Research On The Problem Of Internal Control Self-assessment Of Listed Companies

With the frequent foreign financial fraud exposure, internal control disclosure caused widespread concern in theory and in practice. As a series of financial scandals have frequently been exposed, the United States promulgated"Sarbanes-Oxley Act"(SOX) to regulate the mandatory disclosure of internal controls. Stock market in China also faces the same problem. As a result, Shanghai Stock Exchange and Shenzhen Stock Exchange issued Shanghai Stock Exchange Guidelines on Internal Controls of Listed Companies and Shenzhen Stock Exchange Guidelines on Internal Controls of Listed Companies, which were put into practice on July 1, 2006 and 2007 respectively. Meanwhile, China Internal Control Standards Committee was founded in July in 2006. It released Basic Norms of Enterprise Internal Control, carried out on January 1, 2010. With these regulations in mind, the author tries to analyze the reactions of listed companies to related regulations, and disclosure of internal control self assessment in capital market, which are of theoretical and practical value in the study of current institutional arrangements and their effects.Based on comprehensive literature review and theoretical analysis, this paper takes three years'consecutive annual report of 83 listed companies as the subject, and studies the published reports of internal control self assessment. However, there are only a limited number of listed companies which are willing to expose their reports of internal control self assessment, for which board of directors are mainly responsible. Meanwhile evaluative content and principles are based on their own understanding. Only a small number of listed companies consult certified public accountants to evaluate the reports of the internal control self assessment. Although the internal control self assessment of listed companies is gradually improved by the debut of Basic Norms of Enterprise Internal Control, the annual reports and their evaluative quality still need to be enhanced.The present situation of internal control self assessment of Shanghai Stock Exchange is due to the low social approval, inconsistent laws and regulations, ununified evaluative standards and insufficient supervision. The formal and superficial disclosure in annual reports constrains the internal control information to limited use. As a result, this paper puts forward some suggestions in this respect, such as improving social approval from listed companies, societal public and investors, harmonizing and perfecting laws and regulations, establishing unified evaluative standards, and strengthening supervision according to national conditions.