The Establishment Of The Internal Control System And Practice

The phenomenon of asset losses often occurs owing to the problems existing in the establishment and performance of its internal control system for the enterprise, especially for the state-owned enterprise. This phenomenon also leads to the assets being unable to reach the goal of preserving and increasing value. At present, China has entered into WTO. Enterprises will face more severe business competition from enterprises at home and abroad. Therefore, the establishment of an effective internal control system and prevention of asset losses for the enterprises is the key in order to remain competitive.I think the precondition to establish effective internal control system is that enterprises must make clear property rights and responsibilities, because ambiguous property rights will cause the increase of deal cost and the reduce of efficiency. Hence, ownership and management rights of the enterprise must be divided in order to make a good foundation for the establishment of legal representative management structure.I also think the center of internal control is employee incentive and binding. Since the company system appears after the proprietor and partnership systems, ownership and management rights start to be divided. How to greatly exert the initiative of all parties of the enterprise needs a systematic organization and a decentralized system with employee incentive and binding on the basis of clear property rights.On the basis of the above views, I will discuss in detail in this dissertation the establishment and performance of internal control systems for the enterprises. In summary, enterprises should set up employee incentive and binding systems between owners and operators and focus on the objective of preserving and increasing value.