Research On The Audit Standards For Internal Control Of China

The enterprise internal control has been in the ascendant in recent years. It is the s series of accounting scandals such as Enron and WorldCom that gave birth to the "Sarbanes-Oxley Act (SOX)", which necessitates the audit of internal control over financial report. The standard for internal control, "Auditing Standard No.2-An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements (AS2)" came into being in this background. However, AS2 was so controversial from its release on that it was soon replaced by AS5 three years later.Meanwhile, lots of other countries besides the US are paying close attention to the development of audit over internal control, among which Japan and China are endeavoring to draw up their own audit standards for internal control. The five ministries including the ministry of finance formulated the "Basic Standard for Enterprises Internal Control" in May 2008 and in the following year the "Implementary Guidelines for Enterprise Internal Control (ED)", in the midst of the "Guidelines for Audit of Enterprise Internal Control" forms the main part of audit standard for internal control in China. Eventually in April 2010, the "Implementary Guidelines for Enterprise Internal Control" including the "Guidelines for Audit of Enterprise Internal Control" came out and it was a symbol that China had established its own system of audit standard for internal control.In fact, our "Guidelines for Audit of Enterprise Internal Control" is formulated basing on AS5 so that the former resembles the latter to a high extent. Our audit standard has its own strengths and shortcomings, and it is not easy to understand until we analyze AS5 deeply. Then what are the points where our guidelines referred to successfully, or in other words, why was AS2 replaced by AS5? The questions can be easily answered when the two standards are discussed simultaneously, and this paper goes further to research on the implementing effect of the new guide for internal control. How will it be and what can we do to improve it? The paper solves this problem by referring to the carrying out of AS5. Briefly speaking, this paper mainly focuses on the reasonableness of audit standard itself, and then on the improvement of it.The train of thought of this article is as follows:First, figure out the reasonableness of AS5 and "Guidelines for Audit of Enterprise Internal Control" by researching on AS5 replacing AS2; then, investigate in the probable improvement of the guideline by researching on the guideline and AS5.Of course, during this processes, our nation's condition has also been taken into account.This paper consists of five parts. Part one gives an introduction to the status quo of American audit standard, thus bringing out the questions to be engaged in, relevant research home and abroad is also included in this part.Part two illustrates the development of audit theories & standards for internal control of China.Part three focuses on the key points of AS5 and AS2, thus we know the essence of the former replacing the latter.Part four can be classified as two aspects, one is to know the reasonableness of our standards, the other is the questions on how to make our standards more perfect.Part five is the way to consummate our standards for intimal control, it's the answer to the questions raised in the previous part. This part is also written followed the process of internal control audit.This paper relies mainly on normative study. The innovation points of this paper embody in that via comparing the content of AS2 and AS5, and the reason of AS5 replacing AS2 also concluded, the paper engages in the important issues that the standard is supposed to resolve. Besides, by referring to the experience of other countries, this paper also gives some suggestions to improve the standards.