Research On Internal Control Self-Assessment Of Listed Companies In China

The Enron, WorldCom and a series of financial frauds happening at the beginning of the21st century, make Americans who originally thought to have a perfect corporate governance system realize the importance of the internal control system. In2002, the United States announced "the Sarbanes-Oxley Act "(referred to as" SOX Act "), which was the first explicit requirements for internal control validity of the financial reporting. From then, internal control evaluation was formally included in the scope of corporate governance. In China, kinds of financial fraud cases such as Yinguangxia, Lam shares and CAO, exposed the serious problems that exist in our internal control construction. Considering this, in2008, the five departments of the Ministry of Finance, Securities and Futures Commission, the Audit Commission, the China Banking Regulatory Commission, China Insurance Regulatory Commission jointly issued "the enterprise internal control basic norms ",and in2010, they released a series of accompanying guidelines setting up our initially internal control regulatory regimes. In2011, China’s companies listed both on domestic and foreign market along with some pilot listed companies perform the internal control audit for the first time, and announce internal control self-assessment report according to the requirements of the norms and guidelines. In the future, the scope of internal control audit and internal control self-assessment will be expanded. Taking the important role of the internal control system to enhance the company’s management level into account, by statistical analyzing the internal control self-assessment reports disclosed by the listed companies implementing the internal control audit in2011, this paper research to work efficiency and effectiveness of the evaluation, and recommend improvements for the problems identified, hoping provide useful lessons for future internal control self-assessment work.On the basis of the standard research method, by elaborating the Principal-agent theory and the theory of fiduciary responsibility, this paper analysis the need of the implementation of the internal control evaluation to promote corporate governance, which establishes the theoretical basis of internal control system. Combined with the requirements of the "basic norms" and its supporting guidelines, drawing on abroad authoritative standards (such as COSO framework) and its successful experience in the evaluation of internal controls and internal control evaluation, and combined with the specific situation of China’s enterprises, this paper make a reasonableness specification design for the internal control evaluation system from the aspects of the goals, principles, the main standard, the scope, methods and internal control deficiencies identified, which attempts to provide a useful reference for the evaluation of the internal control.Base on the elaboration of the relevant theory, using case analysis and statistical analysis methods, and taking the internal control self-assessment reports disclosed by the listed companies who executed and pilot internal control for the first time for an example, this paper focus on the statistical analysis of those internal control self-assessment reports. By extracting a series of elements aligned with the basic norms and its supporting guidelines, this paper study the efficiency and effectiveness of the internal control self-evaluation of listed companies in China. Through research, the article maintains that internal control self-evaluation exits such problems as a lack of awareness and emphasis on internal control, lack of effective internal control evaluation methods and other issues. In response to these problems, according to the actual situation of China’s listed companies, this paper gives further suggestions for improvement, from the regulatory level, the corporate level, and the intermediaries level, hoping to provide useful reference for the future work of internal control self-evaluation, and to promote our internal control practice.This article’s innovation lies in that, it enriches the theoretical results of the internal control self-assessment in the view of inadequate of our current study; sort out the relevant provisions of internal control basic norms and evaluation guidelines, and make the evaluation criteria more clearly and the work more standardized; make statistical analysis of internal control self-assessment reports disclosed by the listed companies who executed and pilot internal control for the first time, through which to research the compliance degree and raise improve recommendations for discovery issues, hoping to provide a useful reference for future theoretical research and practice development.