Research And Enlightenment Of V Company's Internal Control

Internal control system is the product of the socio-economic development to a certain stage, is an important tool of modern business management. With global economic integration, management theory and information technology have the rapid development. Therefore, the establishment and improvement of the internal control system is required for modern enterprise, which has a positive effect upon the prevention and avoidance of all kinds of adverse events and commercial fraud.Internal control develops late in our country and shows the lack of theoretical guidance for practice and practical solutions. In this paper, the actual case of internal control in V Company is the object of study; based on the five elements of internal control, the paper carries out the systematic analysis and evaluation of the whole process of V Company's internal control, and summarizes its successes and shortcomings. It also proposes enlightenment and advice on how to establish internal control for China's modern enterprise by combining with existing problems in the internal control of China's modern enterprise and drawing lessons from advantages and disadvantages of the actual operation of V Company's internal control.The paper has six parts, the main content summarized as follows:1. Introduction. Introduces the background of the topic, research purpose and meaning, and briefly describes research ideas and methods.2. The basic theory of internal control. This part outlines the concept and development of internal control, and describes the internal control's theory and development process respectively from foreign and domestic aspects. In regard to the actual development state abroad, it introduces the current status of two countries: the United States whose internal control is most developed today and France where the case in this paper occurred.3. The development and the status quo of V Company's internal control. This part describes the original case of the paper: V Company launched the internal control program in 2003-2004, and fully implemented it in 109 factories and 68 R & D centers around the world in 2005. The company regulations require that the management is responsible for internal control; it has to be audited by certified public accountants; and supervised by the Audit Committee and the board of directors together. Meanwhile, the internal control should be updated into the company's financial manual terms (AMF I.01.01). Company V constructed internal control system based on the COSO framework, which has the same nature as the Sarbanes-Oxley Act of 2002 promulgated by the United States,"To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes."To achieve the purpose of its internal control by optimizing the control environment, risk assessment, implementation of control activities, timely communication and delivery of information and the management's tracking and supervision of internal control, namely to ensure the reliability of financial reports, to guarantee the implementation of national laws and regulations, to protect the security of property and to improve the operational efficiency. 4. Analysis and evaluation of V Company's internal control, is one focus of this paper. According to the actual application of internal control in V Company, this part summarizes and evaluates the company's successful experience and weaknesses based on the five elements of the COSO framework.Advantages:Had a sound standard system of internal control; set up the practical corporate culture; selected decisive talents for the management; established the practical system.Established 220 critical control points through 12 business processes; made the action plans through the tests and documented them to track. Gave full play to the ERP system for the control of the separation of incompatible duties,accounting systems and budget through the effective combination with management information system; used the Internet and IT tools to make information delivered, tracked and shared in more than 100 branches around the world, and to have the information effectively delivered, tracked and monitored, so that the effective implementation achieved objectives of the control, and continuously improved the internal control system.Disadvantages:The essence of the internal control is risk management. The risk characteristics determine that the risk assessment is a major time-consuming project, but the V Company took less attention to the risk identification and risk response, it had no systematic risk identification and analysis, and did not timely take effective coping strategies or adjust risk-coping strategies according to the company's own business situation. V Company lacks security management of information system, the company took extensive application of management information systems, information system security is essential to the company. Meanwhile, in order to implement various management information systems, V Company paid a very high cost and human resources.5. The enlightenment of V Company's internal control for the internal control of our modern enterprise, which is another focus of this paper. This part describes the main problems of our internal control; based on the five elements of the COSO framework, it also proposes enlightenment and advice on the establishment of internal control of China's modern enterprise through combining with the advantages and disadvantages of the actual operation of V Company's internal control.In order to achieve the target of internal control, the company should improve its governance structure, build up good enterprise culture and complete the human resource policies to optimize the control environment; attach great importance to the risk assessment and risk response; focus on the control of the approval authority, identify and separate the incompatible duties and fully utilize the information technology to make the control activities more effectively; improve the communication efficiency and supervision by the application of management information system and IT tools.6. Conclusion. This part has made a conclusion of the study on internal control in the whole paper. For realizing the nature of internal control, the company should establish and improve the internal control system according to the company's vision and strategic objectives; build up the good control environment; attach great importance to the risk assessment and risk response; ensure the efficient information sharing and communication; fully utilize the ERP system and modern information system to supervise and detect the implementation effect, analyze the reasons, and develop corrective action plans and send out the report to the relevant department to ensure tracking by professional people, so as to make the internal control system improved continuously and implemented effectively and thoroughly.