Study On The Problem Of Internal Control Of External Investment Decision In Private Enterprise

With the rapid development of economy in our country and frequent externalinvestment of private enterprise, the way that expanding the scale of the enterpriserapidly through external investment has become a tradition way of many companies.But currently there are many examples that making incorrect external investmentdecision in enterprises. Although private enterprises have established the internalcontrol system of external investment decision-making, but implementation effect of thesystem is poor. Therefore, this article intends to choose internal control of externalinvestment decision-making as the research subject, discuss the problem and its reasonsof internal control of external investment decision-making in private enterprises andoffer advice for perfecting the internal control system of external investmentdecision-making based on the process control.This paper mainly discusses the related issues on internal control system ofexternal investment decision-making in private enterprises by the method of normativeanalysis. By browsing the related literature of internal control system of externalinvestment decision-making, the author finds that predecessors’ researches of internalcontrol system of external investment decision-making mainly concentrate on meaning,necessity, control objectives, control means and methods, etc. of internal control systemof external investment decisions, basing on an internal control or the five elements tobuild internal control system of external investment decision-making, such as thecontrol environment, risk management and control. Based on the study, this article seizethe external investment decisions, discuss the problem of internal control of externalinvestment decision-making in private enterprises, and to look forward to offer theguidance of internal control practices of external investment decisions in our enterprise.The general idea of the paper: it firstly elaborates the related concepts of internal controland external investment decisions of internal control; secondly describes the relatedconcepts of private enterprises, the characteristics of external investment of privateenterprise; analyses the problems of internal control of external investment decisions ofprivate enterprise again; finally attempt to look for the reasons behind the problem fromthe five elements of internal control and tentative propose some suggestions to improvethe internal control system of external investment decision-making.The paper is divided into four parts; the contents of this four-part can be summarized as follows:The first part is the introductory section. It introduces the research background andsignificance of the topic of this article, offers domestic and external related literaturereview and comment of the theory of internal control and issues on the internal controlsystem of external investment decision-making, builds the framework of the writing ofthis article.The second part is the theoretical explanations, including the first and secondchapters. The first chapter is on related concepts of internal control: the meaning, thefive elements and design principles of internal control; second section describes therelated concept of the internal control system of external investment decisions: themeaning and goals of the internal control of external investment decisions; Finally,processes of external investment decision-making and their critical control points: themajor critical control points of the examination and approval of external investmentprojects is proposed personnel of external investment projects, the preparation of theproject proposal and the approval of external investment proposals; feasibility study andcritical control point of assessment: team selection, the legitimacy of the investmentproject and risk; critical control points of external investment decisions: the choice ofdecision-makers, control of decision-making results and control of investmentdecision-making records. Chapter II first states private enterprises concept: meaning,role and characteristics of private enterprises; second section describes thecharacteristics and risks of the external investment in private enterprises; finally, theneed for establishing internal control of external investment decisions in the privateenterprises.The third part of this article is the focus chapters, including Chapters III and IV.Chapter III analyzes the prevalence issues of internal control of external investmentdecisions in private enterprise, as follows: highly centralized of the decision-makingpower, a mere figurehead Board, unreasonable of configure permissions, unauthorizedapproval, risk assessment mistakes, lack of risk response measures, lack of externalinformation tracking, improper adjustment of decision-making, the formalized ofoversight audit, poor enforcement of internal control; then analyzes the reason for theproblem based on the five elements of internal control: the lack of favorable externalenvironment of good internal control, lack of accountability mechanisms, failure of riskidentification system, lack of information communication of external investmentdecisions and supervision and inspection mechanisms; Chapter IV improves the following recommendations to improve the external investment decisions of privateenterprise internal control system and enhance its execution: good internal controlenvironment of investment decisions, risk control of external investment decisions,strengthen information sharing and communication, cooperation and improve thesupervision mechanism of the external investment decisions. There is a reference for theinternal control of the external investment enterprises to improve their decision-making.The fourth part is the conclusion section of this article: the establishment of processcontrol-based organizational structure is conducive to the improvement of the internalcontrol environment; expressly authorized approval is conducive to the establishment ofaccountability mechanisms; optimize external investment decision-making process isconducive to the feasibility study and assessment of risk control. Improving the externalinvestment decision-making mechanism is to hold the final hurdle for externalinvestment decisions.