Correlation Research On Internal Control Defects And Corporate Performance

Both Enron Corp in the United States and China National Aviation Fuel(Singapore) in the domestic inrecent years, their causes are related to the imperfect mechanism of corporate governance and theinternal control defects. In2002, The United States passed the Sarbanes-Oxley Act, this showed thatgovernment must state the enforcement of laws and regulations to make up for the imperfection of marketeconomy. Although the economic system of our country is incomplete market economy, many problemsleft over by history are eroding the development of the company in the process of reform. In order to adaptto the times change and the development of international economy.In2006, China’s two stock markets alsoissued the guidelines for the internal control of listing Corporation. which is a prelude of the "enterpriseinternal control standard". Internal control is in the operation of the entire enterprise everywhere, not onlywith the corporate governance complement each other, and coexist with risk management. So, bothacademic and practical field attach great importance to this theme.The biggest problem of the internal control is the internal control defects, which not only makes theenterprise can not be normal operation, will make the business performance discount greatly. Theconstruction of the internal control is a long-term process, and it need the participation all the staff in theorganization. At present, the company’s existing shareholders, creditors and potential investors, are veryconcerned about the long-term development of the company, therefore, they are not only concerned aboutthe company’s financial statements, but also pay more attention to the internal control quality, thecompany earnings, the development ability and operation ability is sustainable or not.At present, the research on the internal control defects and corporate performance in China areconcentrated in the normative study, but the empirical research literatures is less than the former. Based onthe" enterprise internal control standard", this study will research the relationship between the internalcontrol defects and corporate performance by the Shanghai A shares as a sample of listing Corporationin2012.In this paper, financial report has corrected or revised, the types of audit opinions, and whether ornot the annual report of the existence of illegal acts as a proxy for the internal control defects,comprehensive financial index as the proxy variable of corporate performance. we want to verify therelationship between the defects of internal control and corporate performance by the correlation analysisand regression analysis. The results show that, compared with no internal control defects, anothercompanies performance is more worse.According to the empirical research of this paper, we found that the performance of the company isgood or bad, which the root cause is the internal control problems in the organization. Therefore, webelieves that if the company want to gain great development will need to get social recognition, and showthem the good internal control and significant corporate performance. So, to strengthen the construction ofinternal control, ensure the effective implementation of internal control, then the company can stand out inthe fierce competition environment.