Research On China’s Internal Control And Companies’ Financial Risks

The internal control is an inevitable outcome of the development of the social economy. It develops from the initial internal contain based on the actor level to today’s overall framework of internal control based on the comprehensive enterprise risk management by stages, and behind it there are a lot of company business failures and final bankruptcy liquidations. The risk from lots of uncertainty faced with the enterprises in the market becomes an impeccable tremendous power to the internal control. The investigation to the frequent financial harm case in the80s of America from the "against false financial report committee" of the United States shows that nearly50%of the events can be all or part blamed on failures of the internal control, and it prompted the birth of the COSO committee, by which the report " internal control-the whole framework" was issued as a milestone in the history of the internal control in1994.Yet the importance of the risk management has been realized because of the outburst of the financial crisis, so in2004the COSO committee promulgated the "Enterprise risk management framework",which made a new extension to the internal control, added new ideas to the risk management, and put forward that the internal control was one of the goals of reducing the operating risk of an enterprise, improving the management efficiency, and realizing the enterprise strategic goals. It is thus clear that the importance of risk management and the Complex link between the internal control and the risk management have come to realize. Moreover the financial risk as an important issue in risk management has an inherent conduction divergent, which should be paid close attention to.In this paper, it frameworks the contact between the internal control and the financial risk with the comprehensive risk management, expounds the contain role from the internal control to the financial risk by the five elements of the internal control, and expounds the coupling between them at target, motivation, features.First, this paper makes a contact between internal control and financial risk from the perspective of a comprehensive risk management. Subsequently, it introduces the function of internal control to curb the sources of the financial risk from the internal control motivation and causes of financial risk, as well as the five elements of the internal control. Based on the above, this article puts forward five hypothesis that the internal environment, risk assessment, control activities, information and communication and internal oversight have a negative correlation between financial risk., establish index to evaluate the quality of listed companies’internal control indicators, use available listed companies’internal control self-assessment report and attestation report for the assignment, and test the reasonableness of the assumptions empirically by packet inspection and general inspection. The result is that the internal environment, control activities and internal oversight are more pronounced. Finally, from the perspective of internal control for the prevention and control of financial risks,the paper gives some constructive comments.