Research On Disclosure And Evaluation Of Internal Control On External Investment Of The Listed Companies

Abstract:As financial scandals happened in some domestic and foreign companies one after another, and the outbreak of the financial crisis, internal control has attracted people’s attention gradually. In these financial cases of companies, some of the origin of fraud is investment failure; some carry out fraudulent practices by investments; some are hiding the huge investments. One important reason why these happened is lack of internal control on external investment or failure. So we can see the importance of internal control on external investment in the enterprises. Besides, the total of trading financial assets, financial assets available for sale, investments held until their maturity and long term equity investments has increased year by year since the year2007executed the new accounting standards. And they are relative much in the total assets every year. The income on investments is also increasing year by year except2008and account for about20%of the gross profit. These show that external investment is an important part of the assets and the income on investment is an important source of the gross profit in companies. Therefore, the internal control on external investment should be taken seriously. Studying the disclosure and evaluation of internal control on external investment, we can not only improve the norms about internal control on external investment in China and the quality about internal control and disclosure of external investment, but also prevent enterprises using external investment to carry out fraudulent practices or being caught in financial difficulties because of improper external investment.The paper firstly defined the concepts of external investment and internal control on external investment, and introduced the theory of external investment and internal control, internal control information disclosure, and evaluation on internal control. Then, this paper researched on normative status and system requirements about internal control on external investment by five ministries and listed companies, as well as basic requirements of information disclosure of internal control on external investment. Taking the manufacturing listed companies in the Shanghai Stock Exchange as the object of study, by analysis of selection and content about information disclosure of internal control on external investment in the sample companies, we have found that the selection diversification, limited contents and lack of appropriate evaluation system. Therefore, this paper established an evaluation system of internal control on external investment, and then selected the key evaluation indicators from the five elements of internal control on external investment, and taken the proportion of the income on investment accounted for the total profit as the auxiliary evaluation indicator. This paper, using the variation coefficient method to determine the weight, built the comprehensive evaluation model to obtain comprehensive evaluation indicator of internal control on external investment in the sample company, and did descriptive statistics, correlation analysis and regression analysis with the rate of return on investment. Finally, it is proposed to improve the normative system and the degree of attention, strengthen external supervision, and introduce the evaluation system of the internal control on external investment.