Research On Enterprise’s Internal Control Business Process

With the constant development of economy and emergence of a series of major violations, the concern degree to internal control is gradually improving by the theory、practice、government and enterprises, and they agreed that perfect and effective internal control system is an important safeguard to protect the investors interests and the sustainable development for enterprise. In April 26,2010, the ministry of finance issued "enterprise internal control supporting guidelines" in conjunction with the auditing, the CSRC, the CBRC, the CIRC jointly. This supporting guidance builds the Chinese enterprise internal control standard system along with "the enterprise internal control basic standard" which was issued in May,2008. It will beginning apply in listed company that both at home and abroad from January 1,2011, and then expand to listed companies which in the Shanghai stock exchange and the Shenzhen stock exchange from January 1,2012; On this basis, choose the appropriate time to imply in small and medium plate and GEM companies. Meanwhile, encouraging large and medium-sized enterprises to execute which have not listed in advance. Therefore, the internal control system has been completed, but how to imply the internal control system in practice remains to be summarized and perfected.At present, most enterprises especially the large enterprise have already taken part in the construction of internal control actively in China. At least half enterprises, especially in financial industry have made great progress on perfecting the internal control mechanism which was reported by Deloitte in internal control annual survey in the last half of 2009. Enterprises value internal control construction, hope to clear up the business process by abiding the basic standard of internal control, set up corresponding control mechanism through recognizing the key risks point, and find the internal management problems and make corresponding rectification, thereby improve risk management level in all. However, Chinese enterprise construction and the process of improving internal control meet much problem, including the design of business process is imperfect, could not combine specific circumstances, some key points could not make the optimal settings according to relevant risk, thus causing internal control construction is incomprehensive, Therefore, it needs to make further improvement on internal control business process design in the process of establishing and perfecting the internal control system.Most of internal control theory is based on the COSO internal control overall framework in our previous research, these research are confined to the construction of internal control system, ignoring the implementation and application of internal control system. In this paper, we combine normative research with case analysis method, inducing and summarizing internal control theory through some related literature, and research materials, then we analyze the issue of internal control processes by the branch of A group’s internal control system and business process design. Finally, the research points to its shortcomings and suggest for improvements, at the same time, the conclusions provide specific guidance and reference on establishing internal business processes for other companies. As the main research subject of this study is enterprises, which excludes non-profit organization, so this conclusion may not apply to non-profit organization.This study is not the perspective of information and communication for researching and, nor the perspective of the traditional corporate financial reporting and internal control mechanisms operating activities, because these content have become mature and been widely recognized.This paper aims to innovate internal control business process by using modern systematic approach, which not only helps us integrate existing internal control framework, but also clarifies the relations between internal control and risk management, and establishes the concept of risk control, and pays attention to human factors and environment-related risk. On the other hand, systems thinking is an interdisciplinary theory and method, we can design and established internal control system which pay attention to the needs of people according to modern systems thinking soft systems thinking approach. So it is not only internal control theory of innovation but also avoids providing simple solutions to complex business problems for internal control. At the same time, it plays a role in amending, supplying and perfecting the traditional internal control theory.The research which has been based on existing internal control theories try to analyze deeply the principle on designing internal business processes of enterprise. This paper takes the branch’s processes of A group for example, through evaluating the branch’s business processes and giving appropriate suggestion for its shortage; hope it can provide a scientific reference and reflection for other companies. Details are as follows:The paper introduces internal control and business process related research in theoretical review section, which build the foundation on designing internal business processes for the later part. First we introduce the internal control related theory, including internal control connotation, foreign internal control development course, domestic internal control development and internal control mechanism. The mature development for any economic theory is a gradual process, and internal control theory is not exceptional also. The development of internal control has gone through five stages from experiences internal check, internal control system, internal control structure and internal control overall frame to enterprise risk management framework in a foreign country. In China, the research on internal control theory started late, the government began to increase the implementation effort of internal control of enterprise until the late 1990s. The development of internal control standard in China mainly experienced industry control stage, internal accounting control stage, and internal control systematic stage. Judging from the development of home and abroad internal control theory, there are larger changes on connotation and denotation of internal control, but the internal control research only paid attention to the macroscopic aspect, the investigation from microscopic are few. However, in practice internal control is usually reflected in the form of systems, procedures and operation norm, is closely tied to enterprise’s daily business activities, is a reasonable norm to business process, therefore internal control should be linked with the business activities. The key study of this paper is mainly lies in the internal control business process.Then is the business process theory, in this part, the paper mainly discusses business activities and business process of control, purpose and principle of establishing business process, procedures and steps of designing, cycle model of internal control business, general principle of business process design. Among them, establishing internal control business process has five steps, firstly, planning the control target, secondly integrating process according to the target, on this basis, identifying the control links, finding out the weak links and key point, and then taking effective control measures, lastly taking the cycle testing to optimize and improve process continuously, the whole business process are showed by flow chart or text. In addition, combining internal control theory and business process design theory, this paper sums up the principle of designing internal control business process:planning the process according to risk, standardizing process by responsibility, describing process using matters, optimizing process through certified public accountant. There are a variety of business process cycle model, enterprise’s types is different, the business cycle structure is also different. Considering the contact between business functions and economic business, enterprises should take the matters which have common characteristics of law and the same control type to one category when they constructing business cycle model, and make sure the business cycle model can conform to enterprise characteristics.In case part, this paper takes the branch of A group as an example, introduces the background of the branch of A group briefly at first, then evaluates to the internal control status of the branch of A group, sales business and inventory business process system management respectively, and makes a proposal to solve the related problems. On internal control status evaluation, this is analyzed internal control elements of the branch of A group objectively from the control environment, risk assessment, control activities, information and communication, monitoring, makes suggestion to efficiencies. On business process analysis part, Firstly this paper expounds the sales business, inventory business processes, and key points and control system of each process, and assesses control system of the branch of A group consult with the standards control system, points out the link which needs improve and perfect. Secondly, introduces the key control elements and practice exploration of sales business, inventory business sales respectively, and evaluates business process management system consulting these standards, hopes to provide reference for other enterprises to establish and perfect internal control business process. Along with the development of network technology and the intervention to marketing field of electronic commerce, the traditional internal control system is no longer suitable, the branch of A group should revise and perfect internal control system according to outside economic environment changes and enterprise development, it also requires us study new cases, solve new problems continuously, make sure that the internal control system is more forward-looking and adaptability.Internal control is the foundation for enterprise’s sustainable development. Since each enterprise has its characteristics, so how to establish a suitable internal control system, design suitable internal control business process is a challenge to every enterprise. Enterprise should combine market economy environment and own actual situation to establish enterprises level and business process levels of internal control from controlling environment, risk assessment, control activities, information and communication, monitoring, and perfect internal control business processes in practice to ensure internal control play coordination, promotion and restricting, motivation and supervision effects better, internal control construction is more scientific, validity and rationality.