Research On Risk-oriented Internal Control Of Real Estate Enterprise

Owing to its ability to improve business efficiency, reliability of financial statement and obedience of laws and regulations, internal control has got a lot of attention over the years. It has developed from the original internal check to the present factor-structure stage. Its main object has also changed from preventing wrongdoings to rectifying disadvantages. In the meantime, the real estate enterprises which play an important role in our national economy are experiencing a wide range of risks after ten years of rapid development. Moreover, since2010, the real estate industry has undergone an unprecedented crisis after the promulgation of a series of macro-control policies. Hence, the need to strengthen internal management and external risk prevention and the correspondence between the function and the goal of internal risks make the establishment and reinforce of the internal control mechanism the first choice for the existence and the development for the real estate enterprises.Regarding the Basic Standards for Enterprise Internal Control as the research starting point, the paper firstly analyze the five elements of the risk internal control of real estate:internal environment, risk assessment, control activity, information and communication, and supervision. Starting from the internal environment, it points out that the real estate corporation should establish good internal environment including reasonable governance structure. As for the risk assessment, it introduces how a single company identifies risk by utilizing AHP method. In addition, starting from the control activity, it lists common control activity, such as incompatible position separation, authorizing examination and approval. From the information, communication and supervision, it proposes to establish good information, communication and supervision.Researchers have shown that the internal control drawbacks within the real estate industry actually lie in the shortage of executive power, poor regulation, short-sighted understanding of internal control, insufficient dominance and the major players of internal control failing to meet relevant standards. Researchers have also shown that the real estate industry is generally characterized as blind expansion, unitary financial channel, high asset-liability ratio, restricted refinancing capability, high proportion of current assets and declining rate of stock turnover, all of which contribute to a great risk of enterprise's currency flow. To handle this risk, we must deal with the key issue of internal control, enhancing the project's decision-making management in earlier stage and budget control which greatly influence enterprise's currency flow and procurement administration which has a significant impact on cost. Other supplementary measures related to internal control should also be highlighted to safeguard the effectiveness of internal control.