Research On Internal Audit System Of Nongovernmental Enterprises Based On Shareholders' Value

With the opening and reform policy being carried out in the last decades, there had been a rapid expansion of nongovernmental economy in our country, now it has become the dominant sector of the national economic. Nongovernmental corporations, which is the individual of nongovernmental economy,becomes more and more flourishing with the steps from infancy to maturity. However, with the further development, it becomes a hard problem to establish modern corporation system for most nongovernmental corporation.As the main bodies of social economic, corporations face more surroundings and appear many problems in corporate governance, such complicated as"Moral Risk", "Information Asymmetry" and "Insider Control". These will do harm to the benefits of most stockholdings. Especially, in recent years, cases of financial scandal increased rapidly. Therefore, establishing the self-restraining mechanism becomes the hot problem. In this situation, internal control system becomes more and more important. As the main part of modern corporation system, internal audit plays an extremely important role in the aspect such as consummating the corporate government, establishing internal control system and strengthening corporate management.Internal auditing is established as the interior requirement of the enterprises' and has become a very important part of modern enterprise institutions, which is an important means to improve the enterprises' management and economical benefits. It has been twenty years since the internal auditing institution was put into effect after the establishment of China. During the two decades, we have accumulated some experiences and we also have found many difficulties and problems in our practice, which have seriously affected the functions of internal auditing. At the same time, with the development of the enterprises and the requirement of the public, it is urgent to strengthen the function of internal auditing. It shows great vitality and a vast developing space. It is a necessary way to establish internal audit for nongovernmental corporation, and is the urgent need for the development of nongovernmental corporation.Under this background, the author is trying to have a discussion and research on the existing problems in the internal audit of the nongovernmental corporation. By combing theory and practice together and following the thought of staring from the past situation to the current situation ,then to the future and at last to the case study, by using the means of induction and the way of comparative institutional analysis, the thesis has involved the development of internal audit in no-governmental enterprises; current existing problems, the reasons and some solutions of the problems existing in internal audit of nongovernmental enterprises; creation of internal audit of nongovernmental enterprises. The author is trying to give some inspiration in the aspects of the theory and practice study of the internal audit in the nongovernmental corporation. The thesis consists 4 chapters:Chapter 1: introductionIn this chapter firstly we defined the nongovernmental enterprises to give us a clear picture of what the research is about. Then we defined internal audit and its substance by taking ideas from international and domestic study product. In the end of this chapter we described the background and researching method adopted in this thesis.Chapter 2: history of internal auditIn this chapter we made detail introduction of modern western internal audit theory and Chinese internal audit development including immergence and development of western internal audit, main achievements of western companies'internal audit development in 20th century, Chinese internal audit development history, nongovernmental enterprise internal audit history, present problems faced by nongovernmental enterprises'internal audit, among which the present problems analysis is the probing point of this paper.Chapter 3: corporate governance objective, characteristics of company ownership, internal auditThis chapter is the main part of this thesis. At first we studied on different corporate governance objectives [maximization of shareholder value and maximization of stakeholder value] and their related corporate governance model [shareholder central model and stakeholder central model] and compared each of them to have a clear view of their characteristics.Then we have to define the corporate systematic arrangement in nongovernmental enterprises, i.e. what are the suitable governance objective and model? We adopted views of some scholar that the ownership is the decisive factor of governance model. Therefore, after compared the ownership characteristics of SOE [absence of owner, cheap ownership, insider control, capital kidnapped by employees] and nongovernmental enterprises [clear ownership relationship, highly combination of owner and operator, labor force employed by capital, governance efficiency of big shareholder], we gave the answer to how to make a correct choice between different corporate governance model. We specified that the maximization of shareholders'value should be the ultimate goal of nongovernmental enterprises'corporate governance.Furthermore, we made discusses on shareholder central concept and corporate governance and internal audit system arrangements. In the nongovernmental enterprises, the objective or the reason of establishing internal audit department is due to the entrust relationship and exchange fees. Then we put forward straightly that internal audit in nongovernmental enterprises is to function in corporate governance and help companies maximize shareholders'value by their supervision and service.Chapter 4: internal audit system rebuilding in nongovernmentalenterprise based on shareholder value centered concept In the process of rebuilding, internal audit department should be subordinate directly to ownership of the company, which is related directly to the ownership characteristics.Then we took a deep look at Chinese CPA professional competence framework and the requirements of both international and domestic profession of internal audit. We adopted the input method to analyze the question and set up our internal auditor professional ability and moral standards framework to suit for the nongovernmental enterprise.At last, we have to face the question of what does the internal audit department do? After considering traditional internal audit objectives and functions, we rebuilt the framework of internal audit function according to above model, which included traditional financial audit, risk oriented audit, management audit, agent efficiency audit and project based audit.Innovation:1,Due to different ownership characteristics, SOE and nongovernmental enterprises should adopt different governance objectives and models.2,Internal audit system of nongovernmental enterprises should be rebuilt based on the shareholder value maximization concept.3,In the process of rebuilding, internal audit department should be subordinate directly to ownership of the company, by the same time, internal auditor should have suitable competence.4,We developed the function of internal audit covering traditional financial audit, management audit, risk oriented audit and specific project based audit.