Internal Control

Internal control is an old and young topic because it can be traced back to private-ownership society and it is always under discussion. Since 1990s China has begun its systemic research of internal control. Presently, there are various opinions about it which cannot be unified in Chinese theoretical field. In the meantime the enterprises don't attach importance to internal control and they are beyond effective control. Therefore I decide to write this article and discuss thoroughly the basic theory of internal control and its construction in Chinese enterprises. I hope my article is able to improve the management status of Chinese enterprises.This article consists of four sections. Section One is the theoretical basis of the whole article. In this part, I expatiate on the basic theory of internal control. Firstly, I introduce the development of internal control theory, which ranged from internal check, internal control system, internal control structure to internal control frame. On that basis, I define the concept of internal control. Secondly, I discuss the character of internal control: it is an important part of management and it is a kind of control system within enterprises. Thirdly the article introduces the function of internal control. It helps the policies and rules to be carried out, protect the property, provide the reliable financial information timely, keep away the risks, and contribute to effective management Lastly, I demonstrated the localization of internal control: it is restricted by cost-benefit principle, artificial mistakes, collusion and embezzlement, authority exceeding and system lag.Section Two explains my motive for this article. I analyze the necessity of strengthening internal control in Chinese enterprises and illuminate that it is the obligatory request of banning illegal behaviors and enhance the quality of financial information, is impersonal necessity of deepening enterprises reforms, establishing the contemporary enterprise system and increasing economic benefits, is the urgent demand of joining the WTO and global competition.Section Three includes two parts. The first part is about the evolution ofinternal control in China, in which I introduce the conditions of Chinese research. The second part is the analysis of the internal control in Chinese enterprises. I expound Chinese internal control is still weak and analyze the internal causes and external causes in order to prepare for the next section.Section Four is about the suggestion of perfecting internal control on the basis of cause analysis. I think that we should take measures inside and outside at the same time. On the one hand, the enterprises must accelerate the internal control construction by optimising the human resource management, consummating corporate governance structure, reinforcing communication, managing the risk scientifically and enhancing internal auditing. On the other hand, it is necessary to improve the construction of external environment, which includes the government should intensify the supervision and direction toward the enterprises and the public auditors should carry out internal control auditing.