Listed Companies Internal Control Evaluation

In July 2002,the U.S.Congress issued "Sarbanes-Oxley Act",which imposed the rigorous "internal controls and disclosure" regulations to the domestic listed companies. Since then,many other developed countries also strengthen their supervision to listed companies through setting out their own law framework and institutions to standardize internal controls in listed companies. In recent years, how to practice efficient internal control and make assessment has been a hot topic in theory and practice horizon.The "Sarbanes-Oxley Act" gives enlightenment to the practice of supervision of listed companies' internal control in China.On 5th June 2006,Shanghai stock exchange released "The guidelines of internal control on listed company of Shanghai stock exchange" and enforced it on 1st July 2006.In September 2006,Shenzhen stock exchange also released "The guidelines of internal control of Shenzhen stock exchange" and enforced it on 1st July 2007.These indicate that China entered a new era of building norm system of listed companies' internal controls. On 28th Jun 2008, Ministry of Finance of China,China Securities Regulatory Commission,National Audit office of China,China Banking Regulatory Commission,China Insurance Regulatory Commission,jointly released "The fundamental guidelines of enterprise internal controls" and enforce it on 1st July 2009.This is our country's own guidelines of internal control,which has been regarded as the "Chinese SOX Act".Because it is just only half year since Chinese listed companies have put "The fundamental guidelines of enterprise internal controls" into practice,and the relative supporting guidelines were released just on 26th April 2010,the internal controls is just in the initial phase in our country.The research purposes of the article:To construct the theoretical system of the assessment on internal control of listed company base on the background of our country's supervision requirements and the experiences of foreign countries,meanwhile this article will analyzes the factors of this assessment system,and applies empirical study to the practice of internal controls in Chinese listed companies.Aim at putting forward the theoretical system of assessment on internal control of listed company which suitable for our country through the analysis of current problems of internal control in listed companies.The research methodologies of the article: This article will adopt the methodology which combines normative method with empirical method.When I construct the theoretical framework of assessment system on internal control,and analyze the factors of assessment system,I will use normative method which is the main method in this article. I will investigate and analyze the annual reports and self-assessment reports of companies listed on Shanghai and Shenzhen stock exchange following the empirical research method and evaluate the execution of internal control of our country's listed companies. Based on the above content, this article will be devoted to find out the problems in the current internal control in Chinese listed companies, supply information and source for efficient execution of the "The fundamental guidelines of enterprise internal controls" and put forward to targeted recommendations.The main content and conclusions of the article:1.To construct the theoretical system of assessment on internal control of our country's listed companies, including the internal-assessment and the external-assessment, base on the background and requirements of the laws and regulations of our country's supervision.This article views that the system should include:assessment target, assessment objective,assessment criteria,assessment methods,assessment content, assessment reports and other factors.Assessment objective is the basis for other elements; assessment objective is the answer for "who will assess"; assessment criteria addresses in accordance with criteria to assessment issues; assessment methods to solve the problem "how to evaluate";assessment content is the answer for "what will be assessed";assessment report is the carrier for the above factors,the obligation to disclose their information to public determines the assessment report to be the final vector of the internal control,it also get widespread concern from every national regulatory authority.2. Based on the comparative analysis among the COSO Commitment's "Internal Control-Integrated Framework" of and its expanded report "Enterprise Risk Management-Integrated Framework",Cadbury report and Turnbull guidelines of U.K., CoCo report of Canada,"Sarbanes-Oxley Act" of U.S.and other reports that are relative to internal control,this article bring forwards that "The fundamental guidelines of enterprise internal controls" meets to the current condition and demand of our country, the guidelines could establish a model for all enterprise to construct internal control system,but the guideline is just a basic framework, and the detailed implementation should be improved for the efficient promotion.3. Although it's only half year since the listed companies have implemented "The fundamental guidelines of enterprise internal controls",it has been 2-3 years since Shanghai stock exchange.and Shenzhen stock exchange have enacted separately "guidelines".To find out the situation of execution of internal control and its assessment of listed companies, I collected the annual report and relative self-assessment report of internal control of the 1,314 companies listed on Shanghai and Shenzhen stock exchange, This article compares multi-projections to demonstrate:the situation of self-assessment of internal control of listed companies of our country, the situation of external-assessment of internal control by CPA. The conclusion is:there are many problems in both internal and external assessment on internal control of listed companies of our country, such as:the low proportion of disclosure on internal control,the confused criterion on the assessment of internal control,the disagreement on the content of internal control, the formality disclosure of intemal control,and so on questions.4.Integrate with the characteristics of listed companies at the present stage in our country, this article proposes the development thoughts of internal control of listed companies for the future:at the present stage,the external-assessment of CPA should be dominated,which can push listed companies to fully implement "The fundamental guidelines of enterprise internal controls" from outside to inside;the internal audit should be developed to promote the establishment of a sound and effective implementation of self-assessment on internal control of enterprises through the enhancement of the independence and authority of internal audit; the tendency assessment system should be dominated in the self-assessment of enterprises based on the idea of enterprises risk management and assisted by the external-assessment of CPA.The innovations and major limitations of the article:This article constructed the theoretical system of assessment on internal control of our country's listed companies and detailedly elaborated the factors of the system. This article completed an empirical study on the self-assessment and external-assessment internal control by collecting reports of 1,314 companies listed on Shanghai and Shenzhen stock exchange in 2009,this article supplies a large amount of data and information to support more future researches.Internal control is a complex issue which revolves multi subjects and lines;there are so many deeply researchable areas in both the internal and external assessment. This article only constructed the theoretical system of assessment on internal control and elaborated the factors,but did not thoroughly study and discuss the assessment system of internal control,especially the assessment tools and assessment methods which needs to be further studied both on theory and demonstration.