Research On The Internal Audit’s Affection On The Mechanism And Methods Of Enterprises’ Value Adding

August 22 nd, 2013, China Institute of Internal Audit announced the reversed Principle of China Internal Audit, in which the definition of internal audit becoming nearly same of the global definition about internal control. It considers that internal audit is an independent and objective confirming and consulting activities, which uses the systematic and normative way to review and comment the organization’s conducting activities, internal control and risk management’s appropriateness and effectiveness, in order to achieve the organization’s goals which including adding value to the entity.According to the latest definition about internal audit, which is announced by The Institute of Internal Auditors, Internal auditor is a comprehensive audit that combined the risk management, internal control and corporate governance. One of internal audit’s functions, which are adding the enterprise’s value, has been covered into its definition for the first time. This move indicates that internal audit has a high level position these days. As a management mechanism, it has to look at the big picture, which is the whole enterprise’s interest, to improve the operating effectiveness and help to add the enterprises’ value.We could see that the core of the modern internal audit has transformed from preventing the misstatement to adding the enterprise’s value. This transformation gives a deeper meaning to internal audit, accelerate the process of transformation of internal audit’s professional role. It also provide a valuable chance to internal auditors to occupy the important position in every entities while provide hard challenges at the same time.Internal audit is an important way to improve an entity’s operation, it’s getting mature in China. But people still have doubts about whether it’s adding value to the entity or adding cost to the entity. Many scholars hold the view that as a part of corporate governance, internal audit adding value to the entity through its major function, which includes consulting and evaluating. Internal audit evaluates the entity’s financial records, operation process and management methods. The function of consulting is that according its understanding about the whole entity, internal audit uses its professional ability to give advises about operation management, risk management and internal control etc. These advises aims to optimize the operation process and improve the effectiveness of produce and eventually adding value to the entity. While most people from the entities think that internal audit will add cost to the whole entity. As the internal audit in China is not as mature as it in western country, there is a double zone between the internal audit’s work and external audit’s work. Internal audit’s function of consulting cannotworked that smooth, which means it cannot add value to the entities and will add cost to the entities. Both of them has their reasonable ideas, they just think it in different ways. This paper will deeply research internal audit’s value added function to the entities in a more reasonable way which is combine the theory and practice.This paper is a normative research. Firstly it clarify the definition and meaning about the adding value function of internal audit, which includes the fiduciary duty theory, the development history of internal audit and the meaning of adding value; Secondly this paper make a deep research on the internal audit’s affection on the mechanism and methods of enterprise’s valuation increment. And the methods covers improve the internal control system, take participate in the corporate governance and monitor the process of the risk management. And then, this paper pointed out the problems of the internal audit and the causes of this problems. There is a case study in this part which aim to clarify the current problems of internal audit in our country. At last, the paper made a lot of advises regarding the current problems about the internal audit.