Research On Internal Control Design For Enterprises

Failure in internal control alone does not necessarily result in the collapse of an enterprise. Collapse of an enterprise must, more or less, have something to do with the unsound internal control. The present study probes into the theoretical systems of internal control in line with the practical planning procedures to generalize the procedures and contents which an enterprise should follow in designing its internal control. It further verifies the internal control through case studies.First of all, in the probe into the constructs of internal control and the evolutional process of the environmental impact, the report entitled "Internal Control—Integrated Framework" issued by COSO of the United States in 1992 is believed to be bearing the latest constructs regarding internal control and has been widely taken by both the government and business sectors as the major grounds to set up the internal control policies. The COSO report points out that internal control includes five key components. Through enforcement of the five key components, an enterprise is assured to satisfactorily accomplish the three objectives of internal control—operation objective, financial reporting objective and compliance objective.Next, in planning the internal control through practical aspects, the business philosophy should be first ascertained to set up business targets and strategies before designing the organizational structures and setting up the authority systems based on the characteristics and scales of the business. In turn, the enterprise may reassess and analyze the rational business procedures and its accounting, information report systems. To realize target-oriented management, it should set up sound budgeting systems of appropriate criteria. To set up sound human resource policies to assure the right people to the right slots, it should design sound and appropriate personnel systems.At last, through reassessment of the results attained in the internal control designs, the present study will come to conclusions and proposals: An enterprise should design appropriate internal control and put it into solid enforcement to prevent a failure in business operation. The "Nine-Major-Circulation"-oriented design of internal control should be reinforced by means of the COSO report. The internal control should go hand-in-hand with "Corporate Governance" and come to integral control systems.