A Research On The Internal Audit Of Financial Mixed Operation Group

With the rising of financial integration and liberalization within the world, the creation of financial instrument, the development of financial market, and the loosening limitation to the capital, financial mixed operation has become a common trend in the process of globalization and financial integration. Financial mixed operation group not only has the risk characteristics of the general financial institutions, but also might have bigger systemic risks for the economics. Because of its huge size, the complex internal structure and cross-business operation model, there are special and complicated risk exposure in it, such as the function of risk leverage effect, the contagion effect, the interest conflicts, and the transfer of benefits. At present, the separate supervision. cannot be effective enough to monitor and manage financial mixed operation groups, so that the vacuum of supervising appears. Guided by the modern internal auditing theory and risk-based internal audit theory, the internal audit should be a facilitating role in improving the level of the corporate governance, the internal controls and the risk management. The internal audit of financial mixed operation group also must be set for the corporate governance, internal controls and risk management of the whole group, and contribute to protect the security of China’s financial sector stability.In this thesis, based on the theory of risk oriented internal audit, by using both theoretical research and case analysis, it mainly focuses on the necessity of the Chinese internal audit of financial mixed operation groups, supervision model and risk status of Chinese financial mixed operation groups. Combined with the potential functions of the internal audit in the stage of risk oriented internal audit, it found an operation mode of the internal audit department. First, establish an internal audit department belonging to the Audit Committee, named "the organization structure of dual leadership", which means that on one side, the business activities will be reported to the audit committee, and on the other side, it reports to the general manager. Meanwhile integrate audit resources of the group and branches, and then it can operate with more independence. Second, establish the comprehensive financial personnel with professional competence. Only the internal audit staff with diversity of knowledge and skills can meet the needs in the diverse business of the group, and it can discover the complex and imperceptible problems in the mixed operation. For the third, internal audit must be guided by risk-based internal audit methodology to do the daily work of the internal audit, launch more innovative high-risk areas for audit, look for more valuable items with high-risk, and raise the level of the Group’s risk management. Finally, the internal audit should focus on the specific risk in financial mixed operation, to prevent the new unknown and uncontrolled risk from harming the company and even the financial industry.The PA Group, which integrates the insurance, banking, investment and other financial business into a composited financial services group, is the object of the case analysis of the financial internal audit. The author of this thesis describes the status of the financial internal audit first, analyzes the existing problems in the internal PA Group, and proposes some optimization recommendations. The department of audit and supervision in PA Group has played such a positive role in the process of managing, recommending, constructing the independence and designing the risk-oriented innovative project that it can be also learned and drawn by the other same type of companies. However, there are still numbers of problems in the supervision of PA Group, which should be solved by the improvement and optimization in the internal mechanism of audit and supervision, personnel management systems, internal audit quality, communication with the operating divisions and so on.