The Study Of Internal Control System Design Of AY Company

With the great development of Chinese economy, private enterprises enter aprosperous era in an unprecedented way and they had changed from the necessaryand useful supplement, which had been recognized in the early period of reform andopening-up, to the important part of national economy. Nowadays, medium and smallsized enterprises have a prominent position in private enterprises, but with theprogress of private enterprises, the private economy plays a more and more importantrole in the whole economy. However, the average life-span of private enterprises isreally short and the major reason is that the internal control system cannot catch upwith the expansion of enterprises’ size. Through a number of failures of many privateenterprises, it is obvious that the faultiness and shortage of internal control systemhave became as a big obstacle for the development of Chinese private enterprises,especially medium and small sized enterprises. Therefore, Chinese private enterprisesurgently need an internal control which is suitable to their own advance.This paper takes AY Company as the research target and does a research of itssituation on the internal control. On the basis of the investigation in the internalcontrol of many excellent domestic and oversea enterprises, this paper mainlyanalyzes the situation of internal control in AY Company and what’s more, it is alsodirected by the “fundamental standard of Enterprise internal control”, which is issueby the Ministry of Finance, Securities Regulatory Commission, Auditing Department,Bank Regulatory Commission, and Insurance Regulatory Commission since1stJuly,2009. The main problems of AY Company are as follows: no definite organizationand the establishment of enterprise culture, short of the regulation of human resourceand effective supervision and risk evaluation system, the faultiness of internal control,and the blocked internal communication. According to those, this paper designs aninternal control system for AY Company with developing and dynamic perspectiveand cost benefit principle. In this paper, the first chapter focuses on the research background, meaning andpurposes as well as the research methods and content. The second chapter analyzesthe situation of internal control in AY Company. Relying on the general introductionof AY Company, this part states the circumstance and activities of internal control,information and communication in AY Company. The third chapter points out theproblems in the internal control system of AY Company and also analyzes its reasonsentirely. This analysis includes the analysis of the circumstance and activities ofinternal control, the information and communication of this company, and the reasonfor the problems in the internal control. The fourth chapter offers a design of internalcontrol of AY Company. On the basis of the advanced internal control theory fromhome and abroad, this chapter defines the purposes and principles of internal controlfor the company. In the terms of all above purposes and principles, this chapter statesdetailedly in the structure and organization of the company, the system of humanresource, the policy of the propaganda for enterprise culture, the regulation offinancial management, the guideline of purchase, the principle of capital managementand the supervision and risk evaluation system. The whole set of system clarifies theposition and function of the enterprise and defines the management power in thiscompany. Moreover, those policies also regulate the employees from the aspects ofemployment, training, dismission, resignation, salary, examination, promotion, praise,punishment, vacation, and secrecy. Thus, the whole system can avoid that the humanpower tries to replace the system administration in order to employ the qualifiedemployees. This design also builds up the enterprise culture and the way ofpropaganda for that culture so as to establish a better communication between theenterprise and its employees and also regulates employees’ activities. Furthermore,there are other benefits of the whole set of system: set up a unitive standard forfinancial accounting, the responsibility of employees in finance department and theirapproval authority; take care of the financial seal of the company in a scientific way;avoid the incompatible duty overlapping; make a plan in advance and do a reasonablepurchase; abstain from the supervision leak in purchase; ensure the record of everyitem of capital in order to prevent from unnecessary waste; establish the regularevaluation system of internal and external risks so as to avoid those risks better. The conclusion of this paper not only benefits the development of AY Companybut also be useful for the design of internal control in other small sized privateenterprises.