Research On Disclosure And Evaluation Of Internal Control Weaknesses Of The Listed Companies

In 2001, companies such as Enron, Merrill Lynch, Global Communications and other companies in the United States were reported had serious fraud of financial information, which had brought serious impact to the United States and the world’s capital markets and also exposed the weak of listed companies’ internal control. In view of this, in 2002, the United States Congress promulgated the “Sarbanes- Oxley Act”, it requires that listed companies must build the internal control and the corporate governance layer shall be the responsible for the design and operation of internal control. At the same time, listed companies must publish the evaluation report of the company’s internal control every year.Compared to the capital market in the United States, listed companies in China also occurred a series of financial fraud cases, which had serious impact on the order of the capital market, damaged the interests of shareholders, and even lead to investors no longer trust financial information publish by the listed companies. These events reflect the failure of internal control of listed companies in our country, the confusion of management. In order to improve this situation, in 2006,the Shanghai stock exchange and Shenzhen stock exchange successively promulgated the guidelines for internal control, in 2008 the Ministry of Finance and the Joint Commission, the Audit Commission, the CBRC, CIRC(i.e., the five ministries) promulgated the "enterprise internal control basic norms”, which made further requirements for the design,implementation and supervision of the internal control of the listed Corporation.In order to provide more specific guidance to the construction and evaluation ofinternal control of the listed companies in our country, the five ministries in2010 promulgated “a complete set of enterprise internal control guidelines”,Guidelines for the evaluation of internal control of enterprises require the listed companies must publish the disclosure of internal control evaluation report along with the annual report and require the listed companies disclose the details of the recognition and the rectification of the defects of internal control.In 2014, the CSRC and the Ministry of Finance jointly promulgated the " public offering of securities of the company information disclosure reporting rule No.21- annual internal control evaluation report of the general provisions”,referred to as " the No. 21," making a further request to the disclosure of the defects of the company’ internal control.Perfect construction and effective operation of internal control can create a good atmosphere for the operation and management of the company and promote the company’s sustainable development. Effective internal control can help the development of the company, but once there are defects in the internal control, it may become an obstacle to the development of the company.Identifying and disclosing the existence of internal control defects can make the company have a clear understanding of itself internal control, and take corrective measures to improve the existing problems timely. Therefore, in order to make internal control play the full role in company, listed corporation must first make a scientific and rational evaluation of the internal control defects.This paper studies the information of defect of the internal control disclosed by the domestic and overseas listed company in 2012-2014 and found that sample firms have less disclosure the defect of internal control, lack the opinions of the independent directors and the board of supervisors on internal control evaluation and do not have uniform standard to identify the defects. In order to make internal control defects to be identified with a unified standard,this paper constructs the defects of internal control evaluation system, and based on the five elements of internal control to determine the main evaluation index,the period costs accounted for the proportion of revenue as auxiliary evaluation index, the variation coefficient method is used to determine the weight of each evaluation index, and the build the internal control defects degree evaluation model. Calculating the defect degree of comprehensive evaluation of the sample companies in 2014 and part of sample companies evaluation index in 2015.and then and has carried on the descriptive statistical analysis. Finally, in order to help the listed companies identify the defect in a scientific way, disclose the defects fully and promote listed companies improve the internal control deficiencies in a timely manner, the paper provides the following suggestions:Perfect the standards to indentify the defect of internal control of listed companies; regulating the format and content of the information of internal control defects disclosed by the listed companies; strengthening the supervision to the disclosure of the internal control deficiencies of the listed companies;raising the enthusiasm of listed companies to disclose the internal control defect information; introducing the evaluation system to identify the degree of internal control deficiency.