A Research On Management Reporting On Internal Control

Financial fraud floods the capital market all over the world, no matter in USA, Europe, or in China. There are many reasons for financial fraud, in which the absence or failure of internal control is a very important one. Effective internal control is the first or maybe the last line to prevent financial fraud. After the collapse of Enron empire, the congress of the United States issued the Sabanes-Oxley Act of 2002, which requires the public companies to provide the management reporting on internal control (MRIC). In 2006 both of Shanghai Security Exchange and Shenzhen Security Exchange issued the internal control guidance for public companies. Learning from others, you can get things done! How about the MRIC going in USA? What have the authority done to implement it effectively? What's the current situation in our country? What can we learn from the SOX implementation? These are what this dissertation wants to answer.This dissertation consists of five parts:Introduction. This part describes the research background, research methods & contents, contributions & deficiencies of this dissertation.Chapter One Literature Review on MRIC. This chapter takes a brief review of literature research on MRIC from home and abroad.Chapter Two the Fundamental Theory of MRIC. This chapter analyses the definition evolution and the framework of MRIC, which pave the road for the next several chapters. At the end, the author explains the economic theory of MRIC .Chapter Three An Analysis of MRIC in USA . This chapter firstly described the evolution of MRIC in USA and then emphatically studies the hottest four issues in implementing section 404 of SOX. They are cost-benefit issue, the evaluation of the effectiveness on internal control over financial reporting (ICFR), the auditing standard of ICFR and the implementation issues relating to smaller public companies. The author argues that it remains unclear whether the compliance cost outweighs its benefits or verse. The evaluation framework of ICFR should carefully align with the auditing standard for achieving a better tradeoff between the quality of ICFR and the cost of compliance. Because of the unique characteristics of smaller public companies & its limited resource, their implementation should be scalable and flexible.Chapter Four An Analysis of Disclosure on Internal Control In China. In this chapter, the author analyses the regulations relating to the disclosure of internal control and then takes a descriptive analysis of our companies'prospectus. At the end, according to disclosure problems and the experiences of section 404, the author puts forward some suggestions for improving disclosure of internal control.A little academic contributions: (1) study of the latest implementation issues of section 404; (2) study of prospectus and some suggestions for improving internal control information disclosure.