Research On Disclosure Of Internal Control Of Chinese Listed Companies

Internal control is one key factor to the companies' performance and the reliability of financial information. Recently there had been emerged several cheating scandals in capital market at home and abroad. One of important reasons is the missing or deficiency of the internal control in listed companies. So the act of SOX was passed by the Congress of USA in the year of 2002 which issued rules to require public companies compulsorily to disclose their internal control information in 404 clauses. The aim of the act is to set up the effective system to regulate the listed companies and recover the confidence of the investors. Internal control disclosure is also drawing more and more attention at home, especially after the issuance of SOX act. China Securities Regulatory Commission (CSRC) have already issued rules to demand listed commercial banks, stockjobbers, insurance agents to disclose their internal control compulsorily. CSRC also issued relevant rules on other listed companies. However, the internal control disclosing practice in China is immature, and the study on internal control disclosure is on the initial stage. Based on the above considerations, this paper bring out that we should construct the management reporting on internal control which is helpful to regulate the listed companies, improve internal control management and then protect the benefits of investors.In the first part, this paper reviews and summarizes the research results on disclosure of internal control before and analyses the difference between domestic research and oversea study. In the second part, the definitions of internal control and disclosure of internal control with their necessity and importance are introduced to build theory foundation for the further study. At the beginning of the third part, the current situation on disclosure of internal control is presented by descriptive analysis study based on the annual reports of 300 of listed companies from Shanghai Stock Exchange and Shenzhen Stock Exchange in 2006. And then the writer analyses the existing problems, such as insufficient motivation of voluntary disclosure and lack of correct reorganization about internal control, etc, of which the causes are explained from the aspects of external and internal.To improve the current situation, the fourth part of the paper tries to design disclosure form of internal control reporting for domestic listed companies with experience of SOX act. In the end, the writer review the whole paper and states internal control is a dynamic process through which the listed companies achieve their purpose. In all, the characteristics of the paper are as follows:First, the writer makes a systematic research on management reporting on internal control on the basis of current situation in our country.Second, the paper tries to design reference form of internal control reporting on internal control by theory explanation and chart illustration, and discusses the concept, main, characteristics, scope, time, evaluation procedures, content, in order to set up standards of internal control reporting.