Research On The Value-added Mechanism And Effect Of Corporate Internal Audit In Different Stratigic Situations

The outbreak of Enron and World Com scandal and the subsequent promulgation of the Sarbanes-Oxley Act in the United States have expanded the responsibilities of internal audit and increased its importance.The function of internal audit has expanded from traditional supervision functions such as error/fraud detection and asset protection to the promotion of organizational value.China Institute of Internal Audit states that internal audit should "promote the organization to improve governance,increase value and achieve goals" in "Chinese Internal Auditing Standards No.1101: Basic Internal Auditing Standards",clarifying the value-added target of internal audit.Reserchers have paid close attention to the value-added function of internal audit,but it is more about the discussion of basic concepts,and it is still insufficient to analyze the value-added role of internal audit and the main value-added channels through empirical testing.At the same time,the influence of corporate strategy on corporate value becomes more significant,and even becomes the primary factor driving the growth of corporate value.In order to achieve sustainable corporate value-added goals,internal audit should focus on corporate management from strategy perspective.Therefore,this paper proposes a strategic perspective to study the value-added issue of internal audit.This paper analyzes the motivation,mechanism and effect of internal audit to promote value-added with the logic of value-added role and mechanism of internal audit,and fully consider the impact of strategic factors.The current internal audit mechanism for value-added is based on the GRC framework(corporate governance,risk management,internal control/compliance).In view of the shortcomings of this framework,this paper proposes GRACE value-added mechanism in conjunction with the function of internal auditing,which is that internal audit could promote the realization of enterprise value-added through governance,risk management,anti-fraud,internal controls,and 3E(economics,efficiency and effectiveness).High-quality accounting information is the basis for improving the governance,risk management,and hence is important to the formulation of effective corporate investment and management decisions,which reflects the internal audit function of assurance;while investment decisions are the specific way to realize the corporate objective,and the investment efficiency often determines the effectiveness of management's investment decisions,which is an important manifestation of the internal audit 's function as a consulting service.Ultimately,whether internal audit can play a role in value-added is reflected in the impact of internal audit on corporate value.Therefore,based on the samples of China's state-owned listed companies in 2014-2017,from the dimensions of ex-enta,current,and ex-post,this paper examines the impact of internal audit quality on accounting information quality,investment efficiency,and corporate value,and analyzes the path of five dimensions of the GRACE framework to play the value-added function,while taking into account the impact of strategic factors,and then through the method of empirical research to analyze the role and specific path of internal audit to realize value-added.The studies find that,firstly,when the number of internal audit departments,audit projects carried out by internal audit,and the opinions and recommendations adopted by internal audit feedback is higher,accounting information quality is better.Moreover,the impact of internal audit on the accounting information quality is based on the dimensions of anti-fraud,internal control and operating performance,and the role of internal audit in improving information quality is greater when higher degrees of strategic difference and strategic change.Secondly,from the perspective of corporate investment efficiency,high-quality internal audit can alleviate excessive investment and increase investment efficiency by improving corporate governance,improving internal control,and preventing investment risks in the investment process,and the impact of internal audit on investment efficiency is more pronounced when the degree of strategic difference and strategic change is greater.Finally,by directly building an association between internal audit and corporate value,high-quality internal audit can enhance corporate value through multiple dimensions of the GRACE framework,and the impacts is more pronounced when the degree of strategic difference and strategic change is greater.In summary,internal audit can promote the improvement of accounting information quality and investment efficiency from multiple dimensions,and then promote the value-added of the company,while adapting to the company's strategic management requirements.The innovations of this paper are mainly reflected in the following aspects.Firstly,considering the functions and processes of internal audit,special indicators of internal audit are used in this paper to study the economic consequences of internal audit from the dimensions of ex-enta,current,and ex-post,which enriches the study of internal audit quality.Secondly,this paper analyzes the ways to increase the value of internal audit based on five dimensions,and summarizes the internal audit value-added mechanism into the GRACE framework,which expands the internal audit value-added mechanism research.Thirdly,this paper adds strategic factors to the research on the role and mechanism of internal audit value-added,reflecting that internal audit has satisfied the needs of strategic management in the value-added process.Finally,the research in this paper has important practical significance for strengthening the application of internal audit in reality.