Case Study On The Internal Control Failure Of Ingenious Ene-Carbon New Materials Company Limited

The truth of financial statement information is relevant to the effectiveness of enterprise internal control.There were plenty of financial frauds that caused by the enterprise internal control failure,while internal control failure may lead to the decline of management ability of an enterprise,and even not listed.Such things may bring economic losses to investors and have negative effect on the capital market.In the internal control auditing reports of listed companies in recent years,since 2014 there are 59 companies whose internal control auditing reports were issued negative opinions,including Ene-carbon New Materials and Heilongjiang Agriculture.Both of their internal control report opinions were negative for several years.It can be concluded that once the listed companies appeared internal control failure,it's difficult to improve effectively in a short time.The research shows that enterprises with perfect internal control system and strict execution have lower probability of financial fraud.The research on the causes and preventive measures of internal control is of great value,which is of great significance for reducing financial frauds and promoting the stable and orderly development of the capital market.Therefore,properly internal control is of great significance to reducing the corporate frauds and promoting the stable and orderly development of the capital market.Based on the case of the failure of internal control in the Ingenious Ene-Carbon New Materials Co.Ltd.,as a representative of strategic transformation enterprises in the old industrial basement of east-north China,the stock of Ingenious Ene-Carbon New Materials Co.Ltd.is the first A-share non-standard opinion to be delisted.Defining the concept of internal control failure,we summarized the matters of internal control failure and analyzed the causes.We try to find consequences of internal control failure based on the case of Ene-Carbon New Materials and give advices for the listed companies.According to the research,from 2014 to 2017,the negative opinions on internal control audit reports for four consecutive years,we can conclude that the internal control has been seriously invalid.The main causes of the failure both the outside and the inside of the company,as the external regulators are not strict enough in laws and regulations.Enterprise internal governance structure is not rigorous,either,thus the level of internal governance is low,the coverage of internal control measures design is insufficient,there are loopholes in the implementation process,internal staffs' risk awareness is weak,and the enterprise internal supervision system also failed to play its role.Actions should be taken to solve this problem.External regulators should perfect relevant laws and regulations.Enterprise internal governance level should be improved to prevent the failure of modern governance structure events.And the design of internal control system should be strengthened as soon as possible,promoting the implementation of internal control measures into the staff evaluation system,making the internal supervision system effective,and promoting the structure of the internal control system in all respects.The purpose of this paper is not only to analyze the case based on the COSO internal control framework but also to get some inspirations,hoping to benefit the listed companies in our country in building reasonable and effective internal control system,and also improving the level of internal control of listed companies in China at the overall level,reducing the problem arising from the capital market,enhancing market transparency,promoting the fair and development of the capital market.