The Study On The Correlations Of The Listed Companies’Internal Control And Irregularities

In order to standardize the order of the capital market, to prevent a second event of Enron, the U.S. Congress enacted the Sarbanes-Oxley Act in2002. The bill marks the introduction of internal controls in the form of a clear legal restriction and officially became a yardstick to judge the behavior of corporate management and ruler. Section404of the Act implemented in2004, the terms of the mandatory requirement for listed companies to disclose internal control information for executives of listed companies in the United States brought a huge blow, straightened and played a huge role in oversight.In June2006, the Shanghai Stock Exchange issued a "Shanghai Stock Exchange Listed Companies’ Internal Control Guidelines", then, the Shenzhen Stock Exchange issued a "Shenzhen Stock Exchange Listed Companies’Internal Control Guidelines", Since then, China’s securities market began to regulate the internal control documents. In2007, in order to guard against financial risks which is similar to the subprime crisis that affects the stability and development of China’s economy, regulators have in the years after the promulgation of the "Basic Standard for Enterprise Internal Control" and its accompanying "Internal Control Guidelines". These normative documents issued by marking the initial formation of the system of internal control systems.However, we found that, although regulators issued a series of laws’ provisions on internal control of listed companies, the actual effect of the implementation of the provisions of these regulations are far short of expectations, listed companies’ violations are happening all the time, and these violations occurred brought a large negative impact. So we have to repeatedly question the phenomenon that whether the construction of the internal control system plays a role in suppressing violations in the end, whether the relationships indeed exist between the internal control and the public listed companies’irregularities. With questions, the author dividedly analyzed the theory and the data so as to reveal the relationships between the internal control and the violations listed.The first chapter is the introduction. The total for the full text is from this chapter which introduces the research background and significance of internal controls, then, this article presented the research methods used herein, the research framework and the expected contribution of this paper are described as well in the end.The second chapter is a literature review and abroad. This chapter elaborated the four parts which include the internal control and corporate governance research literature, the literature of internal control information disclosure, the documentation and evaluation of internal controls and internal control violations enterprise research literature in a detailed exposition, and the author found that the number of the issues research of irregularities associated with internal control in the country is still relatively small, there is some research space.The third chapter is a sort of discussion of the internal control concepts and theories.In this section, the author expounded on the principal-agent theory, signaling theory, contingency theory, asymmetric information theory, new institutional economics theory, based on the conceptual framework for internal control which was built by the implication summary of the internal controls, internal control information disclosure, internal control deficiencies, irregularities in the construction at the same time.Chapter four is the study design section. The author of this chapter in accordance with the foregoing exposition of the theory put forward in this paper three assumptions, which assumes one:the presence or absence of internal control deficiencies and irregularities occur if there is a correlation, assuming two:the number of internal control deficiencies and irregularities occur if there is a correlation and hypothetical three:the occurrence of internal control deficiencies and penalties for non-compliance exists whether or not there is a correlation between these three relationships, while the description of the data selection process, the variables are defined, and finally build a model.The fifth chapter is empirical section. In this chapter, the author processed the collected data in accordance with the definition of variables and model built on the descriptive statistics, correlation analysis, multi-collinearity test and regression analysis. After verifying the results, we found that, the empirical results of the assumption one and two verified these two assumptions, but the previous validation results of the assumption three show the departure from the expected assumptions. I eventually concluded that:to punish breaches of listed companies will not only not reduce the company’s internal control deficiencies listed, but will probably increase its generating internal the possibility of defects, indicating that penalties for correcting the role of internal control is limited, and may even be negative.The sixth chapter is the conclusion chapter. The author of this chapter summarized the full text, and came to a conclusion:internal control deficiencies have a significant impact on the enterprises which have irregularities; fewer deficiencies in internal control and the high quality of the internal control can suppress violations of companies to some extent to help enterprises to achieve business objectives; however, after violations occur, the penalties listed companies cannot raise people’s expectations so as to reduce the possibility of defects within the listed company’s control, but also on the quality of the internal control of listed companies little help. Meanwhile, the author of the construction of internal control put forward their proposals and views that the laws and regulations for the capital market should be dynamic. Regulators will need to turn to the prior supervision, post-supervision, supervision and oversights throughout the life of things in business activities, thus improving the ability to control the actual regulatory authorities; capital market regulatory authorities in addition to the existing regulations should be introduced as soon as more standardized, specific, the actual regulatory documents and supporting regulatory approaches. In addition, I also proposed the construction of five steps to improve its internal control measures. Finally, the paper points out the shortcomings and areas for improvement in this study, and the research prospects.The contribution of this article is based on the phenomenon that after the introduction of legislation the market environment in the country still has not improved the quality, starting from the point of view of internal controls, using the normative discourse and empirical method of combining with the actual data model and assumptions to explain why the introduction of statutory provisions do not play the desired effect. It is to some extent unique in our existing literature. Therefore, the study of this paper has kind of certain timeliness, also can be expected to compensate for the lack of existing research to a certain extent, and has some theoretical and practical significance. But there are also shortcomings in this article. Variable data used in the text due to an excessive number, there may be omissions or artificially inflated in the collection and collation, which may affect the empirical results; the model used in this paper is relatively simple, there are some variables which are not used in this verification, and it may will reduce the article’s persuasion, in addition, resulting from the author’s limited theoretical grasp, less actual experience, the analysis of the test results is more one-sided, the phenomenon is not able to explain the reasons for the formation of the essence.