Research On The Evaluation Of Internal Control Of The Listed Real Estate Central Enterprises Based On The Analytic Hierarchy Process

BACKGROUNDIn2001, the scandals of Enron, WorldCom and other companies were exposed, so the United States enacted the Sarbanes-Oxley Act in2002. The section404and the related regulations in this act carried out the requirements of U.S. listed companies to disclose their financial reports and also the internal control reports regularly. Since then, many countries pay more and more attention on the internal control of companies.There are also many bankruptcy cases in China caused by lack of internal control. And China also enacted some regulations to improve the China’s internal control situation.Real estate industry is the pillar industry in China’s economy. Since the reforms and open policy in China, China’s real estate industry developed at an amazing speed. Meanwhile, real estate industry is also an industry which is easily influenced by policy control. From2010, the authorities have introduced a series of policies to control the risk and pressure in real estate industry.Listed central enterprises are the leading roles in the real estate industry, and their performance influences the whole economy of the country. These companies are supervised by authorities directly, and they often have more social responsibilities. The paper is based on the related policies, regulations and research, and it aims at building a dynamic system to evaluate company’s internal control. Besides, Poly Real Estate Corporation is used as a case, to analyze the internal control of China’s listed central enterprises by AHP method.PURPOSE1. Based on China’s policies and the research on company’s internal control across the world, the paper aims at building a theoretical framework and system to evaluate the level of company’s internal control.2. Using AHP as the evaluating method for company’s internal control, the paper wants to build a dynamic evaluation system combining different advantages, to overcome the disadvantages of traditional methods which are just single aspect evaluation.3. Using quantitative methods to analyze the case—Poly Real Estate Corporation, the purpose is to summarize the characteristics, including key point analysis and disadvantage analysis, of internal control of the listed central enterprises. It could also guide these real estate companies to improve their state of internal control.MAIN CONTENT AND VIEWThe main contents of the paper are as following.Chapter1is introduction, and it explores4issues. The first one is the analysis background and analysis meaning; the second is thinking route; then there goes the analysis methods; and finally it is the contribution and shortcomings of the paper.Chapter2is literature review. There are two parts of the literature review:the theory and the methods of evaluation of company’s internal control. Besides, there are also notion definitions and development of internal control evaluation.Chapter3is the theoretical analysis. Based-on the theoretical basement in the first part, then there goes the analysis on the theoretical framework of internal evaluation control. And in the following, combine evaluation factors across the research on the first two parts of the chapter.Chapter4is the core part, using empirical study method. After introduction and analysis on the general situation of Poly’s internal control, build index system to evaluate Poly’s internal control, using AHP method to calculate. The last part of the chapter there are some advices.Chapter5is the conclusion, and it is to conclude the characteristics of China’s listed central enterprises.MAIN CONTRIBUTIONSFrom the theoretical side and also the practical side, the paper has certain contributions.On the theoretical side, the paper explains the driving factors of internal control evaluation from different aspects, such as principal-agent theory and signaling theory, and it build an integrated theoretical framework to study these issues. On the practical side, using AHP methods, the paper build an evaluation system for internal control, with dynamic index. The system combines advantages of different methods and overcome the disadvantages those methods just evaluate internal control from single aspect. Besides, the paper also help some of the related policies and regulations be understood. Last but not the least, the paper can provide some ideas to improve the internal control of China’s listed central enterprises.