Research On The Internal Control Improvement Of K Company

Since 2020,China’s small and medium-sized enterprises(SMEs)have accounted for 95.68% of the market entities and become the backbone of national economic development.However,Central Bank President Yi Gang mentioned that the average life cycle of SMEs in China is only three years,the problems of SMEs due to the weak internal control such as irregular management,difficult and unaffordable financing have seriously increased the pressure on SMEs’ survival.In the "Outline of the 14 th Five-Year plan for Accounting Reform and Development" issued in 2022,the Ministry of Finance stressed that SMEs should firmly establish and improve their internal control systems,improve their management level and anti-risk ability.Taking into account the characteristics of SMEs such as concentration of ownership,lack of resources and flexibility,copying the construction methods of large-scale enterprises is not feasible when constructing SMEs’ internal control system.However,the current regulatory documents for internal control focus more on large enterprises,less involved in SMEs,which provide insufficient reference value for SMEs.In view of this,this paper may throw some new light on how to establish a robust and efficient internal control system for SMEs.Based on the "Basic Norms of Corporate Internal Control" and supporting guidelines,"Norms of Small Corporate Internal Control" and other documents,relying on principal-agent theory and risk management theory,this paper chooses a SME K company as the research object,discusses the internal control problems and causes by the way of case analysis,then puts forward the improvement scheme.Through on-the-spot investigation,in-depth interviews and other means to collect relevant information of K company internal control status,this paper finds that there are some problems in K company,such as weak internal control environment,lack of risk management system,inefficient implementation of control activities,backward and single communication channel,lack of internal supervision.Therefore,based on the problems of the existing internal control system of K company,this paper puts forward the following improvement measures: First of all,K company should optimize the control environment,improve the governance system,cultural construction,human resources policy and internal control institution.Secondly,K company needs to build a risk assessment system,raise awareness of risk management and set up institutions to do the work.Furthermore,K company should carry out effective control activities by taking multiple measures such as separation of duties,authorization approval,documents record and other control to realize the management of market and other risks.Additionally,K company ought to use multi-ways to collect internal and external information,and actively disclose information to the outside.Finally,K company is supposed to strengthen internal supervision mechanism through establishing two lines of defense with internal and external supervision.In view of the above improvement proposal,this paper further proposes that K company also needs to strengthen the internal control consciousness and encourage full participation to form organization atmosphere guarantee.Then,strengthen the institution operability and establish internal control evaluation mechanism to build the institution safeguard.At last,K company should also strengthen information system and human resource support to achieve resource guarantee.Hope that no matter the case company or other similar SMEs can get some inspiration from this paper to regulate their internal control framework,so as to break through the bottleneck of SMEs development and achieve high-quality development.