Research On Internal Control Appraisal Of China's Listed Commercial Banks Based On The Grey Relational Method

BACKGROUNDFinance is the core of modern economy and the lifeblood of the social economy.Since 1980s,with the speeding up of the world economy and the integrating of the market,science and technology have been advanced by leaps and bounds. Financial liberalization and economic globalization have been apparent increasingly as well as the financial innovation. All of them above promote the rapid development of all financial industry.As the most important financial intermediary, whether Commercial Banks can efficiently operating is related to the steady and health of global finance. In recent 30 years,the world banking have been developed fast,while also the financial and bank crisis.The reason of banking crisis is quite complex, but a special research by Basel Committee on bank losses and collapse has found that nearly all the Bank problems have relationship with internal control defects.In recent years,as the propulsion of financial liberalization,the financial supervision has relaxed,commercial bank risk increased dramatically,meanwhile,the bank has not establish a good enough internal control systems,plus the change of macro economic and financial environment,it led to bank crisis wave after wave.Thus, the global commercial Banks began to re-examine and review its risk prevention systems,explore the case of financial crisis and the bank failure theoretically,looks for the serious defects of financial system,speeds up the process of formulating reform plans, in order to reduce the risk to the greatest extent.In the process of establishing and perfecting the bank's internal control, appraising the internal control system reasonably is quite important,it is helpful for auditors to obtain audit evidence accurately and effectively,also,to reduce the auditing risk,so as to issue an objective and fair audit report.In addition,it is useful for bank authorities to find out the weakness of management according to the evaluation results,and push the development and perfection of the internal control system of commercial banks.Therefore,it has great significance for the healthy development of China's banking financial industry to research the internal control appraisal system of commercial banks.PURPOSEThe purpose of this paper is to appraisal the internal control of china's commercial banks comprehensively and quantify.These quantitative evaluation results can reflect the internal control level of different commercial banks of their own,also,it is facilitate to compare internal control level between these 14 banks, and then analyze the defects and put forward some suggestions.MAIN CONTENT AND VIEWSThe main contents of this paper contain the following parts:The first chapter is introduction. This chapter basically tells four aspects:The first aspect explains the background and significance of this paper;The second one gives the technical line.The third one tells the research methods;The last aspect is to analysis the main contribution of this study and the insufficiency.The second chapter is literature review. Firstly,This chapter combs the evolution process of internal control theory,makes clear the connotation of internal control,then comments on the literature of internal control appraisal theory and methods of commercial Banks both in domestic and foreign.The third chapter is the theoretical analysis of internal control appraisal of China's commercial banks.Section one of this chapter is to analysis internal control appraisal from the aspect of information economics theory, control theory and system theory.The second one described the process of establishing the internal control appraisal index system of commercial banks according to the COSO report and the relevant laws and regulations.The third one analyze the applicability of the gray relational analysis method in the appraisal of internal control system of commercial banks:commercial banks internal control system,is a grey system,contains a lot of grey information,the grey relational analysis method does not require large size of samples and requires no typical distribution.,and the qualitative analysis results generally match the qualitative analysis.So this paper chooses grey relational analysis to appraisal the bank's internal control.This chapter and the above one are the theory of this paper.The fourth chapter is the main part of the paper.Section one of this chapter is to build the internal control appraisal index framework of the commercial banks.The second one makes China's 14 listed commercial bank as sample, according to the weights set by "the commercial banks internal control evaluation method",gets data from the internal control information disclosure and questionnaire survey,grades the commercial banks internal control evaluation index,and obtains the initial processing data.The third one is to evaluate the internal control of the 14 listed commercial banks by grey relational analysis method based on data obtained.The results from the gray relation analysis is quite according with the actual situation,so that it is reasonable and feasible to use the grey relation analysis to appraisal the internal control.The fourth section analyzes and researches the internal control of 14 commercial banks internal control situation from the internal control environment,risk identification and evaluation,internal control measures,information communication and exchange and internal control supervision and evaluation according to the results above.The fifth chapter is the recommendations and outlook section.This paper made the following proposals according to the COSO report:1,Internal control environment aspects:Perfecting corporate governance mechanism,set quantifiable internal control objectives,build enterprise culture with bank characteristic;2,Risk evaluation aspects:Strengthening the financial risk prevention and control consciousness,establish comprehensive risk management system,learn from foreign advanced risk analysis method,raise the risk analysis ability;3,The control measures:Innovate the control activities according to the actual demand and pay attention to the implementation of internal control measures.4,Information communication:Strengthening the communication with external related, pay attention to the information disclosure;5,internal supervision and evaluation aspects:Pay special attention to the internal control self assessment work,especially the comprehensive of assessment,Internal control loophole should be show alone and makes timely countermeasures and response plan.CONTRIBUTIONSThe main contribution of this paper is:Firstly,the construction of appraisal index system is based on inspecting public listed information in our country commercial bank thoroughly,and on summarizing the relevant authority,it has certain significance.Secondly,at present,although there are much research on grey correlation method and the commercial Banks internal control appraisal,it is still tiny of research on combining them together,this paper have a try on this field.Thirdly,this paper design the grade table of the newly constructed internal control appraisal index system of China's 14 commercial banks,based on the index weight according to the "Commercial Banks Internal Control Evaluation Method",combined with public data.For the qualitative indexes part,this paper uses information questionnaire together with manual collecting information from public data to quantifies the qualitative indexes, in the form of grade.