The Analysis On Influencing Factos Of Internal Audit Of Listed Companies

Early 21st century, Enron happened to bring the Sarbanes-Oxley Act (SOX Act). In 2002, internal audit Deputy Department Manager in WorldCom opened a fake shady of WorldCom, hitting a world record of falsifying. Since then, Xerox, Merck, Johnson, and other financial scandals have exposure, which makes society’s focus gradually change from an external control to internal control, worldwide and sets off a wave of new wave of corporate governance reforms. Other countries have enacted relevant laws and regulations. United States Securities and Exchange Commission SEC require public companies to establish internal audit bodies and the employed and dismissal of the head of internal audit bodies determined by the Audit Committee appointment. COSO members proposed that the internal audit for the establishment and perfection of internal control system and risk spreading strategies should provide recommendations, so as to add value to the organization. In China, the State Auditor, internal audit and control Association and the Shanghai and Shenzhen stock exchanges also have developed the relevant criteria, initially set up the basic framework of China’s system of internal audit standards.In 2008, in financial history the world’s largest illegal operation scandal "law Hing Bank" event occurs, which makes people pay more attention on the importance role of internal audit of monitoring again. One of the four cornerstones of the internal audit as effective corporate governance are not only important components of enterprise internal control mechanisms, but also important means of monitoring and evaluation of internal control. So in the consideration of internal control, at the same time internal control has gradually become the research hotspots. It is this change of the external environment that pushes the frontiers of history of internal audit. Internal audit is an era full of opportunities and challenges.In other countries, internal audit in corporate governance, internal control and risk management plays an.active role which has been proved that is a proven system in theoretical circles, company management and regulatory approval. In China, establishing internal auditing system of motivation of economic environment and the establishment of the internal audit department and overseas has a great deal of difference. Therefore, in China whether internal control can effectively play its role in the economic environment needs further research and discussion.As a service Internal audit survives and development depending on its quality. Only having high quality internal audit will be approved and radiate light. Internal audit’s quality and efficiency directly have an effect on survival and development of internal auditing within the organization. Therefore, improving the quality of internal auditing and making internal audits play a greater role, which are the urgent problems to be solved in the development of internal audit? Based on the existing system environment, the study of internal audit quality, through the analysis of factors affecting the quality of internal auditing, identifying effective measures to improve the quality of internal auditing, and improving the effect of corporate governance, create value for enterprises.This main research method is the empirical research combining theoretical analysis in an attempt to discuss the measurement of the quality of internal control based on the research of the quality of internal auditing in China, from the perspective of factors influencing the quality of internal auditing and investigate the factors affecting the quality of internal control from the external environment and internal environment. Based on the theoretical analysis and empirical test results, we make policy recommendations to strengthen internal audit practice, enrich and expand the study on internal auditing, thus promoting the development of China’s internal audit.The contents of this article are divided into the following six chapters:Chapter I:introduction. This chapter describes the background, significance of research on this article, the study purpose, research methods and research content.ChapterⅡ:literature review. This chapter consists of five main parts:the first to review the present situation of study on characteristic factors of internal audit, including the establishment of the internal audit department and its independence, the size of the internal audit, internal audit staff quality and scope of internal audit functions; partⅡon the literature review of research on internal audit quality; part III study on factors affecting internal audit review of the literature. International Institute of Internal Auditors has proposed, the Board of Directors, senior management, internal audit and external audit are the four cornerstones of effective corporate governance. The connection of Internal auditing three other large contact cornerstone of governance can help improve corporate governance. Therefore, this section on internal audit executives, boards of Directors and its Audit Committee and External Auditors conducted a review of research on the relationship. In addition, this part of the study on the external economic environment also reviewed the literature on the effect of internal audit; part IV describes evaluation and enlightenment of literature.ChapterⅢ:theoretical analysis. This chapter begins with a brief introduction to the implications of internal auditing, including the definition, features and functions of internal audit; then on the quality of audit and analysis of the definition of internal auditing quality; then in theory an in-depth analysis of factors affecting the quality of internal auditing. Any emergence and