State-owned Enterprises Bankruptcy Liquidation Internal Control Theory Research

With the continuous development of market economy, the deepening of thestate-owned enterprise’s reform, competition leads to the survival of the fittest. It isinevitable for the deficit state-owned enterprises run into bankruptcy. The so-calledbankruptcy is that when all of the debtor’s assets become insolvent, creditors will becompensated averagely based on all of the debtor’s assets through certain procedures sothat the debtor’s other debts unable to pay can be exempted and the court declares that theenterprise goes into bankruptcy. This is not only a positive relief to the plight of enterprises,but also a good way to take account of the interests of the creditors, maxing the positiverole and mining the negative role to the social economy. However, the bankruptcy of thestate-owned enterprise arouse hidden assets, bribes, bad transfer of state-owned assets,bankruptcy fraud and other problems, these problems not only seriously damage theinterests of creditors, disrupt the social credit and disturb the social economic order, butalso increase the social unstable factors, damage the construction of a harmonious society.To effectively control undesirable phenomenon during the period of bankruptcy, there is anurgent need to establish the theory of internal control framework about the state-ownedenterprise’s bankruptcy and liquidation. The development of the theory of internal controlwill have a positive role to the state-owned enterprise’s bankruptcy and liquidation.Nowadays, Chinese and foreign theoretical research results include the bankruptcyliquidation, bankruptcy fraud, insolvency, bankruptcy property and so on, researches aboutinternal control frame include COSO, the results of these studies has greatly promoted theconstruction of internal control system and the legal construction of bankruptcy system.Apparently it did not combine the two studies, resulting the internal control weaken inbankruptcy liquidation or even nothing and providing the opportunity for state-ownedenterprise to encounter potential risk in the period of bankruptcy liquidation. Therefore,based on state-owned enterprise’s bankruptcy liquidation to build the internal controltheory has great theoretical value and practical significance.This paper will improve and complement internal control theory framework ofenterprises’ bankruptcy liquidation from main body, object, assumptions, principles andfive elements. The subject of the internal control includes the making subject, thesupervision subject and the implementation subject. The making subject is the bankruptcyadministrator, making the relevant system and solutions; the implementation subjectincludes debitor, bankruptcy administrator and creditor; the supervision subject is creditor,supervising the bankruptcy administrator. According to the different main body, the object will be divided into the supervision object, the making object and the implementationobject, the supervision object is internal structure and the related persons of the bankruptcyadministrator, the implementation object includes all bankruptcy liquidation affairs, themaking object includes all the relevant system and solutions. The goal of internal control ofthe state-owned enterprise bankruptcy is to safeguard the interests of creditors, allliquidation activities are for maxing the creditor’s benefit. The theory of internal controlframework has six hypothesis and seven principles, assumptions and principles as internalpremise are the essential part of the theory of internal control framework. the internalenvironment, risk assessment, control activities, information and communication andsupervision and inspection about the state-owned enterprise bankruptcy liquidation willtheoretically be analyzed further and deepen, thereby avoiding some problems caused bylacking in internal control, so it is of important theoretical significance and realistic value.Finally, this research provide a wider and deeper aspect about bankruptcy studies, suchas the internal control of the bankruptcy reorganization, the external control of bankruptcyliquidation, risk warning of bankruptcy liquidation and so on, providing a new train ofthought for further perfecting the bankrupt mechanism.