The Research On Evaluation And Optimization Of WD Enterprise’s Internal Control System

BACKGROUNDSince1912when Montgomery proposed the theory of internal control, it has been developed at the request of enterprises’internal management, and the importance of internal control has gradually received large scale of recognition. The international society and the world capital market were shocked at the financial fraud incident of Enron, and WorldCom in2001which completely frustrated investors’confidence. The problem of internal control has drawn worldwide attention ever since. In2008, Chinese Ministry of Finance, together with other five ministries, issued Basic Rules of Company’s Internal Control which has been fully carried out in Shanghai and Shenzhen stock exchange. Timely publication of a series of laws and rules on internal control and its evaluation, and orderly implementation of those laws and rules in listed companies demonstrate China’s urgent needs to improve enterprises’internal control system and to promote sound development of Chinese capital market.Real estate market in China has grown stronger from scratch during the30years’reform and opening up. Real estate industry has become an indispensable part of our national economy. In2011, with the deepening of control on real estate policy, an increasing number of real estate enterprises began to transfer. The internal control of companies should be attached importance to in this critical stage. Because suggestions on effectiveness of internal control from evaluation methods in Evaluation Guidelines on Enterprises’Internal Control focus on qualitative analysis, without exerting any quantitative standards, horizontal comparison and overall evaluation are lacking in convenience and integrity.RESEARCH SIGNIFICANCEOn the basis of analyzing relevant theories of internal control, this paper builds internal control evaluation system within the framework of Basic Rules on Enterprises’Internal Control, which integrates analytic hierarchy method and fuzzy math to build internal control evaluation model. In this way, subjective judgment can be transferred into specific value. According to case study of internal control of WD corporation which is the top company in real estate industry, the management level could discover risks and dangers through the evaluation results, finds solutions to problems, so as to improve and strengthen internal control, and ensure achieving of every internal control target including enterprises’strategy, operation, rules alignment, report and asset security.MAIN CONTENTThe paper adopts analytic hierarchy method to evaluate enterprises’internal control system, applies internal control system to practice. The systematic analysis will help to improve internal management, scientific implementation of internal control and ensure effectiveness of internal control system.Part one is introduction, introducing research background and significance, train of thought, research contents and methods of this paper, in order to demonstrate the necessity of enterprises’internal control evaluation, and pointing out major contributions and weaknesses in this paper.Part two firstly analyze and generalize relevant theories of internal control, concept and development of internal control, and system theory, control theory and agent theory as the theoretical basis of this paper; then the paper summarizes both Chinese and foreign theoretical research and practical study of internal control evaluation; finally the paper focuses on analyzing theoretical framework, namely Basic Rules on Enterprises’Internal Control and Guidelines of Evaluation.Part three introduces the background and situation of WD corporation, and analyzes its internal control of from internal environment, control activities, information and communication and internal supervision.Part four utilizes analytic hierarchy process and fuzzy math, based on Basic Rules of Enterprises’Internal Control, to build internal control evaluation system for WD corporation. This part decides factor group to evaluate WD’s internal control, and evaluates WD corporation with fuzzy analytic hierarchy method.Part five analyzes evaluation on WD’s internal control and puts forward with suggestions to strengthen weak links, so as to further improve internal control system of WD.Part six summarizes and concludes research of this paper, and makes prediction for future studies.CONTRIBUTIONS1. This paper summarizes and integrates both Chinese and foreign theoretical studies on internal control and evaluation, introduces theories, studies, research achievements and trains of thoughts, in order to provide some theoretical foundation for further research.2. This paper combines analytic hierarchy process and fuzzy math theory together and carries out quantitative analysis on qualitative evaluation standards in internal control system. Specific numbers obtained from the evaluation on the enterprises’internal control could directly determine weak links in the internal control, which points out the direction for improvement.3. The internal control evaluation system could be used in practice to systematically analyze the internal control of a specific enterprise, make it more scientific, improve internal management of WD corporation, thus increasing economic profits and ensuring effectiveness of internal control.