The Study On Creating Internal Control Assessment System Of DP Co. Changchun Branch

In 2002, the collapse of Enron and the finance fraudulence of WorldCom made the world much amazed which led to the U.S. Congress introduced the "Sarbanes-Oxley Act" abbreviated SOX under. Especially, the 404 item in SOX regulates clearly that the management of public companies are responsible for the creation of the internal control (Abbr. IC) system and ensure it effectiveness. Under that background, DP corporate as an American public MNC also actively reformed its IC system which was built according to the COSO Report of IC framework. But Chang Chun Branch is just one of 200 branches of DP company and internal audit teams in each region performs the audit to the IC system according to the disposition of HQ about every 3 years as a result that the completeness, reasonableness and effectiveness of the IC system would be lacking of tight assessment so as not to find and remedy the deficiency of IC in a timely way which will increase the risk of inefficacy of IC.The assessment system design and creation is aiming at the characteristic of Chang Chun plant business and key control points defined in the important business area which will influence the financial reports significantly based on the Importance and Cost Benefit principle and the Chang Chun Branch's role that only produces and reports its financial situation.The paper has four chapters and begins with the introduction of SOX background. The Act mainly regulates that the management of American public company is responsible for setting up perfect IC system and monitoring its effectiveness. DP company in this article is also an American public company which has over 200 plants in the globe and has built corresponding IC system according to the SOX which effectiveness will be assessed by internal audit team each year. It is because there are too many branches in DP to do the audit to each branches every year, moreover the assessment system is not formed by each plant itself which will influence the quality of IC largely. China Aviation Oil (Singapore) event leaps momently before eyes, the IC assessment system of the branches of DP is expected to be erected urgently. The assessment method, evaluating standard, assessment subject and object etc. were described in this article in detail. The assessment method is CSA(Control Self Appraisal) which is seldom used in companies in the whole world. The great change occurred with the CSA which subject change from single subject to the participation of all the company in the IC assessment that will raise the quality and the effect of the assessment much greatly. In addition, the key business area separation also raises the performability of the appraisal system. As it is divided into several areas, the appraisal has the definite target.The main line of this article is as following.The Chapter 1 is Proem: The study background is introduced at first, and then the significance of this article and the problem DPCC (DP company Chang Chun Branch) met are summarized and described, at the same time, the reason why the IC of domestic and foreign companies failed are pointed in this part. I hold that it is not only because of the incompleteness of the IC system, but also the lack of the IC assessment system. For the outside lessons such as Aviation Oil event and the limitation of the available auditing resource from HQ, the branches'own IC assessment systems are urged to be built.Chapter 2 DP Company IC System Framework: Firstly the related concept and theory is stated in this chapter, in the meanwhile, the IC framework of COSO is depicted which includes 5 main points that is Control Environment, Risk Assessment, Control Process, Information and Communication, Monitoring. Those 5 factors are not isolated but related with each other. Healthy control environment is the basis of them and also is the hardest to form. Motoring is at the highest level overlooking the whole control system as a watcher or a supervisor to the IC system. And then, the design and execution of the IC is pictured in an illustrational way.The assessment system of DPCC is constructed in Chapter 3. The appraisal principle, subject, method and the standard are settled in this chapter and the article emphasizes that this system construction should follow the Importance Principle and the Cost Benefit Principle. CSA is chosen to be used as the assessment method in the constructed assessment system which is much distinguished from the traditional isolated assessment performed by CPA or Internal Audit. CSA can completely mobilize the employees'initiatives so that they could reflect their own jobs'control deficiencies proactively which will make the assessment more efficiency and effective. Certainly, though we have a perfect assessment system, we may suffer failure in the process of execution without top management's support.Chapter 4 Finish the construction of the detailed test procedures. In the first place, the IC process is divided into several important parts. Next, some key control points are set up. In the end, the corresponding test procedures are designed embodying the Importance Principle and Cost Benefit Principle. It's impossible for all the control points being focused on completely. Only important business areas are divided and key control points are defined, the better assessment quality will be obtained.The end of this article is conclusion, which summarizes the construction of the IC assessment system in DPCC is a must. CSA will keep running forward play an important role gradually in the process of assessing the IC system.