Research On Financial Crisis Forecast With Internal Control

Till the end of 2014, stock markets of Shanghai and Shenzhen have 2592 listed companies with A stock market capitalization of 3711 million yuan, accounting for 58.3% of GDP. However, facing fierce market competition and complicated industry environment, how listed company reduces financial risks in daily operation and realizes its continuous operation has got much more attention of the managers.Financial forecast and internal control have become two effective methods for modern enterprises to prevent crisis.Nowadays, most writers are focus on the single side, the purpose of this essay is to study how effective the forecast precision of forecast model is when combine with internal control factors, by selecting 20 ST enterprises and 20 non-ST enterprises of A stock of stock markets of Shanghai and Shenzhen from 2013 to 2015. Whether enterprises are treated specially has two situations, so Logistic regression model is selected. During the period of selecting forecast index, not only traditional financial index is considered, but the function of internal control in enterprise operation is taken into consideration. This essay proposes ratio of independent directors, ratio of employees with college degree or above, whether contract dispute happens, whether financial restatement happens, whether internal control assessment report is revealed and whether internal audit report is revealed, which preliminarily establishes the index system of financial forecast.Before empirical research, firstly forecast index should be preliminarily screened, secondly factor analysis should be used to reduce the dimension of index variable and finally the logistics model that is based on traditional financial index is constructed by five main factors. With this basis, internal control variable construction forecast model is added. It is found out that the forecast precision of forecast model with internal control variable is 12.5% higher than the precision of forecast model with traditional financial index, which indicates that internal control index has certain enterprise financial crisis information that can complement with the crisis information contained in traditional financial index to improve the precision and timeliness of forecast.Finally, Yaxing Chemistry is taken as the case for case study, aiming to inspect the actual application effect of forecast model. With the analysis on forecast result, the forecast precision of forecast model based on traditional financial index is 76.6%, the forecast precision of forecast model added with internal control element is 96.6% and forecast precision rate is increased by 22.8%.With this above, we can understand that the forecast model based on financial index has certain forecast ability. Adding internal control index in financial forecast model has obvious effect on improving the model’s financial crisis forecast precision.