Impact Study On The Effectiveness Of The Internal Audit Of Corporate Governance Environment

The financial falsification and malpractice cases frequently occur internal or abroad indicate that it ishard to maintain the independence of professional regulation, although audited by the external third partindependently. Internal audit dominant for internal supervising enhancement, mechanism improvement andaccident prevention. Nevertheless, there is a close relationship between its existence and circumstance.Only comprehending the constraints of circumstance and the trends of developing, distinguishing how thevarious circumstances influence the result of internal audit, the tactic fit for realistic could be drawn uprespectively to take effect. Therefore, two firms in manufacturing, from A-share Listed Firms in Shanghaiand Shenzhen, are sampled in article. Via the improvement of corporate governance environment; a furtheranalysis is taken to clarity the influence of external governance circumstance on internal auditeffectiveness.The research background, significance, and current are introduced in first chapter. Then the contents,scope, and approaches are abstracted from the research overview. The conception and principle of corporategovernance environment and internal audit effectiveness are elaborated in second chapter to support thefollowing research.The third chapter is the detailed description of company’s internal and external environment.Meanwhile, the development of internal audit is analyzed via organization membership, personalqualification, the affiliation of instituted al.Entropy-weight Method, Panel data Model are utilized to further analysis the influence ofadministration circumstance on internal audit effectiveness. Firstly, the topic of that inner and outeradministration circumstance influence the internal audit effectiveness is analyzed theoretically, then theresearch hypotheses is advanced. Secondly, Entropy-weight Method is utilized to comprehensively appraisethe internal audit effectiveness. The whole situation of internal audit effectiveness and significant level ofinternal audit effectiveness with different characteristics is analyzed to obtain the following results:1. Thesignificant level of internal audit effectiveness, on whole Listed Firms in manufacturing, is lower in2007to2012, but it have a raising current.2. Comparing internal audit effectiveness between differentcharacteristics, it is found that rising affiliation levels conducive to boost the significant level of internalaudit effectiveness, while the current internal auditor quantity and internal regulation establishment havenot yet take effect, and have no good to improve the internal audit effectiveness. Thirdly, the associatedcriterions of firm governance are quantified from internal and external. At last, the influence degree of allhypotheses on internal audit effectiveness is systematically analyzed via Panel data Model. In aspects ofexternal administration circumstance, there is a positive correlation between marketization, legalization andinternal audit effectiveness, while government intervention negative. In aspects of internal administrationcircumstance, there is a negative correlation between shareholding proportion of the controlling shareholderand internal audit effectiveness, while the restriction ratio between the controlling shareholder and No.2toNo.5shareholder positive. The position combination of chairman and general manager, board size has anegative correlation to internal audit effectiveness. There is no correlation between independent director proportions and internal audit effectiveness, supervisory board also has nothing to do with internal auditeffectiveness. But the salary of top three senior executive has a positive correlation with internal auditeffectiveness.Combining the result of empirical analysis, suggestions are made from internal, external governancecircumstance and audit itself in fifth part. In aspects of improving external administration circumstance,suggestions that boost marketization level, enhance legalization establishment, and reduce governmentintervention are made. While in aspects of improving internal administration circumstance, we shouldoptimize shareholding structure further, improve efficiency of board system, enhance supervisory boardenforcement, and design suitable incentive system. And in aspects of improving internal audit growing, theenforcement to internal audit regulation should be guaranteed, and the information of internal audit shouldbe open broadly. There is a summary in sixth part elaborates the deficiency and looks forward to the furtherresearch.