A Study On Efficiency Of Internal Control Based On Financial Risk Control For Listed Companies On SMEs Board

Surrounding the theories about Internal Control-Integrated Framework, this paper drew 306 samples listed on small and medium-sized enterprises(SME) board of Shenzhen , got 306 groups of observation data, and conducted an empirical study mainly on efficiency of internal control based on financial risk control. Since the Enterprise Internal Control Standards Committee of China released the act of the Enterprise Internal Control Standard-basic norms in 2006,the internal control system of the SMEs have been constructed for over 5 years, the majority of the SMEs have their own internal control systems, but does these internal control system really have effectiveness to the enterprise, that is the very question we should discuss about.Based on the theories about internal control of the Committee of Sponsoring Organizations of The National Commission of Fraudulent Financial Reporting, to control risk is the main purpose of internal control. So based on financial risk control, this paper discusses about whether the internal control system really play a remarkable roll in avoiding financial risks to achieve the purpose of risk control. According to the basic theory about framework of the internal control, we divide internal control into five factors, The Internal Environment, Risk Assessment, Control Activities, Information and Communication, Internal Monitoring. According to the five elements, we selected 18 index-es established internal control comprehensive evaluation index for estimating the level of internal control quality of the SMEs, and With the Z-score measuring of financial risk, we measured the internal control effect.theTo established a regression model, we chose the Z-score as dependent variable, and the internal control index, internal environment index, risk assessment index, control activities index, information and communication index and internal monitoring index as the independent variables. Lastly, we found that although the SMES have a generally high level of internal controlquality, but the effectiveness of controlling the financial risk is not as good sa that, not all the companies on SMEs board have a high level of internal control effect, their financial risk is still very high. According to the explanation degrees of the regression model, the Internal control played a role in financial risk control, but not a remarkable one, only 30%. From five elements of the internal control, most companies on SMEs only pay attention on the direct factors related on risk control, for example risk assessment, management activities and internal monitoring. And other elements such as control environment and information and communication, may be the indirect factors related on the risk control, are not taken seriously by the companies. They playe a weak role in financial risk control. Especially information and communication has no relationship with the financial risk control. Why the internal control quality of the SMEs improved, but the internal control effect did not, the reason is that the level of the quality of five elements is not balance.The SMEs is still in the developping period, the internal control also need to further standardize. Finally, according the conclusions mentioned above, in order to improve the internal control effect of the SMEs, effectively reduce financial risk, we should balance the development level of five elements of internal control, especially focuse on the construction of control environment and information and communication.