Analysis Invalidation On The Internal Control Of Chinese Listed Companies

The cases happened recently one by one that the listed companies made the false financialinformation and the shocking news is often read that superior management offended the crimeor disappeared suddenly. At the same time lots of middle and little stockholders lost heavilyand the listed companies are well known as the "cheat"or "trap"corporation and the CPA &business accounts are censured as the tools of making false. As the result, the Chinese capitalmarket dropped into bear. The reasons may be many, but the primary reason lies in theinvalidation of internal control in the listed companies. As far as available theories areconcerned, on the one hand, the foreign theories are very advanced but the social & historicalbackground and the surrounding is very different from ours and can't explain the Chinesereality directly. On the other hand, the Chinese ones fall behind relatively. So there are notappropriate theories that can indicate to solve the Chinese problem now. The historicaloriginal reasons to the above problems in the internal control of Chinese listed companies isthat the nation-owned enterprises had not the internal control policies in planning-orientedeconomic era and that the preparation is not sufficient and comprehensive of the systemic theinternal control which is harmonious with the revolution of the ownership during thetransformation. Institution is integrated framework that includes not only the formalinstitution but also informal institution and execution. What's more, formal institution isclosely linked with the informal. The execution and the result of the formal depend on theinformal and the informal decrease the cost of execution of the formal. So the paper analyzesthe invalidation of the internal control on the basis of historical analysis from the formal andinformal institution. At last, the paper gives some solution to the problems above.