| This paper is organized in the way. First, the external and internal environment of the China Mobile SOX project's implementation is analyzed to clarify the necessity of the implementation and possible difficulties in the future; then, the process of SOX projects is explained and the paper also discusses how the China Mobile promote steady implementation of the project to ensure smooth passage of external audit report and the internal control assessments; after that, the paper emphasizes the impact of SOX projects on China Mobile and my considerations about the SOX projects are summarized; and at last, the paper recommends that the SOX project is not a short-term project but a long-term planning.There are five chapters.Chapter 1 is"Introduction". In this chapter, the significance of the main thesis, theoretical tools and methodology, the logical structure and the basic ideas as well as other related issues are explained. Chapter 2 is"The Internal and External Environment Analysis regard the Project Implementation". This chapter studies the SOX Act's background and the main content, the basic information and internal controls systems of China Mobile. Based on this study, the necessity and urgency of implementing SOX Act are explained. Because of Enron and WorldCom scandals, SOX Act aimed at solving a series of financial scandals of listed companies in order to restore confidence on the capital market and eliminate worries on the veracity of the financial statements of listed companies. The Act has 11 chapters. Chapter 1 to 6 mainly consider how to regulate accountants and corporate behavior. Chapter 8 to 11 emphasize on improving criminal liability of corporate executives and white-collar. SOX Act signals that the US financial securities law shift from information disclosure regulation to substantive control. This Act came up with more stringent regulatory requirements on corporate listed in the US. China Mobile is one of the representatives of the state-owned enterprises listed in Hong Kong and US. China Mobile is always devoting itself to establish excellent corporate image by standardizing corporate governance in capital market. Along with the development of corporate governance and business, China Mobile's internal controls have also been gradually improved. At present, according to its operation ratios, China Mobile have become one of the largest telecom company in the market worldwide. However, it still has difficulties with implementation of SOX on its operation and management process. These difficulties are: firstly, it's hard for extensive management model to meet requirements of SOX Act; secondly, the existing internal control system still needs to be improved; thirdly, the high costs and complexity of the mechanism may bring many troubles. There is no reference on how to implement SOX Act, so we need "cross the river by feeling the stones." Therefore, China Mobile has long way left to go.Chapter 3 is"Process Analysis of SOX Project". After the Promulgation of the Act, China Mobile has organized a professional team to conduct a study on the Act, formulated the overall implementation plan for steady progress. The Audit Committee and Information Disclosure Committee have been established; the project based on 404 provisions has been implemented. Provision 404 makes a more stringent requirement on internal controls provisions for companies so that the public can easily detect the fraud firms and the reliability of financial reporting can be restored. Listed companies have to pay a heavy price, including a lot of time, human and financial resources to act in accordance with the provision. Therefore, to the listed companies in US, the implementation of the SOX Act is the processes of implementation of the provisions of 404. There are four stages to be implemented to comply with 404 provisions: the first stage is to clearly define the scope of the project; the second stage is to improve internal control documentary; the third stage is an internal testing; the last stage is to assess and report on the internal control deficiencies. To ensure the requirements of the SOX Act can be met, China Mobile was formally launched the implementation in June 2005.Chapter 4 is"Impact of Implementation of the SOX Act". This is what this paper focused on. With the analysis of the impact on enterprise, the paper tries to find a long-term and effective way to implement the internal control mechanisms. The paper exams six impacts on the enterprise: Firstly, the impact on corporate culture. New Enterprise culture will establish "responsible" and "the best" as its pursuit and will create a sound control environment to effectively promote the smooth implementation of SOX Act in China Mobile. Secondly, impact on organizational structure. With the establishment of Internal Audit Committee, its functions will be shifted to internal control audit and risk management as well as coordinating the daily operations with regulatory body like audit committees of listed companies. Sichuan Mobile established accounting centers centralized financial management, preparing financial reports and control process. From one hand, the risk can be reduced; on the other hand, the management of high-risk spots, the weak links and repair defects, strengthen internal control can be utilities, which can effectively reduce enterprise risk. Third,"the Impact on the Contracture System". The internal control is a form of contracture system, so the internal control must be sorted according the accounting policies, business processes to find defects, and it is very important to establish the anti-fraud systems and the control systems of all business processes. The fourth is the impact on the informationalizaion. Information technology plays an important role in the SOX Act. The internal control of IT is an indispensable part of SOX Act implementation. According to current IT system status, IT internal control system is the weak link. The enterprise enhances the role of information through a variety of measures so that an effective risk control of information technology on major incidents of financial reporting. The fifth is the impact on the personnel training and attitude. For internal control, it is not important in implement the Act word by word, but to establish an atmosphere, which weight the responsibility and emphasize the understanding of risks. Finally is the impact on the internal audit system. Corporations should establish a self-evaluation mechanism and put effort to ensure the effectiveness of the internal control system.Chapter 5 Recommendations on The Implementation of SOX Act. SOX Act is highly controversial from the day it was introduced. Since the introduction is in a hurry, there is no matching guideline to be followed, in particular 404 provisions, so the understanding of auditors becomes important. The establishment of internal systems is not necessarily reasonable and needs to constantly revise and improve. Moreover, it is more important of the implementation of the internal control system than the design of the internal control framework. However, to effectively implement internal controls, China Mobile also has to build the corporate culture with the help of codes of conduct and ethical standards to guide staff and establish the correct values. Company managers at all levels should be an fine example to demonstrate its high ethical standards, actively promote the establishment of a learning organization, encouraging other individuals to devote their efforts to enhance professional knowledge and improve their ability to resist risks. So the enterprises and individuals could maintain the capacity for sustainable development. SOX Act pays most attention on senior management of listed companies in terms of responsibility. The essence of corporate governance is to solve a problem of internal control. How to solve the conflict between the limited term of the management and long-term strategies in capital market will have major impact on effective implementation of internal control.Finally, the paper proposed that even if China Mobile passed the test on internal controls audit by external auditor, however, it is not a stage of the SOX Act, is not a short-term project, but an ongoing process. China Mobile only sum up some experience, strengthen the concept of establishing full awareness of risk, strengthen its implementation, optimize process and prevent resurgence. SOX Act will be followed into the normal management, so the effectiveness of risk management can really be effective to ensure the long-term development of internal controls.Compared to the former studies, this paper emphasize on the following issues. First, thesis topic is new. At present there are many interpretations of SOX Act, but those interpretations only follow a simple analysis and lack of specific detailed analysis. In this paper, I select China Mobile, a large listed company, to take a deep analysis on SOX project. Empirical studies have enriched the study of SOX Act.Secondly, research perspective is unique. This paper clearly discussed the implementation of the project and detailed steps required from both internal and external environment. Also this paper focused on analysis of the impacts on the implementation of SOX Act and recommendations have been provided from different aspects on SOX internal controls. Third, the study's findings can take the role of reference for the upcoming studies. China Mobile is one of the leading enterprises listed overseas. The difficulties encountered in the processes of the project implementation, detailed implementation process and its effects can be a reference to other Chinese enterprises. |
PDF Full Text Request