Research On The Effect Of Audit Committee On The Effectiveness Of Internal Control

Economic globalization and market economy system set higher demands on management of enterprises. In order to maintain their core competitiveness and adapt to rapid development of economy and volatile market conditions, enterprises put the internal control system in an increasingly important position. The step of introducing the internal control has also been gathered in our country:China promulgated the basic criteria about the internal control of the enterprise in2008, and promulgated the relevant supporting guidelines of internal control in2010, which together build our internal control system. So our internal control has entered a stage of standardization, but the reality of our internal control phenomenon is very serious. From the early Erie embezzlement case, Skyworth Digital Chairman of the Board of Directors of the appropriate company property embezzlement case, to Zhongxintaifu’s huge loss and Wuliangye’s related party transactions, all reflect the internal control problems. This is an urgent requirement for enterprises to further improve corporate governance and strengthen internal control. Therefore, the research on the audit committee on the internal control effectiveness is of great significance.As the primary environmental factor of internal control, corporate governance structure is the premise and foundation of ensuring effective internal control. Audit committee is one of the special committee under the Board of Directors, which contains the general meeting of shareholders, board of supervisors and managers. It is responsible for the review of internal control, the effective implementation of monitoring internal control and internal control self-assessment. As a coordination of internal control audit, it plays an important role in the corporate governance structure. China’s internal control system formulates the duties and powers of the audit committee in the internal control and operational process, make the audit committee as a monitoring role in the internal control. Therefore, the research on the effect of audit committee on the effectiveness of internal control becomes a subject which is worthy studying.This dissertation is divided into five parts:the first part is introduction part, mainly including the research background and significance, the domestic and foreign research review, the idea and method, the innovation points and the shortcomings. The second part is the foundation of theory, which is based on China’s current capital market and the existing literature both at home and abroad, the internal control relevant concepts and their effectiveness. It summarizes the audit committee and its characteristics, then combines the relevant basic theory about how the audit committee influence the effectiveness of the internal control, mainly expounds the principal-agent theory, contract theory, corporate governance theory and internal control theory. The third part is the normative analysis part, which analyzes the current situation and characteristics of the listed companies in China, and the mechanism of how the audit committee influences the effectiveness of the internal control, relying on the related theory normative analysis. The fourth part is the empirical research part, which is empirically testing how key characteristics of the audit committee influence internal control effectiveness, using the financial report of Shanghai A-share listed manufacturing companies in2010motherboard as research samples. The fifth part is the conclusion of the research, which is summing up research conclusion on the basis of the research, and posing policy recommendations and the outlook of the research topic about the relationship between the audit committee and the effectiveness of internal control.The innovation of this dissertation is in two aspects. One is about the study content. At present, the domestic existing research literature are about the internal control research mainly focus on corporate governance overall level, while this paper make further refined research specially in company management structure of the audit committee. Another is about the empirical analysis. In the empirical analysis, the measure way of the effectiveness of internal control is improved, combining the internal and external point. The internal point of view is according to the internal control objectives. And the external point of view is according to the external disclosure of internal control. This study can strengthen internal control and improve the audit committee system.