The Influence Of The Corporate Governance To The Internal Control Defect

Recently occurred many scandals in big corporates like Enron, Yin Guangxia andeven Olympus which concealed its huge financial losses for nearly twenty years all suggesta breakdown in internal controls and the lack of adequate corporate governancemechanisms.The problem of the corporate governance and the internal control is that in the case ofthe incomplete corporate governance, the internal control is weak, the key people overridethe internal control, management collusion fraud occurs frequently. It invariably showsthat the corporates which exist the weaknesses in internal control are weak in businessmanagement, lacking the effective corporate governance structure, in turn, we candetermine that the invalidation of our internal control is owing to the deep lack of thesound corporate governance structure, the implementation of internal control can not beseparated from the role of corporate governance. Therefore, it is necessary to figure out theintrinsic relationship between corporate governance and internal control, and establish asound internal control system is the key to keep the enterprise vitality.The previous scholar’s research object is mainly focused on the main board and smalland medium-sized board market. This article has selected the growth enterprise marketlisted companies as the research object because the GEM market is a stock market that islow in threshold, big in risk, strict in regulation. Higher risk for the GEM listed companiesputs forward higher requirements on internal control, study of the companies’ internalcontrol defects is more urgent. And based on the 《Supporting Guidelines For EnterpriseInternal Control》that issued by the five ministries in2010, this article choose the internalcontrol defects as evaluation index of the internal control to study which unreasonablefactors of the corporate governance will lead to internal control defects, and put forwardthe targeted countermeasures and suggest ions to perfect the governance structure of theGEM listed company and improve the effectiveness of internal control.