Constructing The Target-Oriented Evaluation System Of Internal Control

In July2002, the U.S." Sarbanes-Oxley Act2002" pointed out that the introduction of internal control and information disclosure of listed companies to make strict rules; In Sep.2004, COSO(The Committee of Sponsoring Organizations of The National Commission of Fraudulent Financial Reporting) released a research report-《Enterprise Risk Management-Integrated Framework"》(here in after referred to as ERM framework), representing the latest research of the theory of internal control theory; In April2010, Ministry of Finance Accounting Division published a series of documents, e.g.《Enterprise Internal Control Supporting Guidelines》. It is our internal control construction of clear goals, and pointed out the direction. Building Internal control evaluation is a vital link for standardizing and improving internal control systems, our internal control evaluation need to seriously think about on how to promote internal control intended to ensure that internal control level is rising, and how to propel researching and improving our evaluation on the basis of the actual situation.In order to ensure the operability of the evaluation method, the objectivity of evaluation conclusions, and to uphold the principle of economy, the author attempts to achieve the level of observation and objectivity of perspective from the internal control objectives, try to use publicly available objective data at this stage to build a goal-oriented system of internal control evaluation, hopes to be able to better, more true reflection of the internal control operation to meet the needs of the stakeholders of the listed companies in China for internal control monitoring and decision-making; and is tested based on the empirical data of Chinese listed companies in the evaluation system established.In this paper, it would use a method of combining normative and empirical research to regulate the research-based, analyze and discuss the study of the status quo, a preliminary discussion on the internal control evaluation system; analysis to identify the problems in the system of internal control evaluation. According to the internal control theory and specifications, we try to build a goal-oriented system of Enterprise Internal Control Evaluation. The main methods used in this article are as follows:①Induction. In this paper, internal control evaluation of the status quo discourse analysis about the induction U.S. and British etc..②Deductive method. According to foreign internal control evaluation practices, combined with the institutional environment of Chinese enterprises and internal control provisions of the Basic Standards and related guidelines, to explore the construction of our internal control evaluation system.③Empirical research method. Goal-oriented internal control evaluation index system was constructed based on the Analytic Hierarchy Process. Empirical tests,453manufacturing companies in China’s Shanghai Stock Exchange A-share listed in2010as a sample, is the assessment of internal control system established effective, but also to build their own evaluation system to provide a reference.Internal operational control system is the enterprise implementation of internal control in the whole process as a stage. For the managers of an enterprise, not only to attach importance to the design of the internal control system, not only to emphasize the running state of the internal control system and, more importantly, also stressed the supervision and inspection on the design and operation of the internal control system. Because, no matter how well designed the system does not perform or ineffective implementation, then it just decoration. Therefore, the only reasonable construct of the proper application of internal control evaluation system, in order to continue to promote the effective implementation of internal control system and continuous improvement. Divided into seven chapters:Chapter Ⅰ "Introduction". Focuses on the background of this study, and then pointed out that the purpose of research, which leads to the significance of this study, then describes the main content of this article and research methods; Chapter Ⅱ "Literature review". From international and domestic, described the existing literature, and Brief Review in the final; Chapter Ⅲ "The course of development of the internal control evaluation and Assessment". The system summarizes the current domestic and foreign internal control evaluation of the development on the basis of the existing internal control evaluation, demonstrated the feasibility of the target-oriented evaluation system of internal control; Chapter Ⅳ "goal-oriented internal control evaluation framework build", include building the framework of principles and methods, starting from the evaluation objectives to build a complete evaluation framework; Chapter Five" goal-oriented elements of internal control evaluation", starting from the elements of the internal control evaluation of each element of the representation are discussed in detail how to select the evaluation index system, and targeted expression of the author’s point of view for the index selection; Chapter VI "Goal-oriented evaluation system empirical test of the effectiveness ". The author tested the internal control evaluation system to collect empirical data; Chapter VII " The research findings and future prospects ". In the end of the article, this article make a summary of the innovations and limitations, internal control for the future Send to evaluate development hope.To achieve internal control objectives, to some extent, dependent on comprehensive and reliable internal control evaluation system, one can effectively help business managers found that the problems and deficiencies that may exist in internal control, reduced risk, made up and improved enterprise internal control systems to help companies achieve their goals; the other hand, you can also increase the information content, to enhance the transparency of the enterprise to meet outside the enterprise stakeholders in the decision-making and regulatory needs. However, to achieve these internal control evaluation goals, the most important thing is to establish a scientific, reasonable operability of internal control evaluation system. The evaluation system should meet the comprehensiveness, objectivity, hierarchy, and operability principles. Otherwise, it is likely that companies spend enormous human, material and financial resources, internal control evaluation, but the results of the evaluation. cannot bring corresponding earnings. Therefore, the first step is internal control evaluation literature Review and Summary, and then discuss the evaluation of internal control development in the world, followed in accordance with relevant laws and regulations introduced a theoretical system of internal control evaluation, such as evaluation’s target, the main body of evaluation, evaluation of content, evaluation methods and procedures. After make a research on the theoretical system of internal control evaluation, the author attempts to achieve the target’s degree of internal control as a starting point, the discussion and analysis by the internal control objectives, combined with hierarchical analysis of the various goals broken down into specific evaluation indicators, followed by the use of expert research method to determine the evaluation of indicators for each goal, and finally the use of expert advice to determine the relative weights of the various goals and targets, to establish a goal-oriented, comprehensive, scientific internal control evaluation index system. In order to verify the author to establish the effectiveness of internal control evaluation system established, in Chapter6of the2010China’s Shanghai Stock Exchange A-share the manufacturing of the453listed companies in the empirical data, an empirical test concluded that