Chinese Enterprise Internal Control Legal System

Internal control is one of the ways for directors to fulfill fiduciary duty and realize self-supervision.First proposed in the United States,but also in the history of the United States in the evolution of continuous development and maturity,and as a template for the world’s acceptance.In 1992,COSO,an American non-governmental organization represented by the association of accountants,innovatively made a systematic discussion on the internal control system.Subsequently,AICPA,SEC and other organizations in the United States began to accept the contents in the report of COSO and took the internal control system theory proposed in the framework of COSO as the paradigm for enterprises to design internal control.Since the introduction of basic norms for internal control of enterprises ten years ago,the construction of internal control of enterprises is closely related to the management responsibility of directors.The requirements for internal control of directors become clear along with the fiduciary duty of directors,and eventually the enterprise forms an internal control mode with the board of directors as the core.In recent years,however,the capital market violations exposed a large number of enterprises,lack of internal control of the center of gravity shifted from "financial information is not true" to "control people violate compasses guarantee",the board of power imbalance,the board to the core status of the internal control system of internal control have to face disapproval,in fact,should not only in business activities of the internal control management tool.However,it is difficult to reach its connotation by studying internal control only from the perspective of objectives.After all,internal control objectives are constantly changing with the development of enterprise theory,and it is easy to "get a glimpse" if limited to the study of objectives.Internal control should be understood as "controlling power" and "preventing deviation".In fact,the internal control required under the background of modern company law should set up the mutual restriction mechanism of various departments on the basis of fully mobilizing the reasonable allocation of internal resources of enterprises,which is the inevitable way to achieve the legislative purpose of company law.Therefore,"internal control" in the new era should be "functional control" based on "management control" and "organizational control" in the context of "company law".Secondly,in terms of the right of management of enterprises,the company law is slowly changing,from the very beginning around the "shareholders" to build a governance control model,to the core of the "board of directors" migration.In terms of procedure,the board of directors is still elected by the board of shareholders,and its responsibilities to shareholders have not changed.Compared with "shareholders’ meeting centrism","board of directors centrism" highlights the independence of the board of directors as an enterprise operating institution and is no longer purely an executive organ attached to the resolutions of shareholders’ meeting.The development of the board’s governance status is not the result of legislation enforcement,but the reflection of corporate governance reality in legislation.This makes the company law existing in the governance structure and the basic norms for the board completely independent to take the functions of the internal control positioning seems to be conflict,restrict the shareholders’ committee on board is not in conformity with the current company law "shareholders first" in the power system design,but if we do not limit,the lack of internal control environment,the controlling shareholder abuses type internal control defects will still occur repeatedly,the internal control system designed is also difficult to achieve.Therefore,in order to clarify the "organizational control",implement the "functional control",improve the enterprise internal control,return to the traditional company law principle,clarify the relationship between the board of directors and the board of shareholders,may be the best solution.With the help of the classic theory outside the company law,as well as China’s current capital market internal control status,this paper attempts to improve the existing internal control responsibility system.While clarifying the connotation of internal control,the responsibilities of relevant persons in the company law should be differentiated.In terms of corporate governance,the scope of relevant persons in internal control and their legal responsibilities should be carefully expanded.Article 69 of the securities law of China shall be applied as the basis for the implementation of responsibilities.