Research On The Current Situation Of Internal Control Self-assessment Of Listed Companies In China

The business failure and fraud scandal frequently showed"up across the country and around worldwide, which greatly reduced investor’s confidence in listed companies and their executives and caused tremendous impact on international capital markets. At the same time of the listed companies’ weakness in internal control and lack of information disclosure are exposed, internal controls and financial information disclosure become the focus of the domestic and foreign countries.Shanghai Stock Exchange and Shenzhen Stock Exchange respectively published "Internal Control Guidelines of Listed Companies" in June and September2006. In June2008, five ministries, the Ministry of Finance, the Securities and Futures Commission, the Audit Commission, the CBRC and CIRC jointly issued The Basic Regulation of Company Internal Control known as the Chinese version of the Sarbanes-Oxley. Firstly implemented among the listed company since July1st,2009, this regulation requires the listed companies effectively conduct self-assessment and disclose the annual self-assessment report. In April2010, on the basis of Internal Control Guidelines of Listed Companies,"Enterprise Internal Control Application Guidelines","Internal Control Assessment Guidelines"and "Audit Guidelines for Internal Control Assessment" were formulated and released, which provide specific guidance for the implementation of internal control assessment and auditing and further enhance the operability of international control regulation.In this context, through the collection of the internal control self-assessment reports of public listed companies in2011, the author analyzed from five aspects of self-assessment standards, self-assessment entities, self-assessment methods, self-assessment report disclosure and internal control weaknesses and summarized the current status of internal control self-assessment of China’s listed companies. The results showed listed companies’ reports format of internal control self-assessment are diversified and the amount of information disclosure vary as well in practice, concluding that it is still in the non-standard prototype stage. In this paper, corrective recommendations are proposed against the issues existing in the practice of internal control self-assessment of listed companies.In addition, internal control self-assessment framework is built from the aspects of company control and process implementation in the combination of18th guidance of Enterprise Internal Control Guidelines and five elements of COSO; a questionnaire for evaluation of internal control effectiveness and a implementation scheme of internal control self-assessment system are designed by taking procurement process, sales process and finance process as example so as to provide a reference for regulators and practitioners.