Research On The Factors Which Influence The Effectiveness Of Internal Control

Internal control is a control system which is used to protect the quality of accountinginformation, the security of assets, integrity, and to ensure the implementation of relevant lawsand regulations. Effective internal control system can not only enable the rational allocationof resources, ensure the quality of accounting information, and improve labor productivity, butalso can prevent and discover the internal variety of corrupt conduct, protect the legitimate rightsand interests of investors, ensure the effective operation of capital markets. It plays an importantrole in the development of enterprises and the orderly operation of market. China corporationinternal control system has basically completed since the release of “Internal Control SupportingGuidelines” in April2010.It is a major project after the implementation of corporate accountingstandards system and auditing standards system, and is another step connecting with internationalstandards. The system will exert a deep influence on guarding against business risks, standardizecorporate governance and promote the sustainable development of enterprises. In this condition,I continue to deliberate something about the internal control on the basis of previousresearch: what kind of internal control is effective? Which factors have an impacton the effectiveness of internal controls?The main content of this paper are: First, on the basis of summarizing and combining thedomestic and foreign literature on the study of internal control, I make the current researchlimitations and further research space clear; Second, this paper states the changes of internalcontrol in all stages of development, defines the evaluation of internal control and theeffectiveness of internal control and elaborated the theory of the internal controlevaluation methods; third, this paper selects4065companies listed in Shanghai Exchange andShenzhen Exchange from2008to2010as samples to make empirically test which chooselegal compliance, financial report reliability and operating efficiency as the explanatoryvariable.It tests the impact of factors on the effectiveness of internal control fromownership structure, the report and the company itself, which including seven explanatoryvariables, such as ownership concentration, ownership structure characteristic, AuditCommittee, board characteristic, company size and so on. Finally, this paper makes a numberof policy recommendations based on the empirical results, combining with the variousproblems which is faced by China listed companies in the construction of the internal control, inorder to promote the development of internal control of listed companies in China.This study is the first to systematically and comprehensively explore the factors impactingthe effectiveness of internal control from empirical and theoretical angles, It helps toenrich the internal control theoretical system, and make governors pay more attention to the relevant factors in the management process in order to improve the effectiveness of internalcontrols.