| Today, internal control evaluation has become the focus of regulatory authorities, management and investors at home and abroad. Especially in the context of the international financial crisis, due to imperfect internal control, many listed companies, such as China Eastern, CITIC Limited, and so on, has experienced financial fraud, accounting fraud, huge asset losses, business failure and even bankruptcy, which emphasizes the importance of internal control evaluation. Therefore, governments at all levels have introduced various policies to regulate the internal control in companies. In2006, the Internal Control Guidelines for Listed Companies on Shenzhen Stock Exchange and the Internal Control Guidelines for Listed Companies on Shanghai Stock Exchange were released. In June2008, the Basic Norms for Companies’Internal Control was jointly issued by the Ministry of Finance, the Securities and Futures Commission, the Audit Commission, the CBRC and CIRC. In April2010, again, these departments jointly released the Supporting Guidelines for Companies’Internal Control, which provides criteria and foundation for the internal control evaluation of enterprises in our country. However, what on earth is the quality of internal control in current listed companies of China? How to evaluate the quality of internal control in a company? What kind of internal control is the best practice? How should enterprises establish a sound internal control construction? There is still no consensus on these issues. To solve these problems, the core is to establish a scientific, rational, and comprehensive system of internal control evaluation.This dissertation focuses on solving the problems of "why" and "how"."Why" refers to why we should make an internal control evaluation of enterprises;"how" refers to how to make a scientific and objective evaluation of enterprises’ internal control.Starting with establishing a scientific and rational system of Chinese enterprise internal control evaluation, the dissertation first makes a comprehensive analysis of how designing the elements in an evaluation system, which includes the subjects, objects, purposes, indexes, criteria, and methods of evaluation. Then, the dissertation focuses on the building process of internal control evaluation index system in Chinese enterprises, which specifically covers how to choose the enterprise internal control evaluation index, how to quantify the enterprise internal control evaluation index, and how to determine the weight of the internal control evaluation index. Finally, taking the listed companies in China’s construction industry for example; the dissertation conducts an applied research of Chinese enterprise internal control evaluation system that this dissertation designed.The dissertation employs the multilevel fuzzy comprehensive evaluation method which combines the analytic hierarchy process and fuzzy comprehensive evaluation method. This method has the following significant features:1. Combination of the qualitative evaluation and the quantitative evaluation. On the determination of the index weights, the author first employs the Delphi method, which belongs to the qualitative evaluation method. Then, the author uses the entropy method to quantify it, which is quantitative method. The evaluation index consists of qualitative indicators and quantitative indicators, which also reflects the combination of qualitative evaluation and quantitative evaluation.2. Moderate precision of fuzzy phenomenon and quantification of qualitative analysis. Based on the fuzzy mathematics, this method employs the fuzzy relation composite theory to quantify some ill-defined and difficult-to-quantify factors, using fuzzy membership grade theory to make a reasonable quantification of the qualitative indicators. It is a good solution to the problems of the single evaluation index and the unreasonable evaluation process in the existing evaluation methods.3. Scientific and reasonable index composition operator. This method uses the weighted average to calculate the evaluation score. Compared with other synthesis methods, this method not only has a simple calculation process but considers the contributions of each factor.The paper is organized as follows:Chapter I, Introduction:Introducing the study background, the purpose and significance of the study, the basic ideas and methods, the content, the innovation and deficiency of the study.Chapter II Literature review:Reviewing foreign research results of the internal control evaluation and summarzing the domestic research results of the internal control evaluation from two aspects:the internal control evaluation method and the construction of internal control evaluation index system.Chapter Ⅲ The theoretical basis and institutional background:Introducing the internal control theory and the theory of risk management and the laws and regulations relevant to the internal control having issued so far.Chapter Ⅳ The design of Chinese business’internal control evaluation system:Chinese business’internal control evaluation system is an organic whole composed of various elements of mutual ties and constraints, of the unity of the connotation and extension. Its specific components include the subject of evaluation, the object of evaluation, the purpose of the evaluation, evaluation methods, evaluation index and evaluation criteria. This chapter gives a detailed analysis of how to design all elements of the evaluation system.Chapter Ⅴ Chinese business’internal control evaluation index system:The whole construction of index system, starting from the internal control objectives, covers the five elements of the COSO framework, draws18application guidelines, combines the actual situation of Chinese enterprises. Meanwhile, it complies with the following construction principle:the principle of science, the principle of objectivity, the principle of system, the principle of hierarchy, the principle of intelligibility and the principle of operability. Index weight