A Study About Internal Enforcement Mechanism Of Accounting Standards In China

'Accounting standards for business enterprise 2006' which are issued by Ministry of Finance indicates that China has made great progress in accounting standards construction. However, high-quality accounting standards does not equal to high-quality financial disclosures. The cases of Wu liangye, Guangdong Kelong and Yin guangxia in recent years all have something to do with ineffective enforcement of accounting standards. So how to ensure the effective implementation of accounting standards has become an important issue. The study about internal enforcement mechanism of accounting standards has an important meaning to resolve the theory and practice problems that are faced by the accounting field. These problems are how to prevent fraudulent financial reporting, how to realize accounting internationalization, and how to construct high-quality financial reporting system.Internal enforcement mechanism of accounting standards is an internal corporate governance-based system within certain institutional arrangements which is interrelated and interacted by sundry restricted factors. Its objective is realization of enforcing accounting standards effectively and releasing managers' accountability. The four major natures of internal enforcement mechanism of accounting standards are the clarity of its objectives, restriction of its scopes, dynamic of its operational processes and universality of its impacts. The theoretical bases of internal enforcement mechanism of accounting standards are rationality assumption, agency costs and incentive mechanism, revenue equalization theory and the theory of separation of powers.Internal enforcement mechanism of accounting standards comprises three important mechanisms, namely credibility and moral mechanism, internal corporate governance mechanism and internal company accounting mechanism. Credibility and moral mechanism improves self-consciousness of self-implementation from the perspective of executives within the company. It is examination and investigation of executives' own level of quality and ethics. Internal corporate governance mechanism assures its effective operation through good design and function of configuration, thereby enabling effective enforcement of accounting standards. Internal company accounting mechanism is the first executor of learning and using accounting standards, so it plays a very important role in internal enforcement mechanism of accounting standards.In reality the current status of enforcement of China's accounting standards are not ideal, there are still many problems to be solved. They are mainly: accounting professional ethic problems due to lack of company credibility and social credibility; imbalanced internal corporate governance mechanism caused by big state-owned shares; and dysfunction of internal accounting controls because of inadequate internal control systems. In addition,'rule-based' accounting standards also affect the effectiveness of internal enforcement mechanism of accounting standards.Take example by foreign experiences, the United States reduces monitoring costs of enforcing accounting standards by self-regulatory enforcement mechanism which is under dual guarantee of perfect integrity system and powerful forces of media monitoring, while 'Sarbanes-Oxley Act' on mandatory disclosure requirements of internal control is conducive to the good implementation of accounting standards. Germany relies on its unique supervisory system, and workers in business management and business decision-making mechanism, to realize the effective implementation of accounting standards within the enterprise.In order to improve China's internal enforcement mechanism of accounting standards, we must first clear enterprise property rights in order to establish the foundation of credibility mechanism; improve legal system in order to increase the penalties for offenders and prevent them from violating accounting standards; and to strengthen discipline and moral education in order to guarantee the enforcement of accounting standards. Secondly, increase the number of independent directors, strengthen the independence of audit committee and enhance the authority of internal audit will help improve the company's board of directors, thus ensure the effective implementation of accounting standards; improve board of supervisors, especially introduction of external supervisor system can increase the independence of board of supervisors, monitor management implement accounting standards afterwards, check and balance the unrestricted powers of independent directors, thereby improve the efficiency and effectiveness of supervision mechanisms and accounting standards enforcement; improve manager incentive mechanism by organically linking his own interests to shareholders' interests, provide high-risk reward in return for manager's due diligence to avoid violation of accounting standards. Finally, establish effective internal control agencies and a sound communication system, implement strict accountability mechanism and attach importance to selection of internal control staff and development of internal control culture will improve the internal accounting mechanism, help to safeguard the efficiency and effectiveness of accounting standards enforcement mechanisms. In addition, the'objective- oriented' accounting standards can facilitate the development of high-quality accounting standards, which is the premise to ensure the effective implementation of accounting standards.