Research On Internal Control Evaluation System Of Commercial Bank

Based on their credit and payment function,commercial banks play an important role in themarket economy.But many problems emerge during the operation process, to some extent,these problemsare related to the unsound internal control system of commercial banks, one of them is the lack of effectiveinternal control evaluation system. While collecting the literature about evaluation of enterprise internalcontrol and commercial Banks internal control, an interesting fact shows that,during the evaluation ofcommercial bank internal control, most of the essays stand on the insiders’ point of view, and the evaluatingsystem is mostly based on the elements or process of internal control,even both.However, theseevaluating methods don’t put enough consideration on the cost-benefit principle.Thus, this article is aimedto build an target oriented commercial Banks internal control evaluation system. During theconstruction,this article gives a non-ignorable consideration to relevant rules,regulations and methodsof the commercial Banks internal control evaluation. The evaluating methods are introduced and comparedto each other,and analytic hierarchy process(AHP) is picked out as the most appropriate method.As thetheoretical basis for the paper, the principal-agent theory, information theory, incomplete contract theory,and contingency theory are introduced.Among all of them, the principal-agent theory and incompletecontract theory are the basis of the commercial Banks internal control, internal control is mainly aimed tosolve the problem caused by the separation of ownership and managerial authority; Information theory isdivided into signal transmission theory and information asymmetry theory, both demonstrate that theexternal information demanders have a strong demand to the commercial Banks internal controlinformation; Contingency theory mainly emphasized that we should fully consider the characteristic ofcommercial bank itself while using the experience of other industries.Before building the system, first of all,this paper elaborates the reasons and the advantages of thetarget oriented evaluation system; Secondly,it analyzes the principle of commercial Banks internal controlevaluation index selection, including target oriented, comprehensiveness, importance, etc. Finally, itanalyzed the commercial Banks internal control objectives. Considering the regulations on internalcontrol, strategic objectives, business goals, the report target, legal compliance, asset security goals areconstructed on the second level. After serious consideration, building the third level of target indicator is necessary and reasonable.To determine the weights of the indicators,comparison matrix is built to acquire itand check the consistency of the weights. Considering the quantitative indicators and the convenience ofefficacy coefficient method,this paper mainly used the efficacy coefficient method and direct method toquantificat the indicators.Through the process, the score of the commercial Banks’ internal controlsystem,which is objective and relatively comparable is given. To confirm the commercial bank internalcontrol effectiveness and defects,one way is to allow an independent third party to confirm according to theactual situation of commercial Banks,the other way is that the information demanders can use the rank ofthe score of commercial banks’ internal control calculated by the system provided to identify theeffectiveness and the defects of internal control. It is important to consider the internal control providesreasonable assurance, not consider the limitations of the commercial Banks internal control.This paperseriously introduces the defects and the limitation of commercial Banks internal control system, hopeto be helpful to the independent third party and information demanders.At the end of this paper, as the increasing number of listed commercial Banks,it looks fowared tothe possibility of the application of the target orientated commercial Banks internal control evaluationsystem, hoping that one day the published data about commercial banks are enough to test the feasibilityof this system.