has been built through combining with subjective and objective weighting. This approach, to some extent, not only reflects the subjective information of the decision-makers, but also take advantage of the raw data and mathematical models, making the weight coefficients objective.Chapter Ⅵ Application of Chinese business’internal control evaluation system:This chapter will take the public companies of construction for example and collect their public material before April30th in2011, including annual reports, internal control self-evaluation report, the internal control attestation report, social responsibility report and then grade each index based on the internal control evaluation index system and grading standard of each index, using the method of fuzzy evaluation. Lastly, it will calculate evaluation scores layers of weighted on average according to the identified index weight and identify the quality of the internal control according to evaluation scores thus to apply and prove the operability of the internal control evaluation system built in this paper. Chapter Ⅶ Conclusions and outlook:Summary and outlook of the study.The contribution of this paper is mainly reflected in the following aspects:First, the establishment from the internal control evaluation indicators. Although many scholars have made studies on how to build the internal control evaluation system, but most researches focus on establishing the evaluation indicators in accordance only with the five elements of internal control. Under China’s internal control evaluation mode, it is not suitable to set up evaluation model according to five elements of internal control. This paper starts from internal control target according to the COSO framework, the "basic norm" and "supporting the Guidelines", combining the reality of China’s internal control evaluation to establish a scientific system of internal control evaluation index system so as to make up the deficiency of the evaluation index according to the internal control five elements. In the meanwhile, it has established an indicator system from top to bottom based on the establishment of principles of evaluation index system and one layer is more concrete than another and eventually established three layers of indicators. On the specific design, a combination of quantitative indicators and qualitative indicators enhances the objectivity of the evaluation work.Second, we study from the perspective of the index weight determination, In this paper, the method of combining the subjective weight and objective weight has been used to establish the index weights, which reflects not only the subjective information of the determiner, but also reflect the objectivity of the weight coefficients.It has also compensated for the defect using only subjective weighting method or objective weighting method. Third, we studied from the perspective of research content. Difficult as it is to acquire the internal control of the specific data; previous studies have focused on how to evaluate internal control of the enterprise. Focusing on introduction methods, the method to validate the rationality of the evaluation method is rare. In this paper, after exploring how to design internal control evaluation system of the listed companies in China, it has conducted an applied research to the internal control evaluation system, taking Chinese listed companies in the construction industry as an example. At the same time, a summary and analysis has been conducted with regard to the operating quality and implementation performance of the internal control based on the composite score on the effect of listed construction companies.At present, because of various industries, various enterprise management level and various personnel quality, this set of internal control evaluation system is not necessarily suitable for all the business and may not be able to fully taken into practice, However, the system can be used as a benchmark to measure the enterprise’s internal control profile and it has a certain reference function to the enterprise.The deficiencies of this paper are mainly reflected in the following aspects: first, in the external validity of the case studies. Because of the limitations of objective conditions, it is impossible to prove the feasibility and rationality of the model by many cases. This paper analyzed and discussed merely from the partial listed companies selected by the local construction industry. Seen from the scale of the sample, it is impossible to rule out the drawbacks of the small sample. Therefore, the effectiveness of the internal control evaluation system in this paper is to be further verified in a larger sample scope. Second, it is reflected in the internal validity of case studies, In the process of scoring the listed companies on the construction industry, the author did not take the way of teamwork. A certain degree of arbitrariness and subjectivity in the analysis process has been made by the author’s personal bias and the limits of power, and it will affect the internal validity of the study.Third, it is reflected in the reliability of the case studies. To ensure the reliability of case studies, the standard ones will triangulate the obtained information in a variety of ways. The triangulation stressed using various means to study the same phenomenon in avoidance to the prejudiced final judgment. Literature, interviews, observation, archival records and physical evidence are the most common information sources for case studies. Because of the limited conditions, the study of the internal control evaluation system only used the publicly available data of listed companies of China’s construction industry as the main source and it lacks a deep and detailed field surveys to the enterprise. Therefore, the analysis results obtained may be have some deviation with the case in the real situation and it may reduces the reliability of the research itself. |
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