Internal Audit Department Of Public Firms Establishment Motive And Governance Effects

Internal audit wasn't a fresh topic already, both of domestic and foreign research. It was a long-standing subject, and it has profound development history. With the development of the theory of corporate governance, most of domestic researcher more and more emphasized the effects of internal audit on corporate governance. And most of scholar studied the effects from the normative angles. Presently, almost there was nobody who studied the factors which affect the establishment of internal audit and the effects of internal audit on corporate governance from empirical angle. Owing to these reasons, we studied the factors which affect the establishment of internal audit and the effects of internal audit on corporate governance from empirical angle, in order to supply theory and policy suggestions for perfecting internal audit's establishment.There are three parts in this paper. Corresponding contents and conclusions are as follows:The first part of this paper analyzed the nature,the theory about internal audit,the factors and it's governance effects. The part included two chapters. In the 2 chapter, firstly, we described the implications. Secondly, we described the theory of accountability and explain that the internal audit's nature is accountability. Lastly, we introduce the theoretical basis: scale economy theory,principal-agent theory and corporate governance theory. In the 3 chapter, firstly, we carried out fundamental analysis on the motivation of internal audit's establishment.2)owing to governance motivation;Secondly,we analyzed the effects of internal auditing on corporate governance. In this part, we demonstrated that internal audit and corporate governance have similar theoretical basis and objects. Then we introduced different effects of internal audit on corporate governance.Second part is the main body of this paper. In the 4 Chapter, we carried out empirical test of the internal audit's motivation and effects. Firstly, we introduced the thoughts of empirical research,the distribution of samples and data.Secondly,we discussed the factors affecting the establishment of internal control by T test and Logistic model's regression test. The empirical results are: enterprise assets scale,independent ratio,market complete and real controller pass the significant test. Enterprise assets scale,independent ratio and market complete have significantly positive effects on internal audit's establishment. The real controller has significant negative effect on internal audit's establishment. Thirdly, we analyzed the effects of internal audit on corporate governance. From the descriptive statistical analysis, we found: Comparing to the company without internal audit, the company that has internal audit has lower possibility of accounting error,lower agency cost,higher earning profit,higher possibility that the external audit organization show a standard audit report. Then, from the linear regression analysis, we found the internal audit has significant effects on corporate governance.Last part is the 5 Chapter. Firstly, we demonstrate the empirical results in the third part. Secondly, we supply suggestion for perfecting the establishment of internal audit on the basis of previously empirical research. Lastly, we demonstrate the default of this paper and supply suggestions on future research.