The Formation And Development Of Internal Control

As the foundation of the corporate governance, internal control is an important guarantee of the sustainable development of the company, is the effective mechanism for the improvement of the company’s management ability and risk prevention ability. At the beginning of the21st century, Enron and WorldCom Scandals have caused huge impact on the United States and global financial markets. One of the reasons for those scandals is the material defect in their internal control. Enron and WorldCom Scandals have raised the attention of the internal control in worldwide countries, many countries have then legislated laws and regulations concerning with internal control. In our country, the relevant departments have legislated several laws and regulations concerning with internal control from different aspects.But due to the extreme abstract of those existing laws and regulations concerning with the internal control, the conflict of laws, the lack of deep research and discordance of the regulations on the directors’responsibilities on internal control. It’s extremely difficult for companies to build up a sound internal control system, severely affected the healthy and stable development of the companies.This article intends to make some advices on how to clarify the directors’ responsibilities on internal control, and how to establish a sound legal system on internal control in our country, with the light of the advanced experiences United States have on internal control. In the first chapter, I reviewed the formation and development of the internal control in the United States, introduced the evolution of the concept of the internal control and the legislation development of the internal control. In the second chapter, I introduced the theories and judicial precedents in the United States concerning with the directors’responsibility on internal control. Among them, I first introduced the corporate governance briefly, which have important influence on the internal control, and then I introduced the theories and judicial precedents concerning with the directors’responsibility on internal control. In the third chapter, I summarized the current legislations, theories and practices in our country on internal control, analyzed the deficiency of the internal control legislation. And finally in chapter four, I made a profile on the directors’responsibility on internal control, and put forward some advices on how to establish a sound legal system on internal control in our country, after the summarization and analysis, with the hope of making some contributions to the establishment of the legal system on internal control.