Research On The Internal Control Material Weaknesses And Its Influential Factors Of Listed Companies In China

Internal control material weaknesses just like "black swan" in company management.Before "black swan" occurring,the internal control problems are so subtle that its existing in the process of management often been overlooked.But it has huge influence in company management;it may cause unpredictable serious damage or even lead to bankruptcy to these companies.In 2014,the appearance of internal control material weaknesses in Liuzhou Chemical Industry Co,Tibet Rhodiola Pharmaceutical Holding Co and other listed companies make a wake-up call to Chinese internal control system construction.With the continuous development of enterprise management,a series of laws and regulations had been issued.In order to further adapt the internal control information disclosure requirements,"Sarbanes-Oxley Act","Financial Instruments and Exchange Law" were promulgated in the United States and Japan.In China the "Basic Norms of Internal Control" and "Enterprise Internal Control Guidelines" had been issued.As the internal control information disclosure system gradually improved,it provides significant support for this thesis which studies the internal control deficiencies.Firstly,from the purpose and significance of internal control material weakness,research status,research contents and methods,meaning of internal control material weakness,disclosure of internal control material weaknesses,etc.,this thesis conducts a comprehensive analysis of the internal control material weakness.Then this thesis analyzes the disclosures status of internal control material weakness and its existing problems in China.Finally,the thesis analyzes the factor of internal control material weakness from the geographical,industry and links of material weakness.It concludes that there are five aspects,corporate governance structure,the complexity of management,resources devoted to internal control,company growth and audit status,that effect internal control material weakness.This thesis uses all A-share listed companies in 2012 to 2014 data as samples,from five angles to give an empirical research on factors of internal control material weaknesses.These five angles are Corporate Governance Structure,the complexity of management,resources devoted to internal control,company growth and audit status.The results showed that: the number of independent directors,company size,sales growth,capacity of cash flowing,audit agencies are negatively significant with internal control material weaknesses;the case that chairman concurrently served as general manager,debt ratio are positively significant with internal control material weaknesses.Overseas Business and internal control deficiencies are negatively correlated;the result is in contrast with the hypothesis.It may be due to that the enterprise operating overseas business would have strong financial strength,management capacity and improved internal control system.According to the results of empirical research,the thesis makes suggestions to identify internal control material weakness,and recommends listed companies to strengthen internal control.Improving the corporate governance structure,increasing investment of resources to internal control,promoting reasonable growth,constructing better corporate management,upgrading the audit level would reduce the internal control material weaknesses.