A Study On Construction Of Internal Control System Of Small And Medium-sized Enterprises Based On Risk Management

The theory and practice both show that the internal control plays a very important role to encourage enterprises to achieve healthy and sustainable development. Nowadays, internal control has been widely used in management process of the modern enterprises, but for the Chinese small and medium-sized enterprises (SMEs), the internal control is not well-improved, the problems includes:the internal control system has not yet been established, managers do not pay enough attention to internal control, internal control and risk management disjointed, and so on. In fact, SMEs not only occupy more than98%of the total number of enterprises in China, but also play a very important role in employment, innovation and economic development in our country. Therefore, the study on internal control of SMEs, especially combined with risk management, has practical significance.Affected by operating characteristics, firm size and financial strength, SMEs have higher requirements about the effectiveness and operability of internal control. At the present time, the mainly researches of internal control of SMEs start from the five elements of COSO internal control framework, the internal environment, risk assessment, control activities, information and communication, monitoring, although these researches show a certain degree of risk management consciousness, but it can not meet the need of SMEs.Based on the above reasons, after the review of literature and theories of internal control and risk management, this article put forward a set of internal control system based on risk management, by recognizing and analyzing the internal and external risk points, SMEs can set up the corresponding control points, and build up a set of internal control system which is different from specific development stage, specific industry and specific enterprise. In addition, the author takes Y company for an example and finally gives some advice to the construction of internal control system of SMEs.This article includes the following six parts: The first part:Introduction. Starting from the research purpose and research significance, the author points out the research ideas and research methods of this paper, and makes a brief introduction of the content.The second part:Literature review and theories overview. The author summarizes the internal control literature at home and abroad, and systematically reviewed the connotation, research process of internal control and risk management theories and the relationship between them. This part laid a theoretical foundation for the later writing.The third part:Analysis of the internal control problems and causes of SMEs in our country. On the basis of the analysis of characteristics of SMEs, the author points out the problems and causes of the internal control from five aspects: internal environment, risk assessment, control activities, information and communication and internal supervision.The fourth part:The construction of internal control system of SMEs based on risk management. In this chapter, the construction of internal control system discussed. On the basis of analyzing the internal and external risk faced by SMEs, the author puts forward the ideas and principles of the construction, and the five construction steps:enterprise analysis, strategic analysis, risk points and control points, the formation of the internal control system, internal control implementation and adjustment.The fifth part:Case analysis. The author makes a research about company Y, and take the construction of internal control system for an example to prove that the internal control system mentioned above is feasible, and finally make some improvement suggestions of its internal control.Sixth part:Conclusion and prospect. The author puts forward some suggestions about the construction of internal control of the SMEs in China, and points out the shortage of this study and future research directions.Main contribution of this article is to provide a new train of though about helping SMEs establish internal control system, which can better reflect the internal control system combining with risk identification and management, hope the system can be set up to help SMEs build up their own scientific internal control system.