Research On Internal Control Auditi Of Public Companies

In recent years, the international and domestic market had broken out some seriousfinancial fraud cases. Although the cases’ background or reasons were different, the samecharacteristic was those companies’ internal control were failed or defective, and the defectslead to significant financial misstatements. Related enterprise management agencies of eachcountry has regulatory focus from simply focus on financial report, to paying equal attentionto financial reporting and establishment and perfect internal control. During2008and2010,Chinese related departments issued “The Basic norms of internal control” and “InternalControl Audit Guidelines”, and calling for the listed companies which are executing internalcontrol standard system to hire accounting firms to audit t-he companies’ internal controleffectiveness.Based on the above background, the paper introduces the basic content of internalcontrol audit and its development, illustrates a brief workflow of the internal control auditingprocess, by studying Chinese listed companies disclose the internal control auditing reportsdata and some events of internal control auditing nearly three years, analysis of the problemsexisting in Chinese internal control auditing, like comments section lacking in substance ininternal control audit report, the audit reports lack of unified standards, existing thephenomenon of going through the formality and so on. The main reasons of problems are thatthe departments agencies lack of experience about internal control auditing, the legal systemis not sound, and accounting firms personnel equipped is imperfect.The paper put forward countermeasures to the problem of internal control audit,furthermore, discuss the judgement standard of the internal control weakness and theescription of internal control weakness in the report. In the paper, the weaknesses of internalcontrol are divided into material weakness and general weakness, in two methods, qualitativeand quantitative determination, to judge whether the weakness of listed company internalcontrol is material. The paper thinks that In the internal control audit report, CPA should addto explain for the base date, and describe what the extent of the impact by the incidenceweakness of internal control to potential misstatement in qualitative and quantitativedetermination.Then, the paper has gave two examples, Phenix Optical and HeilongjiangAgriculture Company(HACL), to explain how to describe with emphasis on matters ofunqualified’s internal control audit report and negative opinion’s internal control audit report.