Research In Relationship Between Effectiveness Of Internal Control And Financial Performance

From the beginning of the twenty-first century, a series of financial fraud cases occurred, which had not only caused immeasurable losses and the dark financial times, but also become a catalyst for the development of internal control. Although the development of internal control theory in China falls behind the western developed countries, China at the forefront of the world in internal control standard practice at the beginning of this century. After Guidelines on Internal Control of Listed Companies on Shenzhen Stock Exchange was issued by Shenzhen Stock Exchange in September 2006, a series of internal control laws and regulations related to the internal control appeared. According to internal control basic norms of regulations, and certified public accountants are required to issue audit reports on financial reporting internal control effectiveness.In such an environment, a series of questions come into the author’s mind, such as whether the implementation of the internal control is able to help enterprises to avoid risks, improve operation efficiency, enhance the quality of assets, improve financial performance and so on. With an intellectual curiosity, an internal control effectiveness and financial performance correlation study is launched, hoping that its result can provide some help for the development of regional economy as well as the future research.In this paper, the financial data of 800 Jiangsu Province A-share companies listed on the main board are selected to conduct internal control effectiveness and financial performance related research. The data range is over four years(i.e. from internal control report mandatory disclosure of 2011-2014). In order to avoid the manipulated the results of the analysis, principal component analysis method is adopted to select the variables relating to accounting index. Correlation and regression analysis are also used in this paper. The results show that internal control effectiveness and financial performance of Jiangsu Province A-share companies was significantly positive correlated. According to this, corresponding measures and suggestions are put forward from different aspects of internal control. Generally speaking, the effectiveness of internal control is related to the performance of the financial performance of enterprises, and it hopes that this will become the driving force for the implementation of internal control of the non-listed company.