A Study On The WL Company's Internal Control Improvements Based On The COSO Internal Control-Integrated Framework(2013)

Company WL,being a Chinese operating company that is in the process of its initial public offering(IPO)in the US market while has not met the requirement of the Sarbane-Oxley Act 404(SOX 404)for disclosing and discussing its internal controls,has numerous significant deficiencies in them when comparing to the internal control framework developed by the Committee of Sponsoring Organizations(COSO).Hence,setting a high standard using the new internal control framework from COSO and keep improving the internal control is the key to WL's success in achieving the relevant US market requirements.The US,being the largest financial market in the world,has become the cradle for Chinese companies in obtaining financings,fast expansions and gaining world-wide recognitions.However,since 2011 numerous Chinese companies that were listed in the US had been exposed of on their fraudulent activities and conducts and,subsequently,the Securities and Exchange Commission(SEC)has signficiantly enhanced the supervision on the Chinese companies' s internal control.In 2013,COSO has released its new framework on the internal control structure to support the trend of enhancement.Therefore,to achieve a high standard of internal control has become a difficult problem that needs to be solved by Chinese companies.Through the discussion of this essay,the importance of a company's internal control will be emphasized and highlighted,from which detailed variances and deficiencies of the current internal control structures of Chineses companies will be analyzed when compared to COSO's new framework.This essay would also provide a general guidance for Chinese companies who are committed to go public in the US market and an initiation to China's own internal control development.First,this essay provides detailed and comprehensive introduction on the current status of WL's internal control.Then,through a systematic comparison with COSO new framework,the essay identifies the variances between WL and the benchmark.Secondly,this essay provides in-depth analysis on the reasons and impact on the establishment of those variances through aspects such as policies,personel,culture,etc.Lastly,the essay will construct a customized improvement plan for WL to achieve COSO new framework.This essay uses Company WL as a representative of Chinese companies to reflect the current circumstances of the lack of understandings on and usage of internal controls which,in general,are implemented in a negative manner to show the apparence rather than actual preventative actions.The standards set for WL was relatively high but it is effective in revealing the distance Chinese companies has with the comprehensive benchmarks and requirements and to shorten that distance in efficient and direct ways.The ultimate goal of this essay is to provide constructive and practical guidance to Chinese companies that are committed to be listed in the US.As the Chinese economy nowadays is converging with the internal market,an increasing amount of foreign investors are paying extensive attention to Chinese prospective companies.Therefore,establishing a high standard internal control is inevitable to be a milestone for Chineses companies.