The Internal-control Research Of Securities Companies In Our Country Based On The New COSO Frame

In the second half of 2007, China opens up the permission of newly established securities companies, and more ones will enter into the securities service industry to share the huge profits from the development of the market. Particularly with the establishment of Sino-foreign joint venture companies, the advanced management and service concept, the better service and the lower commission, they bring in, will greatly impact on China's security businesses. However in such a grim situation, a large number of China's securities companies are revoked, closed or taken over by the administration for losing control or inefficient operation. The consequences are caused by weak internal controls in our securities companies have been very serious. According to the SFC's summary of the report, there were 133 securities companies in China on December 31st 2004, but till August 2007, there were only 104 left. The declining of securities companies' number is mainly because of our special formation mechanism for securities companies and the lagging of the China's financial system reformation. The domestic securities companies haven't developed enough in the internal control system, so the companies' ability to resist risks is relatively weak. In all those reasons, the company internal control is the fundamental one. Therefore, how to perfect the China Securities internal control system, how to improve the securities company level of internal control and risk management is not only of theoretical significance, but also the urgent needs in practice.The author, based on the research results of many scholars in securities theory, tries to explore the internal control deficiencies, including the highly concentrated equity, ineffective supervision, the non-standard securities market, the asymmetric information, and the inadequate financial risk management. Then learning from the COSO internal control frame, which includes eight elements (the internal environment, goal setting, the incident identification, risk assessment, risk response, control activities, information and communication and monitoring), and combining the actual situation of China's security companies, she constructs the internal control system. There are six parts in the system, including the internal control environment, the controller, the information disclosure, the effective-ness, the risks and the comprehensive evaluation indicators. To test its applicability and feasibility, the author tries to evaluate a real company, the Don Fang security company, by the system and finally proposes to appropriately disperse the stakes, perfect the legal constraint mechanism, encourage the competition in securities industry, optimize the information and communication system, and establish a improved risk management to solve our existing problems.In this paper, the study finds out many problems of internal control in China's securities companies, and on the basis of COSO frame tries to combine the risk management with the risk assessment, and establish a new internal control system with the risk management of COSO Report as the Center. It provides the important ideas and methods for the management department to evaluate our securities companies, and for the companies themselves to strengthen their internal control.