The Analysis Of Relationship Between Corporate Governance And Internal Audit Quality

Developing so far from the eighties, internal audit as an important part of corporate governance has made a series of fruitful results. But, mature compared to western countries, there are many problems in our country. Therefore, internal audit of listed companies on how to improve their work efficiency and how to improve the quality of its own have become China's audit theorists and practitioners'focus. In this context, the study about the quality of internal audit and corporate governance structure has important theoretical and practical significance.In theory, the study enriches the theoretical system of internal audit. In practically, the study is important for improving corporate governance structure and internal audit quality.This paper is divided into five parts.The first part is the introduction. This article introduces the research's background, significance, methods of the study and the ideas of this study. Otherwise, the problems and weaknesses of this study are summarized. The paper has four deficiencies:1.The variables for this study only from the perspective of internal governance structure.2. The variables are only a little part of the internal governance structure in companies.3. About internal audit quality, the study considers only the part of the internal factors, the external factors are not considered.4. The method to construct internal audit quality lacks scientific nature.In the second part of the paper, the key concepts involved in this paper are carried out to define and explain. I think the corporate governance structure is divided into external governance structure and internal governance structure. In my study, the internal governance structure is the main consideration. About the concept of internal audit quality, I consider that is the internal audit department in accordance with the internal auditing standards to work and the comprehensive level of internal audit work. In the end of this part, we also comment researches result from domestic and foreign study about corporate governance, internal audit quality and the relationship between them. I think studies of governance structure are relatively mature, but researches about internal audit quality are relatively poor. Therefore, research conducted in this paper has practical significance.The third part is the theoretical analysis of this study. Firstly, a brief description of the theoretical basis has been mentioned. On this base, I think the relationship between the corporate governance and the internal audit at least two ways to say. One hand is the role of internal audit in corporate governance, the other hand is the impact of the corporate governance on internal audit. Lastly, through the analysis about the ownership structure and the internal audit quality, board characteristics and the internal audit quality, board of supervisors meetings, managerial ownership and the quality of internal audit, eight assumptions have been made.The fourth part is the empirical analysis. In the beginning of this section, I describes the design of this study including sample selection and data sources, explained variable, explanatory variables and control variables'definition and the multiple regression model. We select listed companies that ended December 31, 2009 at the Shenzhen Stock Exchange A share as the primary sample. By reviewing annual reports and internal control self-inspection reports,251 companies full data have been gotten. About the definition of the internal audit quality, there are four areas are mentioned:the objectivity of internal audit department, the size of internal audit department, the scope of internal audit function and the soundness of internal audit system. About the explanatory variables, I select eight variables for this study. There are the proportion of state-owned shares, stock checks and balances, the Board size, proportion of independent directors, chairman and general manager as one, board meetings, board of supervisors and management equity ratio. We also select the natural logarithm of total assets and ROE as the control variables. In the latter part of this section is empirical test. I descript the internal audit quality variables and explanatory variables in first, making a solid foundation for this paper. Secondly, I make a brief analysis of correlation between the dependent variables, explanatory variables and control variables.Finally, I conduct a regression analysis and the empirical results are obtained.The fifth part is the end of this paper. It introduces an empirical test of the main conclusions, puts forward some policy recommendations.The study mainly by the following conclusions:1. The proportion of state-owned shares, equity and balance degree and the internal audit quality have not a significant correlation.2. Board size, proportion of independent directors, board meetings and internal audit quality of listed companies have no significant link between them.3. There is no significant correlation between two jobs of chairman and general manager of one, the Board of supervisors'meetings and the internal audit quality of listed companies.4. Managerial ownership and internal audit quality of listed companies have a positive correlation between them.According to the results of empirical research, this paper makes the following recommendations:1. Listed companies shound gradually reduce the proportion of state-owned shares and enhance the diversity of equity holders.2. Improving the board of supervisors'operating efficiency.3. Government departments, industry organizations should strengthen the norms and rules of the internal audit system. By this way, the regulations have been established for improving the quality of internal audit staff.Future research, we should not only intensify the influence of exterior governance structure variables on the internal audit quality but also spend more time and energy to expand the range of feature variables. At the same time, more factors of internal audit quality should be concluded. Not only the internal auditors'professional ability and government departments'attention, but also the profession supervising of department's rule to internal audit. Only in this way, the analysis about corporate governance structure and internal audit quality has an important role to the governance structure's perfect and the improving of internal audit quality.