized by "external oriented".In recent years,the western internal control represented by the COSO report is so popular that most countries in the world,including China,serve it as a blueprint for building their own internal control,indicates that this model of "external oriented" model has become the mainstream of the internal control design.However,reflecting on the internal control practice,we find that there are two kinds of problems.One problem is the western internal control lag behind the rapid development of practical activities.The bounded rationality of human beings determines that internal control is an incomplete contract,so people can always find the "blind spots" of rules to implement opportunistic behavior to maximize their own best interest.A series of financial fraud such as Enron and Lehman Brothers at the beginning of this century are the best examples.Another problem is China's internal control construction apply "borrowlism",leads to the internal control in China does not work well and also the absence of academic originality in the internal control area.Based on the above problems,this paper rooted in Chinese history and traditional culture,and proposed the new model for the internal control.Specifically,based on ancient books of Pre-Qin philosophers,this paper is to explore and refine the internal control thought of the ancient China,and proposed a model of "internal oriented" internal control that is different from the western one.Following are the main points:(1)Internal control objectives.From the human nature in the expectations and understanding of "good","internal oriented" internal control emphasizes the important role of ethical and moral in improving the individual's mental,by perfecting the mental model to form self-behavior control;(2)Subject and object of internal control.From the perspective of holism,the boundaries of internal control are not only confined to the individual organizational level,but also extended to the society as a whole,integrating the subject with the object.Based on the top-down establishment of shared values and behaviors,social guided the direction of internal control.The organization internal control acts as a means of implement.The individual's self-control is the foundation,transform the external control into self-requirements.(3)Internal control methods.Combine inner order norms with external behavior norms."Tao" carries the responsibility,obligation and the behavior pattern of each social role,this establish the cognition of "what should I do",and mitigate the behavioral deviation at the source.The external behavior norms clearly tells the individual "how do I do it" and determined the behavior boundary.This paper points out that the emphasis on guidance of human nature and human behavior in Chinese traditional culture,so that the individual and the organization accept the constraints of shared values,is the unique contribution of Chinese internal control.We should combine the advantages of Chinese traditional internal control with the advantages of western modern internal control,namely combine the practice of improve the individual's mental model with the emphasis on institutional construction and execution,so form the internal control which is suitable for China and worth other countries learning.