the evaluation system has a high validity.Through research, the following innovations:(1)Building the theoretical framework of internal control evaluationIn theory, the internal control evaluation includes the more integrated the contents of the internal control theory and the theory of internal control evaluation, if only from a practical point of view of internal control, to explore internal control evaluation methods and establish internal control evaluation index system, it would make the internal control evaluation system lacks a strong theoretical supporting, become the only application on the practical level Methodology, and is difficult to establish an effective system. This article draws on previous scholars (Chen Yi,2000; An Zhongtao, Cui Yuanmin,2005; Li Weian,2005, He Yunhong2009) of the recognition and affirmation of the multi-level fuzzy comprehensive evaluation method-established an evaluation system, according to China’s enterprises objectives of internal controls, combined with the specific institutional environment of the listed companies, the establishment of the evaluation system of listed companies in China, internal control evaluation objectives, evaluation of the subject and object, evaluation methods, evaluation index system, thus establishing a theoretical framework of internal control evaluation(2)Building scientific and comprehensive system of internal control evaluationThis article is not only simple in-depth study of the internal control evaluation theory, but starting from the theoretical framework of internal control evaluation, the effectiveness of internal control as the goal, according to internal control theory,"Internal Control Basic Standards","Internal Control evaluation guidelines,"internal control supporting guidelines explain the characteristics and internal control evaluation, combined with the actual state of internal control of listed companies in China, after careful selection of the multi-level indicators, the establishment of internal control evaluation index system of goal-oriented to build a scientific and rational internal control evaluation system, innovative methods for evaluation of internal control.The author based on the multi-level fuzzy comprehensive evaluation method-fuzzy comprehensive evaluation method-level analysis method, we can calculate the target layer in the evaluation index system, index layers of the weight of direct use can query the listed companies to publicly available data can be the internal control evaluation scores, so as to achieve the purpose of quantitative assessment of listed companies the effectiveness of internal control, and thus has a certain value. For many companies, quantitative internal control evaluation scores between businesses and the formation of a comparable, to help further improve and perfect the internal control system. In addition, the author use the score calculated in the evaluation system to collect the relevant internal control voluntary disclosure of information, the empirical test of the empirical data, concluded that the scores obtained by the evaluation system and internal control voluntary disclosure the information was a significant positive correlation, the internal control evaluation system is effective.(3)Establishing a reasonable, strong operability of internal control evaluation systemEstablished this goal-oriented internal control evaluation, they need information and data are relatively easy to obtain the (publicly available information from the enterprise directly), and the public information relative to ensure the objectivity of the data and reliability of the source, so that the evaluation index system with a strong operability. In addition, the goal of the internal control of the overall effectiveness of internal control (development strategy, effectiveness and efficiency of operations, financial reporting reliability, and the security of assets) basic of the norms could be broken down into five specific objectives. In five specific objectives under the guidance of the author access to relevant information, as appropriate, selected based on publicly available information to understand specific indicators, so that not only guarantees part of the upper target of specific targets to meet the internal control of the overall effectiveness of the target, but also makes as specific indicators at the community level to facilitate quantify, operational, and laid an important foundation for the farther evaluation of internal control evaluation scores. More importantly, strong operability based on publicly available information from another perspective, reflects one of the principles of the internal control evaluation-the principle of economy and effective protection of the costs and benefits brought about by the implementation of internal control improve enterprise-wide enthusiasm for the purposes of internal control system.(4)Better meeting the enterprise external stakeholders of the decision-making needsAbove internal control evaluation system, we can get a quantitative comparability of scores, because this evaluation score is calculated based on open business information out of these public information is objective and reliable, making internal control evaluation scores are not only comparable with objective, reliable. External stakeholders (such as investors, regulators, etc.) can be used directly by the evaluation system calculation to arrive at a final evaluation scores, were analyzed for individual enterprises, were compared with enterprises in the industry and found the loopholes in the system and possible the existence of irregularities, to exercise supervision and management functions, make the relevant decision-making, and help enterprises to further improve the corporate risk management, improve capital market efficiency of resource allocation. On the other hand, from their own point of view, corporate management more incentive to monitor the effectiveness of internal control design and operation of sound internal control system to improve the company’s management in this context.(5)Directly using the unmet index to facilitate the discovery of the internal control deficiencies.After in a careful analysis of the evaluation system calculated by the above internal control evaluation scores and a longitudinal comparison of previous years in the comparison between enterprises and enterprises, corporate management identify their own shortcomings and the problems along the internal control evaluation traced index system and found that the related unrealized specific targets, and thus determine the location of the critical control points, in order to further expand the analysis, discussion, to find out where the internal control deficiencies, and supervise the implementation of the rectification to facilitate enterprises and improve the internal control system in a timely manner to plug the loopholes in management, enhance the management level, to prevent deviation from the target risk. This use of the Evaluation Index System found that the method of system defects, from a management perspective, not only fast and convenient, saving resources for the enterprise.(6)Helps Certified Public Accountants to reduce audit riskObtained the company’s internal control evaluation scores, Certified Public Accountant can use internal control the level as the reference standard. In the implementation of the basic audit and risk-based audit process, the CPA may have focused the unmet internal control evaluation indicators, test the integrity of evaluation, compliance testing and evaluation of potential risk areas and sectors, to determine the substantive scope and focus of the audit. This article to establish internal control evaluation system based on system-based audit not only to ensure the quality of audit work to improve the efficiency of audit work, but also effectively reduce the audit risk of Certified Public Accountants.