The Research On Cognizance Standard Of The Major Defects In Internal Control

In accordance with internal control regulations, the68companies, which were listedinside China and abroad simultaneously in2011, must audited the internal control insidethemselves during2011and issued the audit reports by CPA; besides, this system ofinternal control regulation should be fully extended to all the companies listed in MainBoard in Shanghai Stock Exchange and Shenzhen Stock Exchange. However, withregard to the condition of enforcing the internal control regulations, it isn’t implementedeffectively. The major defects in the internal control of the listed companies are rarelydisclosed this situation is not due to that the internal control construction of China’slisted companies has already been a high level, but is due to that, to a large extent, Chinahas not established the criteria for recognizing the major defects in the internal control,thus there being operational difficulties in judging the major defects during internalcontrol audit. Therefore, it’s of great necessity to conduct an in-depth research on thecriteria for recognizing the major defects of internal control in order to enhance thequality of disclosure of internal control information and guarantee the effectiveenforcement of the basic regulations of internal control.This thesis mainly analyzes the existing problems and current situations inrecognizing the major defects of internal control in China; moreover, with the aim atbreaking through the current predicament of principle-style regulations of criteria forrecognizing the major defects in internal control, this thesis puts forward the innovativePrinciples-plus-Rules criteria for recognizing the major defects. Constructed on the threelayers of internal control, i.e. the scope, control objectives and economic consequencesin principles, the major defects are defined on the basis that the scope of internal controlevaluation is specified; then, this thesis studies from the five elements of internal controlregulations in rules, and sets up some subdirectories; finally, the standard system ofrecognizing the major defects, which is both principle-orientated and rule-orientated, isestablished, and it can offer guidance for recognizing the major defects in internalcontrol evaluation. Lastly, this thesis conducts concrete analysis on the Great NorthernWilderness, and recognizes the internal control defects existing in it during2012byemploying the Principles-plus-Rules criteria for recognizing the major defects.Compared with the original recognition criteria, the Principles-plus-Rules criteria forrecognizing the major defects is better at highlighting the key points and can be enforced more easily; besides, this thesis puts forward some suggestions related to the recognitionof the major defects in internal control for its further improvement.