A Study Of Internal Control From A Fraud Perspective

As the foundation of the modern enterprise management, the internal control is an important symbol to measure the level of the management of enterprises and also is reliable guarantee to the continued and healthy development of enterprises. In recent years, there are so many scandals and frequent fraudulent practices which are done by the enterprises'top management at home and abroad. This not only brings the huge economic losses to the enterprises and shareholders, but also produces the great shock and far-reaching influence to the worldwide capital market's development. Above all, one of the most important reasons is the failure of the internal control, especially the internal environmental control. The internal control, whose foundation is internal environment, is the internal system for the enterprises who do self-control and self-adjustment. So it is urgent to further improve the internal control of the company, especially its environmental construction.Firstly, the paper summarizes the studies of the fraud and internal control in the past. Secondly the paper introduces the game theory,the contract theory,the theory of corporate governance and internal control in detail, and analyzes the development and the utilization on internal control which relates to internal control. Thirdly on the basis of the problem which relates to internal control in view of fraud, the paper elaborates the defect of internal control through the subjective factors of the administrative,inefficiency of multi-agent chain and behavior of stakeholders in the game. Then collecting data on listed companies in Shanghai, the empirical study analyses the effect which is caused by the environment on internal controls. The empirical research indicates the results as follows: the first stockholders'stock rate is negatively correlated with internal control efficiency. According to the results above,the article suggests some advice on strengthening the construction of the external environment,optimizing the internal governance mechanisms,establishing an effective multi-level agent control and designing an effective balance of internal control mechanismwhich contributes to improve the internal control system of enterprise through pointing of view of internal control objectives from the corporate governance,and optimizing ownership structure,strengthen the building of the board of directors and board of supervisors and improve the information disclosure system of internal controls. Fraud prevention depends on the internal control, the improvement of internal control is benefit to the company who can prevent and detect fraud in time. Improving the level of internal control and strengthening the regulatory supervision on the fraud will make our business develop well in a highly competitive environment.