Research On Internal Control Defects Of Listed Commercial Banks In China

A sound system of internal control is a "stabilizer" that can make commercial banks develop healthily in contemporary society, and the construction level of the internal control system determines the core competitiveness of the banks in their own industry.The internal control of a bank is the key to improve the bank core competence and to keep the bank stable operation. In recent years, the listed banks in China take a series of principles and measures on the construction of the internal control. The system of internal control of each bank is increasingly perfecting, meanwhile the internal control ability is also improving. However, there are still some financial cases. It reflects that the internal control of Chinese bank is weakness and reveal that there are still some unsafe factors in the internal control of Chinese banks. These risks shall directly threaten the stability of Chinese bank system even the whole financial system and economic order. Therefor, it is necessary for the rapid development and healthy operation of bank to promptly recognize and rectify the defect existing in the bank internal control. At this stage, because the policy scope and content are limited, and the bank management and operator have limited theoretical knowledge and skill, even some related regulators and supervision departments do not management in place, the weakness of bank internal control could not be recognized effectively, which seriously threaten the stable operation of bank. So it requires that when some officers and organizations of bank are evaluating the internal control, firstly, on the level of theory, they should clearly and effectively distinguish the internal weakness, secondly, on the level of practice, due to the large scale and complex system of listed banks, during the process of evaluating, some weakness may be not recognized effectively. Therefor, the work of special examination should be strengthened. Moreover, on the level of monitoring, some listed bank has found that there are some weakness but they are not willing to disclose it due to the effect of “signal transmission”. So the supervision departments should strengthen the power of supervision to the bank internal control and strictly examine the design and operation of bank internal control system. In this paper, it points out that the listed bank evaluate and examine the internal control in order to recognize its weakness so as to take effective measure to correct and constantly perfect the system bank internal control system. If analyzing the weakness of internal control from the perspective of design and operation, the managers shall make sure on which step the weakness occur so as to provide some direct and useful information to constantly improve the internal control.The commercial bank has the features of high risk and high yield, and its govern goal and govern structure are special, so its internal control is more important than other enterprises. The perfection of its internal control design and operation is related to its healthy development as well as the safety and stability of whole financial system. In May 2010, In order to fully develop the enterprise internal control level, Chinese government released “Guidelines of internal control and supporting on Enterprise”. “supporting guideline”including“Guidelines of internal control and application on Enterprise”,“Guidelines of internal control and evaluation on Enterprise” and “Guidelines of internal control and audit on Enterprise”. This regulation and “Basic Standards for Enterprise Internal Control” which released in 2008 form an integrated internal control system. The release of “Guidelines of internal control and supporting on Enterprise” shall improve the imperfect situation of internal control system and make a standard of internal control report and disclosure, which make the internal report comparable and improve the use of it. In 2012, every listed bank applies the “Guidelines of internal control and supporting on Enterprise”, which is an unprecedented revolution of internal control. It strengthen the internal control system at all levels. In this paper, on the basis of “Guidelines of internal control and application on Enterprise”,“Guidelines of internal control and evaluation on Enterprise” and “Basic Standards for Enterprise Internal Control”, it mainly analyzes the current internal control situation of listed banks in China, and shows that there are some weakness on the design and operation of internal control. The five factors are entry point which are control environment, risk assessment, control activity, information and communication, internal supervision. Based on this outline, it will analyze the situation of internal control of the 16 listed banks in detail and analyzed the causes of its defects and put forward some effective measure to improve the bank internal control. So that it can contribute modest strength to improve the internal control system of listed banks in China.It is significant for the listed bank to meet the require of “Guidelines of internal control and application on Enterprise”,“Guidelines of internal control and evaluation on Enterprise” and “Basic Standards for Enterprise Internal Control” and perfect its internal control, no matter on the theory or reality. At the same time, it is very important for the whole banking industry of China to develop healthily and stably.