Internal Control And Auditing Research

In response to the distortion of financial information and major accounting fraud, United States promulgated the "Sarbanes-Oxley-Oakley Act" (SOX Act) in 2002, which requires all listed companies in the United States to regularly disclose the management evaluation reports for internal control. And the report should be audited by CPA. Then the U.S. Public Company Accounting Oversight Board Auditing Standards (PCAOB) have issued the second (AS2) and the five (AS5) Auditing Standards. Institute of Chartered Accountants of Japan also issued internal control evaluation and auditing standards in 2007. Internal control evaluation and auditing standards in Britain, Canada and the European Union, while not mandatory for the audit, but also provides the CPA to provide limited review for the internal audit reports. With the promulgation of U.S. Sarbanes-Oxley Act, internal control got more and more concern in our country. The "Basic Standard for Enterprise Internal Control" was issued by Ministry of Finance and other four ministries in 2008. And then a package of three guidelines was introduced in 2010, including the "Audit Guidelines for Internal Control". The promulgation of these specifications and guidelines indicate that China will carry out internal control auditing. However, because of the late start of the internal control, it still needs intensive study.This article starts with an overview of the basic theory of internal control auditing. Then it discussed the integration of audit of financial statements and internal control auditing, the relationship between the self-assessment of internal control, internal control, internal audit and internal control auditing. This article argues that the audit approach should be taken to integrate and analyze the feasibility of integration. First, the work of the internal control audit and audit of financial statements has something in coincidence, and second the audit of financial statements and internal audit results are used to each other, support each other. The third is because of the two reports all issued by CPA, thus they should be integrated. And then it analyzes the current situation of internal control auditing in our country, proposed the necessity to carry out it and the barriers existing in the system, company and other area. At the institutional level, first internal control standard is not suitable for our state, second there is no standardized criteria for internal audit. At the corporate level, first internal audit of the company is lack of demand; second company does not fully cooperate with the various departments resulting in low quality of external audit, third is the cost issue of the internal control audits. In other aspects, first public is lack of demand for internal control audit report, second partner of accounting firm pay insufficient attention to the internal control audit work, and the third is responsible for the audit staff is not high, the fourth is there is multiple audit issue. Finally, the appropriate advices are given.This article argues that at the system level, China should further strengthen the research of internal control, to develop a suitable and easily accepted evaluation criterion. First, to study what kind of internal control evaluation criteria is the evaluation of financial reporting standards. Then we can work out evaluation of internal control of each industry for each industry. And make out the standards of internal control auditing as soon as possible. The standards must be clear in objectives, the scope and procedures of internal control audit. At the corporate level, companies should improve governance structure themselves, to create a good environment for internal control and internal control auditing. On the one hand an effective corporate governance structure can ensure the effective operation of internal control. On the other hand with the establishment of internal control system and internal control audit play due role, it can help to find out the problems exist in corporate governance and improve the structure and system in corporate governance. And in order to reduce the cost of the internal control auditing, companies should strengthen their own internal control. In addition, we should also further regulate the capital market, raise the level of the practice of the CPAs, and avoid the duplication of audit. In order to regulate the capital market, First of all we should regulate the securities market construction, second the banks and other financial institutions should improve their awareness of their risk. In order to raise the level of the practice of the CPAs, first the CPA accounting firm should conduct training and re-education program, second incentives should to be taken to prevent staff turnover. In order to avoid the duplication of audit, first we should adopt integrating audit method at the time of performing internal control audit, and second registered accountants should take advantage of internal audit result.