Discussion On Internal Control Defects Of ST Pitu Issues

The goal of enterprise management is to maximize the value of enterprises and shareholders,and internal control undoubtedly plays a vital role in the enterprise management system.It is a management mechanism which is established to improve the operation efficiency of enterprises,reduce the principal-agent cost and eliminate improper behaviors such as waste,fraud and abuse of power.Effective internal control system plays an important role in the success of enterprises.However,in China's capital market,the failure of internal control results in financial problems of listed companies.In the case that the relevant regulations of A-share market are not strict enough,the management level of many listed companies only hold less than 20% of the shares of the company,but can easily control all the seats of directors through cross-shareholding and pyramidal shareholding,thus gaining the power to control the company.In this case,the actual controller of the company,just like the professional manager,is likely to sacrifice the rights of other shareholders to achieve the purpose of profit for himself.Major shareholders of listed companies often use their dominant position to consume resources of listed companies by various means and seek improper gains for themselves,which not only violates the principle of fair trading and infringes on the interests of minority shareholders who are relatively weak,but also destroys the reputation of the company.Meanwhile,it is not good to the health of the securities market.The paper shall take ST Pitu company as an example,on the basis of internal control,using the principal-agent theory,information asymmetry theory,fraud motivation theory,mainly uses literature research,analyzing the defects of internal control which are exposed,then come up with suggestions to internal control and corporate governance structure,and make the conclusion to regulate listed companies internal controllaws and regulations revision,etc.It is not difficult to find that ST Pitu internal control defects are mainly manifested in the illegal guarantee,non-standard of the information disclosure,lost control in the subsidiaries and monetary funds were appropriated.In the process of violation,related party transaction is the main means to achieve.Investigating the reasons,what we can find is that the equity decentralization does not form checks and balances,major shareholders have impure motives and pursue their own interests,the internal governance mechanism of the company is seriously inadequate,and small and medium-sized shareholders are short of consciousness of rights safeguarding.Finally,this paper takes improving the internal control environment,and paying attention to the risks of the internal control as a starting point,implement effective control activities,strengthen oversight of internal control and establish a system of accountability,and put forward countermeasures against the internal control defects of ST Pitu.Through standardizing the internal control of listed companies,and thus improve the operating efficiency of listed companies.It makes sense not only to many stakeholders involved in China's capital market but also the development of the capital market.