Research On The Relationship Between Internal Control Defects And Company Performance

In recent years, there have been a series of internal control problems which lead to the failure of enterprise management in recent years. When the enterprise internal control problems, may bring huge losses to the enterprise or even bankruptcy. With the strengthening of national supervision, many companies gradually began to establish the internal control functions of the body, but those responsible for internal audit department usually just a decoration, and did not play the role of the internal control, build a scientific and rational internal control system still need to get the attention of the enterprise internal top managers and leaders. If the company’s memory in a certain degree of internal control defects, it is bound to give the company’s normal operation and management to bring a negative impact, but also lead to a significant decline in the level of corporate performance.Since entering the 21st century, from Enron in America to domestic of China Aviation Oil (Singapore) incident to the Sanlu milk powder incident shocked the country, these events occurred in the final analysis are because of the corporate governance mechanism is not perfect, the enterprise internal control exist defects. For enterprise internal control deficiencies launched the significance of research activities gradually aroused the attention of all walks of life both at home and abroad related professionals and government regulators, in 2002 the United States government enacted "Sarbanes Oxley Act", reflecting the countries to adopt laws and regulations to make up for the deficiency existed in the market economy. Although at the present stage of our country market economy is a kind of incomplete state. However, enterprise system in the reform and innovation of a link will have suffered varying degrees of impact due to different historical legacy factors. In order to seize the good opportunities for development and to adapt to the development trend of the world economic integration, the relevant departments of the Chinese government since 2006 successively promulgated a series of related policies and documents and internal control, especially in Shanghai and Shenzhen Stock Exchange issued by the listed company internal control guidelines for the, for the implementation of the enterprise internal control standards "provides a good support. To attract the attention of the company’s management, encourage enterprises to further build a relatively perfect internal management system, this paper will further according to company internal control deficiencies and the level of corporate performance in the presence of correlation of deep and thorough the research, to ensure that the enterprises to quickly stabilize healthy development.The current research on the defects of the internal control, some scholars from the perspective of norms are also from the empirical point of view to explore. From the normative level, it is mainly about the specific standards of internal control, the main framework of the study, and the internal control of the impact of the disclosure of the factors and economic consequences are mainly from the empirical point of view. Through the review of the literature found that exist as to whether the determination of internal control deficiencies, mostly to internal control self assessment report, there are also some scholars from the point view of sign recognition of that financial reporting is change, whether the occurrence of illegal violations and audit opinion type, and then determine the enterprise whether there is a corresponding internal control deficiencies. However, I am through to 2014 Shanghai A-share listed companies disclosed internal control audit report statistics, after finishing the discovery, only a few part of the business of the internal audit report was issued by the non-standard audit opinion. Therefore, there is no the signs as the criteria.To sum up, this paper will from the point of view of sign recognition by 2014 Shanghai A-share listed companies as the research sample, enterprises will be whether there is a violations and the content of the financial report is whether there is a restatement of the question as the proxy variable of internal control deficiencies. Enterprise performance is from the aspect of finance further elaborated, first of all to selected eight single financial index were principal component analysis and factor analysis extract the common factor, then the common factor score, finally comes to the conclusion that reflected the company’s comprehensive financial index can be as the proxy variable of corporate performance. Then use regression analysis and correlation analysis methods to further analyze and study the correlation between internal control defects and the performance level.Through the specific research activities can be found, if on a variety of other factors for effective control, with and without the presence of internal control defects compared to the company, there are internal control deficiencies in the company operating performance is lower. That is to say, the quality of internal control and the level of the company’s performance is positively correlated. Therefore, in order to make the enterprise can get a relatively good business environment, to avoid related risks that may be encountered, stable, continue to improve the performance level of the enterprise, the enterprise managers should be according to the characteristics of their own enterprises establish compliance with internal control system, and make it really play the effectiveness and to companies in the changeable and complex business environment and market environment better and faster development to provide reliable and comprehensive security.