A Research On Governance Auditing Of Listed Companies In China

Continuous cases of corporate governance failure have urged people to study andseek for higher quality corporate governance. The alarming and regular occurrence offinancial fraud, bankruptcy has always accompanied with some similar questions, likewhy board of directors could not stop this? why auditors could not or even whyregulators could not? The public hope that the audit can take the initiative to strengthenits importance in corporate governance. Furthermore, the legislative department,security regulators, related occupation groups and research institutions has promoted tostrengthen relevant laws, regulations, rules and other regulatory. The legal environmenthas strengthened the responsibility of public corporation directors and seniormanagement. These laws and regulations of corporate governance to strengthen theaudit of its legal status and regulatory responsibilities, have set up a new stage forauditing, making it under the spotlight of the perfection of corporate governance.To fulfill the public requirements on principal-agent responsibility, audit scope hasbeen further expanded to entrust the governance responsibilities, namely, to confirm theeffectiveness of corporate governance. Therefore the new concept of governanceauditing has come up. Governance auditing is based on the current audit deficiencies togive full play to the audit governance function, to supervise and control the governanceperformance of the entrusted responsibility on corporate governance, and to improvecorporate governance and its performance.The main contribution of this paper lies in:(1) study and analysis auditing from theinstitutional change theory, the principal-agent theory and corporate governance theory,and on this basis build the framework of governance auditing from five perspectives,connotation, subject, object, audit scope and reporting relationships and the approachrespectively.(2) describe and analysis the current situation of implementation ofgovernance auditing on listed companies in China first. Then use the mothod ofdescriptive statistical analysis, correlation analysis and linear regression analysis toanalysis the relation among governance auditing, corporate earnings management andcorporate governance.(3) choose China Minsheng Bank as a case study from the angleof internal governance auditing. Firstly, introduce the background and the overallsituation of China Minsheng Bank, examines the development process of the internal governance audit, and analysis the implementation of internal governance audit ofChina Minsheng Bank in details, finally contrast China Minsheng Bank with thegovernance auditing framework.Research findings show that:(1) the results show that the better corporategovernance is, the higher the quality of audit. When the independent auditors implementexternal governance auditing, before the formulation and implementation of auditprocedures, there is need for the evaluation and analysis on the company’s overallgovernance. Therefore, the evaluation of corporate governance into the governanceauditing approach is meaningful.(2) establishment of governance auditing conceptframework is the basic way to carry out governance auditing research. Especially in thefinancial sector, the establishment of governance auditing concept framework caneffectively avoid internal operational risk and respond to external financial market.(3)governance auditing is still in the preliminary stage of practice. The implementation ofcorporation governance auditing is mainly concentrated in the internal audit institutionsof a monitoring and evaluation of corporate governance, however, external independentaudit has no significant intervention.(4) The implementation of governance auditing isbeneficial to reduce the level of earnings management, improve the level of corporategovernance and corporate performance. Governance auditing can perform effectivesupervision, to guard against the risk management, to alleviate the agency problem, andto improve enterprise operating environment.The Enlightenment of the research is that: at present, some listing Corporation inChina has emerged certain characteristics of governance auditing, and governanceauditing is the future direction of auditing development. But we need to carry out stageby stage on accelerating the development trend. The further implementation ofgovernance auditing need to innovate system, and to strengthen construction of internaland external mechanism. First, establish the concept of top level supervision, and carryout effective governance audit. The company should establish the concept of corporategovernance auditing, strengthen the development and application of governanceauditing, so that governance auditing can effectively improve the level of corporategovernance and enterprise value. Secondly, ensure the independence and authority ofgovernance auditing. To ensure the independence and authority of governance auditing,on the one hand, we can depend on the external governance auditing department. On theother hand, we need to raise the report level for the internal governance auditingdepartment. Thirdly, construct a reasonable and comprehensive system of governance auditing. The basic conceptual framework constructed in this paper does not involvesystem design and more specific audit standards. Therefore, further research ofgovernance auditing need to concentrated on above mentioned parts so as to provide atheoretical framework for developing effective practice of governance auditing.Fourthly, external supervision departments should strengthen the legal environmentconstruction, and strengthening the external control is the direct impetus of governanceauditing.