The Research On The Internal Control Of The State-owned Commercial Banks

Recently, a number of financial scandals have occurred in the four State-owned commercial banks. By analyzing these affairs, it can be concluded that the inefficient and imperfect internal control system should be the major cause of these scandals. Therefore, it is of great importance to reform and perfect the internal control system in the reform and developing process of the Chinese commercial banks.Internal control is a major topic in the field of auditing. The study of internal control began in the 1940s and gradually developed with the development of enterprise and the society. COSO(Committee of Sponsoring Organizations Of the Treadway Commission) issued Internal Control Integrated Framework in 1992, which gives a general description of the internal control system. Then, in the year 2002, COSO committee issued Enterprise Risk Management to perfect the theory of internal control and increased the elements of internal control system from 5 to 8. The issue of Enterprise Risk Management Framework revealed the tendency of collecting risk management and internal control together.Based on the COSO Report, the Basle Banking Supervision Committee issued The Framework For Internal Control System In Banking Organizations, which is the most complete and systematic description about the internal control of commercial banks. The issue of The Guidance to Commercial Banks' Internal Controls by the People's Bank of China in 2002 indicated the practice of internal control in the banking industry in china has went into a new phase.This essay first looks back on the developing process of the internal control.Secondly, with the guidance of Enterprise Risk Management Framework, the paper listed Control Environment, Objective Setting, Event Identification, Risk Recognition and Assessment, Risk Response, Control Activity, Information & Communication and Monitoring Activity & Correcting Deficiencies as the 8 elements of internal control. Then, the paper logically divides these 8 elements into Control Environment, Control Activity and Control Supervision. Lastly, this paper analyses the practice of the internal control of commercial banks in China, and finally makes some commends on the establishment and improvement of Chinese commercial banks.