Research On The Internal Control Weaknesses Of IPO Failure Enterprises

With the development of economy,more and more enterprises have realized the important role of capital market in widening financing channels,optimizing resource allocation and dispersing market risks.A large number of enterprises try to go public in order to raise funds,expand production scale,improve corporate governance,improve corporate awareness and other purposes.However,seen from the actual situation,the failure rate of Initial Public Offerings(IPO)of China's enterprises applying for listing is getting higher and higher,internal control weaknesses has become one of the main reasons for the rejection of Proposed IPO enterprises.This paper takes Xinhee corporation,which has experienced twice failed IPO applications,as the research object,to analyze its internal control weaknesses,in order to provide theoretical and practical guidance for the proposed IPO enterprises to regulate internal control and help them develop healthily and in the long run.Firstly,this paper expounds the related concepts of internal control weaknesses,and briefly describes the relevant theories of internal control weaknesses,which lays a theoretical foundation for the following analysis.Secondly,the requirements and core concerns of IPO audit on internal control are elaborated,and makes data statistics on the overall situation of IPO audit and on internal control weaknesses of IPO failure enterprises.Then,the general situation of xinhee corporation and the twice IPO failure processes are briefly described.Combined with the feedback from the CSRC and the related problems stated in the announcement of the audit result issued by the audit committee,the internal control weaknesses of xinhee corporation are analyzed in depth by comparing the two publicly disclosed prospectuses.Finally,some suggestions are put forward to improve the internal control in view of the main problems,in order to provide some guidance for standardizing the internal control of the proposed IPO enterprises.This paper finds that from the perspective of the twice IPO applications processes of xinhee corporation,it has always been faced with such internal control weaknesses as overconcentration of equity,unclear development strategy,insufficient understanding of internal and external risks,and poor asset management,and these weaknesses have not been improved.These internal control weaknesses are important reasons for the failure of twice applications for IPO of Xinhee corporation.Xinhee corporation urgently needs to improve its internal control system and standardize its operation from the aspects of optimizing the ownership structure,strengthening the checks and balances mechanism,formulating scientific development strategy,strengthening risk management and asset management.The innovations of this paper are as follows: firstly,from the perspective of internal control,the reasons for failure of proposed IPO enterprises are analyzed in depth,which can enrich the relevant research on internal control in China at the present stage.Secondly,the case selected in this paper is Xinhee corporation with a time span of six years and with two listing applications rejected,the comparative analysis is specific and the research object is typical.