Internal Control Theory

A sound and effective internal control system is looked upon as an effective means to resolve many potential problems. It is recognized that internal controls are put in place to keep the company on course toward profitability goals and achievement of its mission, and to minimize surprises along the way. They enable management to deal with rapidly changing economic and competitive environments, shifting customer demands and priorities, and restructuring for future growth. Internal controls promote efficiency, reduce risk of asset loss, and help ensure the reliability of financial statements and compliance with laws and regulations. But the understanding of internal control was disorderly and unsystematic. Because of different intention and demand internal control was given diverse meaning and objectives and it results in confused theory and inaccurate practice. Though COSO has been engaged in constructing a common framework for internal control, it has not achieved the expected effect. It seems that people were used to look on the internal control as accounting problem. Although the trend has been changing, the view is not wide enough to deal with the deep-seated problems in internal control and to meet the stakeholder's requirement and expectation. So it is necessary and important to review internal control with the institution analysis methods and system theory, studying and analyzing it comprehensively from the viewpoint of relation between market and enterprise. Keeping these as points of departure, this dissertation opens up step by step.This dissertation focuses on enterprise internal control and takes it as the core clue of study. Firstly, it finds the systematic development trend of internal control through comparing and discussing its development and points out the problems it is facing. Secondly, in response to the development trend of internal control it analyses the difference in demand for internal control and defines explicitly the scope and border of internal control and fatherly interprets roundly the nature of internal control, and analyzes deeply the relation between internal control and the...