A Study On The Effect Of Internal Audit Quality On Corporate Competitiveness

With the booming development of economy, the environment of enterprise is changing very fast, especially on increasing complexity and uncertainty. Financial scandals happened recently revealed the insufficiencies of internal supervision in enterprise management as well as the flaws in the governance of company. Internal audit, a core method for the owner of enterprise to supervise the manager’s economic responsibility performance and an essential way to monitor the enterprise, is now being concerned more and more. Corporate competitiveness, meanwhile, has been a hot issue across the world for quite a long time. To survive in the drastic market competition, enterprise should improve its own competitiveness.The paper does a literature review of current study on internal audit and corporate competitiveness and comments on it, then illustrates the related theory of internal audit and corporate competitiveness sequentially and makes a specific analysis about the effect of internal audit quality on corporate competitiveness. Depending on former content, the paper raises an assumption that internal audit quality has a positive correlation with corporate competitiveness and represents the latter in terms of 5 respects:profitability; operation capacity; solvency; growth capacity; market controlling ability. Then the paper raises 5 sub-assumptions that internal audit quality has a positive correlation with above 5 factors. To verify these assumptions, a multi linear regression model is built and data of listed manufacturing companies on Shenzhen A-share main board market from 2010 to 2012 is collected and dealt with. After that, the paper empirically analyzes the correlation between internal audit quality and corporate competitiveness, and comes to a conclusion that internal audit quality generally has a positive correlation with corporate competitiveness, which means the higher internal audit quality is, the stronger competitiveness the corporate will have. Finally, suggestions to improve internal audit quality are proposed.Based on the studies we have, scholars always focus on internal audit and corporate competitiveness respectively, research combining these 2 factors and analyzing the relationship between them is lacked, no matter in theoretical or empirical way. The possible innovations of the paper could be as below:(1) to combine these two factors, internal audit and corporate competitiveness, using both normative and empirical research techniques to find out the specific effect of internal audit quality on corporate competitiveness as well as provide the study logic of this issue for the future; (2) to claim that the external monitoring institution should standardize the disclosure format of internal audit and enhance the mandatory disclosure to solve the practical problems in collecting data concerning internal audit.