A Study On Internal Control System Of KD Enterprise Based On Risk Management

With the aggravating of competitions in the market, an increasing number of small and medium size private enterprises realized that there is a close relation between self development and internal control. The effective internal control system can help companies to find the risk point of operating activities and take actions to control the risk in time.Meanwhile, reasonable internal control enables enterprises keep competitive power in a complex competition environment. Due to the influence by scale of the enterprise, operating characteristics or other factors, small and medium size enterprises have high standard on operability and the effective of internal control. The construction of internal control which based on risk management is started with sort of the progress of important enterprises programs, find out risk point and make the control decisions. Improving holes in the enterprise internal control targeted is no doubt a high degree operability measure. As a small and medium scale company which seeking to list on three new board, KD is urgent to find an effective internal control system to improve and help the company to enter the capital market.This paper took KD Company as the study target via financial statements and the calculations and analysis of financial ratios. It is obviously to find that the financial risk of KD is high, according to low the inventory turnover rate, sales gross margin rate, sales net profit, high asset-liability ratio, over increase of operating cost and unstable capital activities.The results indicate KD has high risk on internal control of financial activities, purchasing activities, sales activities and inventory management. Therefore, the improvement of internal control of KD should focus on these aspects.This paper analysis the present situation of company KD on financial activities, purchasing activities, sales activities, assets management under guide of ‘The Basic Norms of Internal Control’. Considering financing activities, risk points of KD include no financing plan, the missing part of financial plan examine and approve, lock of tracing management of how the capital used in financial activities. In investing activities, risk points of KD include less reasonable argument in investment activities and lock of examine and approve rule on investing plans. In sales activities, risk points of KD include no sales plan and too informal pricing on products, less motive force on customer development, shortage of perfect customer service system, lack of standardized on account receivable management. In purchasing activities, the risk points of KD enterprise include no purchasing plan, poor suppliers’ information management, holes in warehouse entry inspection, poor management on outsourcing tracing. In inventory management, risks points of KD include not strictly execute on inventory storage and pick up procedure, unreasonable position set, imperfect stock check system, etc.. In the last part of this paper, control activities are pointed out to improve the internal control system based on risk points mentioned previously. The aim is wish enterprises can build up their own effective internal control system and lay a solid foundation for listing in three new boards and their long-term development.