Research On Internal Control Optimization For FAM Company Limited

FAM Co.,Ltd.is a steel machining enterprise jointly funded by Anshan Iron and Steel Co.,Ltd.,FAW Jie Fang Co.,Ltd.and Japanese Mitsui Corporation.With the change of economic environment and fluctuation of steel price,the external management risk become higher for FAM Co.,Ltd.In order to make the enterprise adapt to those external changes and develop towards their strategic goals,a well-functioning internal control system is particularly important.FAM Co.,Ltd.is set as an example to analyze current situations and problems of internal control,and the operation mechanism of various elements in the internal control system is analyzed based on the COSO internal control framework,which help to put forwards the optimization methods of internal control finally for FAM Co.,Ltd.This paper is divided into four parts.The first part introduces the history of internal control theory development and the research results for Chinese scholars on this field.The second part introduces the characteristics of the steel machining industry and the internal control situations of FAM Co.,Ltd.The third part puts forward the problems of internal control management of FAM Co.,Ltd.based on concrete cases,and the reasons of internal control problems for FAM Co.,Ltd.are analyzed in the view of the interaction mechanism of five elements of internal control.The fourth part,based on the five elements of internal control theory,and combined with the industry characteristics of FAM Co.,Ltd.,internal control optimization ideas are sorted out,and specific optimization measures for specific problems are put forward.The reasons for the problems of internal control are summarized through the study of internal control optimization of FAM Co.,Ltd.Initially,there is a deviation in senior managers’ understanding of internal control theory,who always thinkinternal control is the formulation and implementation of system and process,and overlook the construction of control environment,such as unreasonable corporate structure design,imperfect human resources policy and lack of incentive mechanism.Furthermore,in the process of designing control program,the risk identification and analysis are neglected,and the key control points are not grasped,which make the control process not play a preventive role.Additionally,ignoring the effectiveness of information transmission and communication for the senior managers,which are reflected in the lack of information resources within the company,inefficient information transmission between employees and departments,and shortages of feedback mechanism in control activities.Finally,senior managers ignore the continuous improvement of internal control.Internal control is a dynamic process,and there is no perfect system forever.When the external environment and the operating conditions of the company change,we should find the defects of internal control through internal supervision and improve them to make the internal control system run effectively.Therefore,senior managers of FAM Co.,Ltd.should attach importance to build control environment though risk control,and improve the efficiency of information transmission through the implementation of control procedures,and optimize the internal control system constantly,so that the internal control system can operate effectively.Like most small and medium-sized enterprises in China,FAM Co.,Ltd.have outstanding features,such as fewer staff,concentrated shareholding,small-scale assets,limited production,and poor risk resistance.Providing help and inspiration to the small and medium-sized enterprises in China for construction and optimization of internal control system of through the study of internal control optimization of FAM Co.,Ltd.is the purpose for the author.