Research On The Construction Of Internal Control Index Of Jilin Province And Reveal Of Its Risks

In recent years, the case that lost of assets, cheat in financial report and failureof business, even bankruptcy incurred by the deficiency in the system of internalcontrol or the invalidity of internal control operation is more and more. As a result,the number of the companies who care about the evaluation of internal controleffectiveness level is increasing, not just the evaluation of effectiveness of internalcontrol system, more important is evaluation of the effectiveness of the operation ofinternal control. China promulgated "The basic standard for enterprise internalcontrol" in2008and promulgated "The supporting guidelines for enterprise internalcontrol" in2010, requires public companies to issue self assessment report and auditreport of their internal control, indicates that the internal control of our country hasentered the institutionalized track. But the study found that due to "The supportingguidelines for enterprise internal control" haven’t make a clear regulations for thecontent, method and standard of the evaluation, which lead to many enterprises notperform as the guidelines show, seriously affecting the use of the information ofinternal control to the users, also has restricted the further advance of our country’slisted company internal control system. Therefore, the constructing of the internalcontrol index system is of great importance. In this paper, based on the realizationdegree of internal control goal, I construct the index of the internal control of listedcompanies in Jilin province, to reflect the level of listed company’s internal controleffectiveness.This article selects data of A-share listed companies from2009to2013in Jilin province as sample, finally won the168sample points. On the basis of the degree ofrealization of internal control goal using the entropy method synthesis index, theindex of strategic objectives, internal control management goal, report target index,the compliance target index, the index of asset security goals.Internal control evaluation index system is divided into two layers, the primaryindex as the goal layer, strategic objectives, business objectives, report objectives,compliance objectives, asset security; Secondary index as the elaboration of theprimary index for13in total, strategic target corresponding secondary indexes forthe sales growth, market share and sustainable growth, management targetcorresponding secondary indexes for the return on net assets, total assets turnover,and long-term capital debt ratio, report target corresponding secondary indexes forthe opinion of the financial statements and financial restatement, complianceobjective corresponding secondary indexes for legal and illegal behavior, assetsecurity goals corresponding secondary indexes for asset impairment loss, the relatedparty of capital utilization and guaranty.Using quantitative and qualitative methods to determine the line of the risk ofthe listed company of Jilin province, the Jilin province listed companies internalcontrol level and target realization degree is divided into three levels3A,2A and1A,the risk level is divided into three categories, low risk, moderate risk and high risk.Then take assessment of the effectiveness of the internal control of listed companiesin Jilin province and the risk degree they are facing from the overall and year level.Combining theoretical analysis and reference, I research the factors whichinfluence enterprise internal control index form the aspect of characteristics andcorporate governance. The corporate governance can be divided into three aspects asequity ownership structure, board characteristics and the characteristics of the boardof supervisors.Finally choose the company size, asset-liability ratio, the location where company operate, ownership concentration and ownership concentration by equitybalance degree, the proportion of tradable shares, the size of board of directors, theshare of board of directors, if the chairman hold the position of general manager ornot, if the company set up all the four committees, the number of the board ofsupervisors, the share of board of supervisors member. The empirical results showthat the internal control index is significantly negative correlation with theasset-liability ratio and the board size; the internal control index is significantlyrelated with equity concentration, the proportion of tradable shares, the locationwhere company operate, the share of board of directors, the size of the board ofsupervisors.I put forward policy suggestions from the aspect of listed companies andregulators. Listed companies should control high debt, to reduce the debt risk;perfect the corporate governance, form moderate concentration of ownershipstructure, to avoid "free-rider" problem; increase proportion of tradable sharesproperly; control the scale of the board of directors and prevent inefficient caused bythe large scale of the board of directors, and give members of the board of directorslong-term incentive; expand the scale of the board of supervisors, make detaileddivision of labor, ensure the comprehensive supervision to directors andmanagement. Regulators should pay more attention to those listed companies likewhose operation address is not Changchun, whose equity is over dispersed andwhose non-tradable shares is in a high level.