State-owned Company Financial Supervision Mechanism Research

In recent years, with the continuous improvement of the main investment entities in state-ownedenterprises (in short, SOE), corporate governance and internal control system, the basic framework ofmodern corporate governance have been gradually formed in many SOEs. Financial management andinternal supervision and control mechanism in SOE is relatively more sophisticated. However, it isundeniable that the virtual nature of the investment entities in SOE, corporate governance structure isnot perfect, the departmental functions is weak, and working person and assets flows are relatively free.The above leaves a large weakness to the financial regulatory and the supervision mechanism in theSOEs. This internal weakness in these internal systems is exactly the breeding ground for crime ofSOE’s top managers.The confusion and the non-standard in financial management will not only directly lead to loss ofassets and asset’s low operating efficiency, and will directly or indirectly induce the top managers’malignant expansion of certain improper desires. Some private companies have begun to implementsome significant supervision mechanism in financial expenditure, which is the“multi-password-in-the-same-time” software, and some financial management and supervisionmechanism. These mechanisms have replaced the “single-pen” system, and the SOEs have laggedbehind the private enterprises in this regard.Based on the above mentioned, the current problems of the financial supervision mechanism withinSOEs is analyzed based on the Company Low and the corporate governance theories. A more effectivesupervision mechanism of the assets safety in the SOEs is expected to be formed in this paper.In the first chapter, the research background of this paper is introduced, and the importance ofstrengthening the financial supervision mechanism in the SOEs is proposed within the sight of corporategovernance, and then the research profiles of domestic and foreign financial supervision mechanisms isbriefly introduced and summarized. The research significance and innovation of this paper issummarized in the third and fourth sections.In the first chapter, the theoretical knowledge involved in this paper and the relationship betweenthose theoretical knowledge and research objects is discussed in four sections. The scope of SOEsinvolved in this paper is defined in the first section. The development, content, features and boundariesof corporate governance theory are described in the second section. The conclusion that the internal andexternal governance mechanisms should be included in the corporate governance mechanisms isproposed. The above internal corporate governance mechanisms are a series of institutionalarrangements for reducing the principal-agent costs through the company’s internal systems. The aboveexternal corporate governance mechanisms are defined to forming the positive effect to the corporategovernance from the outside of the company, such as the creditor governanceand the manager markets. The corporate governance theory mentioned in this paper mainly refers to theinternal governance mechanisms. The core task of the corporate governance in this paper is to protectthe interests of the company against the other companies, reduce the friction between the two, andfinally reach the general equilibrium in the allocation of rights, obligations and responsibilities of thevarious stakeholders. The internal control theory is discussed from the development process andtheoretical content in the third section III. The general theory of financial supervision is analyzed in thefourth section, which includes the theoretical connotation, classification, these related concepts, and thespecial role of financial supervision.The system of internal financial control in SOEs is proposed, which has corporate governance,internal audit, financial approval, and the relationship between these components and the financialcontrol of SOEs is discussed in the third chapter. The current situation of these related systems of financial control mechanisms is analyzed based on the component system of the mechanisms in thefourth chapter, which has four sections.The fouth chapter is the focus of the paper, in which the way to improve financial supervisionmechanism of SOEs is established, which mainly includes three aspects. These aspects are to improvethe SOEs’ corporate governance system, establish the “Two-Pen” system of large amounts of cashexpenditure, and improve the information disclosure of the SOEs to administration commission andshareholders.The thesis of the fouth chapter is established on the “Basic Standard for Enterprise InternalControl”(Accounting [2008]7), which is issued by the Ministry of Finance in China, and also refer tothe “Company Law of the People’s Republic of China”, the “Securities Law of the People’s Republic ofChina”, the “Accounting Law of the People’s Republic of China” and other relevant laws andregulations. The internal control is expected to be strengthen and regulated, the enterprise managementlevel and risk prevention ability is hoped to be improved, and the socialist market economic and socialpublic interests is made sure to be ensured with the conclusion in this chapter.The position of functions of the independent directors and supervisors and the delineation ofresponsibility of the Audit Committee and Supervisors is proposed in the first section of the fifth chapter.Thus the financial supervision agencies and the powers and responsibilities of the agencies in the SOEsis combed clearly as to solve the problems of the chaos power of the financial supervisory. Based onthose above, the “multi-password-in-the-same-time” software and the corresponding financialmanagement and supervision is proposed.The “Two-Pen” system of the financial approval mechanisms in the large cash expenditure in theSOEs is presented in this paper. Besides, as to balance the operational efficiency in the SOEs, the“Single-Pen” system is preserved in the petty cash expenditure.Information is the core resources of the modern business activities, and the supervision is uselesswithout the necessary exchange of information. Therefore, good communication mechanisms within theSOEs is made sure to be established, especially the significant financial operating information in theSOEs.The conclusion of this paper is presented in the next chapter.This paper is focused on the legal aspects of system construction, but the detailed system designand establishment need the multi-disciplinary and multi-field participation, which is not fully analyzedwith the limitations of the author’s subject knowledge.