Research In Correlation Between Corporate Financial Risk And Internal Control

The global capital tide is blustery at the moment, and the financial crisis broke out in 2007 also caused a fatal blow to many businesses, international and domestic situation is becoming increasingly grim. How to enhance anti-risk ability which can survive in a market economy and keep sustainable development is a prominent and urgent problem, and it closely related with the strengthening of internal control; global accounting scandals, such as Yin Guang Sha Event, Enron Event, reflect that the company has many internal control deficiencies besides the external environment is extremely severe, which lead to risky enterprises, and even bankruptcy. Because the enterprise risks will be reflected in financial risks from the funds movement, we can understand and control the business risks which reflect physical movement through the analysis and control of corporate financial risks. Therefore, studying the relevance between corporate financial risk and internal control is the need to response to the increasingly difficult market environment, to scientific management within the enterprise, and to the sustainable development of enterprise.This article elaborated the present research situation of business financial risks and internal control, and analyzed the present situation and reason of domestic firm internal control and the risk prevention. In this article it combined the internal control and the guard of financial risk scientifically, associated funds movement with physical movement that is the two associated aspects of the same thing using research methods of systems analysis and combining theory with practice,discussed to prevent the financial risk by internal control, and put forward a overall methods to strengthen the firm internal control and financial risk prevention. From the beginning of establishing an scientific organization structure of internal control and financial risk management,and forming the three lines of defense to enterprise risks, set up comprehensive goals to physical and capital movement, and carried out the comprehensive budget according to the goal, then carried on the appraisal to the financial risk taking the financial target as the breakthrough point,and carried on the risk early warning and the risk control to the appraisal result. While carrying on the financial risk appraisal and the control, it combined the financial risk that reflected the fund movement and the operational risk that reflected material movement, judged whether have had the operational risk as well as the financial risk from the operational risk through the financial analysis, and then implemented different internal control strategy to the fund movement and the material movement to guard against the risks together. In view of the financial risk, to carry on the guard according to financial control's strategy; In view of the operational risk, to carry on the guard and the management through each link of enterprise operation, such as the purchase, the property, the production, the sale, the investment management and so on. Regarding the procedure and method of risk control, the paper carried on the elaboration to the risk control in the light of the five elements of internal control namely internal environment, risk assessment, control activities, information and communication, internal oversight on The Basic Standards Of Firm Internal Control, and eight elements of risk control about Enterprise Risk Management-the overall framework.According to the overall mentality above, this article referred to the existing research results, and then reorganized the specific strategies of improving the firm internal control and financial risk prevention. Finally, according to the cases of Hunan Publishing Investment Holding Group Co., Ltd., the paper provided a practical framework and reference frame to promote further enhances of the business financial risks prevention and the internal control level in our country.