The Research On The Relationship Between The Effectiveness Of Internal Control And Financial Fraud

Global economic and financial crime, fraud is becoming increasingly serious, frequent outbreaks of domestic and international fraud cases greatly undermine investor's confidence and undermine the fairness of securities markets, even have caused serious harm to the entire country's economy. In China, the financial fraud problems have attracted the full attention of the whole country in various departments, and have taken measures to some extent and range of appropriate, but the relevant data show that China's corporate financial reporting fraud is still very serious. As China's capital market is not developed today, financial fraud is affected by many factors. In this series of influencing factors, internal control is one important factor, it is how to affect the financial fraud, whether it has an important impact on the problem, theorists and practitioners have been stuck in the stage of theoretical research and case studies, there is no depth study between them. In this paper, we have conducted a depth study to help improve the company's internal control system to reduce the financial fraud, also provide new ideas for the study of internal control theory.In this paper,we analysis the domestic and foreign related research systematically, put the internal control linked with financial fraud, anaysis the dynamics of financial fraud, the impact mechanism of financial fraud, clear the role of internal control in the prevention of financial control. Drawing on the theoretical and empirical research results of internal control evaluaton, we build a comprehensive evaluation index, internal control index, to measure the effectiveness of internal control, make the evaluation of the effectiveness of internal control from qualitative to quantitative measurement. In the empirical analysis, we have tested and demonstrated the data of 2008-2010, these A-share companies of Shanghai and Shenzhen Stock Exchange were punished by the SFC,the Stock Exchange or the Ministry of Finance; in the sample selection, one financial fraud company have chosen one non-financial fraud company to match, using descriptive statistical analysis,correlation analysis and Logistic regression analysis method, find the difference between the selected indicators, and have a preliminary analysis of the relevance between internal control index and financial fraud. The empirical results of three years all derived that there is a significant negative correlation between the effectiveness of internal control and financial fraud. Under the theoretical and empirical analysis, we use the model to test the communication and cultural industries, and further verify that internal control and financial fraud have a significant correlation. Finally, from the point of inhibition of financial fraud, we propose some views and measures to construct the internal control system. Paper proposes suggestions to perfect the internal control of companies from the following parts:perfect the internal governents structure; strengthen the internal audit; strengthen the internal control culture and risk management; improve the effectiveness of internal control evaluation.