Research On Enterprise Internal Control Theory Framework And Practice

The internal control has become an indispensable part of the modern enterprise management. Especially in recent years, a large number of business failures and financial fraud incidents are due to the failure of internal control. Therefore, it’s an important topic in academic circle to do a deep and systemic research on both theory and practice of internal control.First, this paper reviewed a large number of dissertations in and abroad related to internal control theory in order to grasp the research status. Second, this paper reviewed the process of the internal control institution development and compared the COSO frame in the USA with “basic norms of internal control for enterprises” in our country (“basic norms” for short). Although the basic norms are based on the COSO frame, but it still conducted some adjustments and innovations according to the condition of China, offered a lot of guidance for internal control construction in our country. However, the internal control didn’t appear to be effective. This paper researched this phenomenon and found that there were3reasons.1. The managers and employees don’t have a correct knowledge about internal control.2. The “five element frame” of basic norms which is based on COSO has some defects.3. The internal control operators report that they need a demonstration of internal control construction.Therefore, this paper decide to do some researches according to the above3reasons on3levels.Theory Level: discuss some basic and critical theory issues about internal control, such as the intrinsic quality, the function, the target, the similarities and differences with risk management in order to help the internal control operators establish a correct and deep knowledge about internal control.Framework Level: rebuild the internal control framework and take the YT company internal control improvement as the demonstration of the new framework. According to the defects of “five elements frame” of basic norms, this paper try to add2new elements”target system construction”and”performance evaluation”, then reintegrate these elements and put forward a new internal control framework including “inner core part+outer subsidiary part”. Practice Level: take YT company as an example, based on a full knowledge of operating status, the management requirement and the internal control issues of YT company by in‐depth field investigation, the paper take the new framework to improve and optimize the internal control status of YT company and try to use BSC, fishbone diagram analysis, risk coordinate system, AHP and other internal control technique into enterprise internal control, in order to offer a specific and operable demonstration for enterprise internal control operators.