Relationship Between Supply And Demand Of The Internal Control Attestation Engagements

The audit of internal control has been a popular subject which is discussed by many countries. In order to make the decisions, the stockholders, the creditors, the government and the administration need to know the internal control of enterprise. Thus the effective of the design and operation catch many field's attention. Many countries have published some laws about the audit of internal control, such as'Audit Standard AS5'by USA,'An Audit of Internal Control over Financial Statement and Audit Standard'by Japan. In 2008, The Chinese Finance Department published the'the Fundamental Norms of Internal Control' and the 17 concentrate control standard with other departments. In the same year, 'Enterprise Audit of Internal Control Guidelines (draft)'was published as well. And the formal one was released in 2010. It is significant in the theory and experience of the audit of internal control in our country. With the development of Chinese economy, an audit of internal control system suited to our country is essential. However, the research and development of the audit of internal control in our country is not mature. Moreover, most research is focus on the judging standard of internal control, judging process of internal control, judging method of internal control, if it's necessary to audit the internal control and so on. Thus, this thesis is to analyze the present condition, existing problem of the market of audit of internal control in China and how to solve these problems.Firstly, the thesis introduces the concept and the theory of the audit of internal control and its development and achievement in China and other countries. Secondly, it analyze the auditor of internal control from its demand and supply. The demanders include the stockholders, the creditors, the government and the administration of enterprise. For different demanders their need is different. Considering the cost and profit, the stockholders, the creditors and the administration of enterprise need the audit of internal control over financial reporting. However, in order to manage the market, the government needs the audit of whole internal control. The suppliers are consisted of the CPA and other intermediary organization. Considering of the cost, ability and the risk, the CPA can only provide the audit of internal control over financial reporting. Then, the thesis researches the supply and demand relation of the audit of internal control, its affecting elements, the present condition and the existing problem in economic angel. In china there is not an explicit rule for the extent of the audit of internal control. But it's showed from the audit of internal control report exposed by the enterprises in 2007 and 2008, the most reports are the audit of internal control. We can see from the supply and demand curve, if auditing the whole internal control, the audit cost is so high that the supply line will move to the left and the price will increase. But the audit fee is paid by the enterprises. They pay more attention on the price rather than the quality. Thus the enterprises are willing to choose the accounting firm with low audit price. At the moment, the price the demanders are willing to pay is not equal to the market price. In order to get more business, the accounting firms have to decrease the price. However, decreasing the price will result in the reduction of audit quality. And it violates the purpose of the audit of internal control. Finally, the thesis gives some advices about the audit of internal control in China in demanders' level, suppliers' level and law level.