Study On The Internal Control Of Rural Credit Cooperative Of China

The financial industry is a high-risk industry; the risk of financial institutions is closely related to the regional and even the national financial risk. With the rapid development of the world economy and science and technology, the trend of economic globalization and financial liberalization is becoming more and more obvious, the innovation in financial is emerging one after another; the financial industry's status in world economy becomes more important that ever. But the problem of the world economy with the development of itself is more and more obvious, reflecting on the frequent crises and turbulence in banking system. What we can learn form the collapse of the financial institutions from all over the world is that the internal control is the most fundamental and basic factor, other factors influence the economy through the internal control, though the causes of the financial collapse is complicated. Although there is not obvious financial crises and large-scale bank bankrupt, there are lots of unsafe factors, especially the huge accumulating non-performing assets in banking system, which is a direct threat to the China's banking system and even the financial system and economic order. To investigate its reason, besides the influence of the international financial environment, the weakness in supervision system and the shortcoming of the system, the banking itself, is a very important aspect.As the main financial institution, the rural credit cooperative is the most important channels to circulate necessary funds in agriculture and rural economy. It has been playing a positive role in promoting the development of agriculture and rural economy as well as in increasing farmers'income. But the rural cooperatives of most areas are faced with many problems, such as poor management, low operation efficiency, and high ratio of non-performing assets. The causes why rural credit cooperatives are in the predicament are various, but to rural credit cooperative themselves, untight internal control is an important reason.After decades of development, China's rural credit cooperatives improved greatly in internal control construction and initially established a framework of the internal control system. However, the internal control of China's rural credit cooperatives is still very weak. There are many defects in the construction and implementation of internal control system, which cannot control risks effectively. Most of the current researches on rural credit cooperatives focus on property rights, governance structure and non-performing loans, relatively little research on internal control, but thorough, systemic and specific research is lack, leading to the incomplete internal control system of rural credit cooperatives.Therefore, this paper analyses the internal control environment, risk management, information management and audit supervision and tries to build an effective internal control system to ensure the prudent operation of rural credit cooperatives according to the requirements of the Basel committee, the COSO report and People's Bank of China. This paper includes five parts: the fist part is the introduction, including the research background, the purpose and significance of the research, the current research both at home and abroad as well as the structure and the content of the project. The second part is the definition and the theoretical foundation of the rural credit cooperatives. This part introduces the evolution of internal control and the Basel committee on banking internal control theory firstly, and then introduces the definitions of the internal control and the rural credit cooperatives. The third part is about current situation of the country's rural credit cooperatives. First, it overviews the history of the internal control in the rural credit cooperatives; second, it finds out some major problems; third, it analyses the causes of the weakness in the country's rural credit cooperatives from both in and out. The fourth and fifth parts are the key parts of the paper. They discuss from the aspects of the internal control environment, risk management, information management and audit supervision, which build the country's internal control system of rural credit cooperatives and offer reasonable suggestions to the government.