development of things and the environment are closely related, internal audit was no exception. Its quality is subject to all sorts of complicated factors. To study internal audit quality, internal audit activities must be placed in the environment to be analyzed and investigated. These environmental factors in this article are divided into external and internal environments. External environment consist of political, economic and legal environment, environment, and human environment, internal environment, including the independence of internal audit, personnel quality, scope of business, technology; finally we elaborate the relationship between internal audit and business value. International Institute of Internal Auditors defined the internal audit again emphasizing its role in increasing enterprise value. Modern internal audit is an important part of corporate governance systems, which has a direct effect on the increase of business value in addition to have an indirect role. The direct effect can help enterprises reduce cost, minimize damage and indirect effect can be understood to assist other departments to increase efficiency.ChapterⅣ:the design of empirical study. This chapter describes the design of empirical study on the content, including modeling, variable selection, samples and sources of data. This article listed on the Shanghai Stock Exchange Board manufacturing companies for the study, selecting 299 listed company and data from 2007-2009 as research samples. Firstly using listed company market value represents enterprise value, to measure internal audit quality; secondly we analyze the factors affecting internal audit quality, selecting company market as explained variable and internal audit sector of established situation and independence, and personnel quality, and Board independence as explaining variable and selecting assets scale, assets structure, company performance, equity concentrated, company growth as control variable, establishing multiple linear regression model to test the relationship between the factors and internal audit quality.ChapterⅤ:empirical results. This chapter includes results of descriptive statistics, multiple regression analysis of correlation and model results. Study results show that companies separate internal audit departments, enhance independence of internal audit and staff quality which can help to increase enterprise value, thus contributing to improve the quality of internal auditing. The relationship between strengthening Board independence and enhancing corporate value is not consistent with this article of research hypothesis. This may be related to specific economic system in China policy background. In General, the empirical and theoretical research conclusions are basically the same, and improving the quality of internal auditing of listed companies in China also needs to make further efforts.ChapterⅥ:conclusion. Based on research in the previous section, this chapter summarizes major findings, put forward relevant policy recommendations to Improve internal audit quality. Firstly needing to set reasonable internal audit institutions, guarantee its independence and authoritative, select Board or its subordinate Audit Committee leadership mode; secondly needing to establish perfect legal regulations system, guarantee internal audit to work with full of legal pursuant and detail occupational guidance; thirdly needing to optimize internal audit operation environment, strengthen coordination and cooperation with other company governance boards; finally needing to improve internal audit personnel quality, construct fine internal audit team.This article’s contributions:in the available literature for the study of internal audit, most investigate the setup of internal audit, the characteristics factors of internal audit or the effectiveness of internal audit. Existing literatures on internal audit quality in China are still relatively small, even the study on the empirical research. Existing literatures on internal audit quality mostly discuss the construction of the internal auditing quality control system on theoretical research. This article conducts a comprehensive study on the internal audit quality in theory and then further uses empirical methods, using real data to test the effects of various factors on the quality of internal audit, and putting forward recommendations to improve the quality of internal audit. Compared with the related normative research, this article is more convincing.Due to restrictions on research resources and the level of the author’s knowledge, certain limitations with the research are mainly:(1) Owing to the difficult acquiring data, the selected samples does not cover fully and the study results are limited, and therefore this article may not reflect the full picture of internal audit in listed companies in China, to a certain extent, affecting the universal significance of the conclusions of the study.(2) In part of empirical study, this article only from internal environment investigates factors affecting the quality of internal audit. Measuring external environment is difficult, which doesn’t make the empirical conclusion verify the effect that the external environmental affects the quality of internal audit.(3)So far, the theoretical circle does not have an agreement on a quantitative measure of the quality of internal audit, and more common on internal audit feature a combination of the right to assign values to variables. Through analysis, this article chooses enterprise value measuring the quality of internal audit, which represents the trend of internal audit. This article just studies the relationship between factors influencing the quality of internal audit and the quality of internal audit, so you can ignore this issue.