Research On Problems In Internal Control Audit Of Listed Companies

With the development of economy, the listed company won the unprecedentedopportunities for development, meanwhile the listed company financial fraud case occurredfrequently, which makes investors realize that besides the audit of financial statements oflisted companies, they also need to deal with the internal control by taking "necessarymeasures". Enron and WorldCom financial fraud directly led to the "Sarbanes—Oxley act"(hereinafter referred to as the SOX). Article404of the SOX regulations requires listedcompanies to make self assessment on their internal control, at the same time, they shouldhire an accounting firm to audit the report of the self assessment. Internal control audit in ourcountry, also get rapid development, and relatively abundant theoretical basis plays animportant role in guiding the exercise of internal control audit in China.This paper took Shandong Xinhua Pharmaceutical co., LTD.(hereinafter referred to asXinhua Pharmaceutical) as an example in the case study and analysis on internal control audit,mainly considering that the Xinhua Pharmaceutical as a company listed both domestically andoverseas, it needs to meet the requirements of internal control audit from both markets, andthe stricter standards in overseas market shall have a bench-marking effect. And attentionsshall be paid on the root causes of the serious internal control defects of XinhuaPharmaceutical witnessed in the first year (2011) of compulsory internal control audit, Thispaper analyzed the procedure of internal control audit of Xinhua Pharmaceutical, andidentified the problems existed: failure in self assessment of internal control, defects in designand implementation of internal control system, failure in independent monitoring,incompetence of CPAs. Through Analysis, the paper regarded the causes of these problemsmainly were: inadequate supervision on internal control of listed companies, inadequateimportance attached on capacity building of CPAs, and then raised it’s suggestionscorrespondingly, hoping to provide ideas for the internal control audit practice in our country.The new thoughts lie in the suggestions the paper provided. The paper suggested theregulatory and supervisory department to set up an independent department or institution,randomly checking the internal control work of listed companies, punishing the rules breakers, formulating countermeasures, improving the regulations on construction and implementationof internal control of listed companies, urging the listed companies to exercise self checkingand correcting in internal control. The paper also proposed that to set CPAs assessment andmanagement committee and evaluation system as well as electric archives system for CPAs,encouraging CPAs to improve their capacity building imitatively.