Study On Internal Control Of Local Financial Based On Risk Managemnet

Since January 1,2014, with the document that norm of internal control for the ministry of finance issued in 2012 for guidance, administrative institutions begin to implement the internal control system fully, it reflects that our government attaches great importance to the building of internal control in administrative institutions, as well as working to improve the internal management and strengthening the determination for anti-corruption. The building of the internal control undoubtedly will be good for the administrative institutions to identify, early warning and control all kinds of risks, including economic risk, management risk and technical risk. Accordingly, the ministry of finance, one of the most important administrative institutions, to build their own local internal control system will become inevitable.This study is to provide a theoretical basis for the development of the local financial department for the internal control system, focus on the developing of internal control, local financial risk identification and assessment, local financial internal control system’s optimization and so on. Firstly, this study analysis the differences and relations between internal control and risk management and point out that we can not simply consider their relationship is inclusion relation, other more, we should have strategic vision on building of local financial internal control system. Secondly, this study elaborates the local financial internal control ideology from internal control’s concept, objectives, principles, assumptions and internal elements: five goals was noted; designed internal control principles at designing and implementation; control entity, multiple human nature, no collusion and controllability as the four assumptions. In the above basis, drawing lesson from the COSO internal controls five elements, this study built suitable internal control elements:internal environment, risk identification and assessment, control activities, information and communication and internal oversight, further, relating to the local financial department’s own characteristic, we sent new meaning to the elements, fully integrated with "public", "fairness" and "efficiency" and other value factors. Finally, we specific describe the business management processes from business objective, risk node, risk control and business process diagram, as fiscal budget business module, funds management and government procurement management for example.In order to effectively identify, screen, assess the key risk points of local financial risk, this study introduced a hierarchical holographic modeling framework which has a strict logical, and risk filtering, rating and management (FRFM) method, tried to enable them to be able to be applied in the local financial risk management. The main advantage of the framework is that it can identify from breadth and depth the source of a complex system of risk. In this paper, we built the local financial HHM model with nine financial sectors to show risk scenarios, called risk sources. Also, as to effectively lock key risks, we propose a FRFM method which is suitable for the local financial sector, five processes and qualitative and quantitative method were included. We hope all of this will have great useful for filtering, grading of the financial risk scenarios.To the last, the capability maturity was introduced to my study. I developed different levels and standards of maturity capability and so on and our estimating focused on the main business parts, combined with the five elements. For the lower graders, we also proposed a improved method procedure of internal control capabilities.