Research On The Influence Of Internal Control Environment On Business Performance Of F Home Appliances Company

With the development of global economy and the intensification of market competition, there were cases of failure of internal control resulting in the failure of the business. To solve the operational crisis caused by the failure of internal control in enterprises is a hot topic in both the academic field and in practice. The internal control environment is the basis of internal control; hence, more attention has been paid to an enterprise internal control environment than the enterprise management performance. The research on the influence of internal control environment on business performance has both theoretical and practical significance.In this paper, a large household electrical appliance enterprise in China, Company F, has been chosen as the case study. The research is along on two main lines- internal control environment and management performance. For the area on internal control environment, integrity and professional ethics, Board of Directors or Audit Committee, management operating concept and style, organizational structure, rights and responsibilities, human resources policies and practice, would form the six aspects of the research. The aim is to discover the deficiencies and shortcomings of Company F internal control environment. For the other four aspects, i.e., profitability, asset quality, risk of bad debts and business growth, would be studied under management/business performance. Through the research on the internal control environment and business performance of Company F, the influence of internal control environment of Company F on the business performance is analyzed, with the aim on uncovering the deficiencies in the internal control environment impact on the business performance. Recommendations on how to improve the internal control environment and improve the operation performance of Company F would also be suggested.Through the study of the internal control environment and business performance of Company F from 2006 to 2013, this paper draws the conclusion that Company F internal control environment and business performance are positively correlated. Changes in the internal control environment of Company F have resulted in the lagged on the business performance. Individual business performance indicators could be due to the special attention of management and other reasons and this resulted in a brief departure from the changes of direction of the internal control environment, but it will not change the overall trend of the business performance. The discoveries would provide a reference for further study by the academic on the relationship between the internal control environment and the operating performance of the enterprise. On the other hand, it also has practical significance for enterprises in instituting a strong internal control environment.