Research On The Internal Control Of ST Dakong's External Guarantee

With the development of China's socialist market economy,due to the increasingly complex business,the company continues to have external financing needs in the production and operation process.Among various financing methods,external borrowing is widely adopted by enterprises due to its advantages of rapid financing speed,low cost,the use of financial leverage and great flexibility in borrowing.Because of the serious information asymmetry in the creditor-debtor relationship,the creditor is in a relatively poor information side,it is difficult to guarantee the security of its own assets.Based on the principle of balance between risk and income,the financing interest rate will be raised and the financing cost of the debtor will be increased.The emergence of the guarantee system effectively solves the problems caused by information asymmetry,improves the protection degree of the creditor's interests,thereby reducing the financing cost of the debtor and promoting corporate financing.However,due to the huge guarantee risk of the guarantee business,once the debtor fails to return the debt according to the agreement,the enterprise will have contingent liabilities,which may lead to the outflow of economic benefits of the guarantee enterprise.Internal control is one of the main means of enterprise risk management,reasonable design and implementation of internal control system of external guarantee business is conducive to reduce the risk of guarantee.In order to standardize the internal control process of enterprises,Ministry of Finance of our government have promulgated the basic norms for internal control of enterprises,the application guidelines for internal control of enterprises no.12--guarantee business,and the supporting guidelines for internal control of enterprises,pointing out the direction for the improvement of internal control system of enterprises.On this basis,the design and implementation of the internal control system of China's listed companies have been greatly improved,but there are still some listed companies whose internal controls still have defects.,it is difficult to achieve the purpose of reducing risk.Aiming at the internal control problem of external guarantee of listed companies,we take ST DaKong as an example,this paper analyzes the causes and consequences of internal control failure of external guarantee of ST DaKong,and then puts forward Suggestions for improvement.The research of this paper has certain reference significance for listed companies to clarify the causes of internal control failure and improve the design and implementation of internal control system of external guarantee.This paper adopts the method of case analysis,based on the case of ST DaKong's illegal guarantee,aiming at the frequent occurrence of illegal guarantee caused by the defects of internal control of ST DaKong,carries out analysis from five parts:The first part introduces the research background and significance,summarizes the previous research results,and makes an simple introduction of the research ideas and methods of this paper.The second part is a theoretical overview of the internal control of the external guarantee of listed companies.This part expounds the main viewpoints of information asymmetry theory,risk transfer theory and risk control theory and their application in external guarantee,briefly introduces the meaning of external guarantee,counter guarantee and internal control.The main risks of the company's external guarantees are summarized,and the internal control process of the listed company's external guarantees is explained,which lays a theoretical foundation for the case study of ST Dakong's illegal guarantee.The third part is the introduction of ST Dakong's basic situation and the introduction of the internal control status of external guarantee.It briefly introduces the company situation,ownership structure and operation overview of ST Dakong,and introduces the internal control status of ST Dakong's external guarantee business in detail.The fourth part is the analysis of the internal control defects and consequences of ST Dakong's external control.Judging from the shortcomings of the internal control of the external guarantee business,the ST Dakong has a lack of strict review of the guarantee application,a thorough investigation of the credit information,irregular approval,non-strict or unauthorized approval,and the external guarantee contract has not been properly authorized,and the debtor's operating status The internal control defects such as inadequate monitoring,external guarantees,and timely disclosures,and multiple defects interacted together,resulting in the ST Dakong violation guarantee.Judging from the consequences of the internal control defects of external guarantees,due to the defects of internal control,ST Dakong violation guarantee amount is huge,it have to bear huge guarantee responsibility,contingent liabilities arising from huge guarantees affect investors' judgment,stock price continues to fall,and interests of small and medium shareholders are damaged.The guarantee is severely affected by the punishment of the regulatory authorities,which has a large adverse impact on the production and operation activities of the ST Dakong.The fifth part summarizes the causes of internal control defects according to the analysis results of the fourth part: the mutual protection of the executives leads to the external guarantee control system being ineffective,the executives instructing the business personnel to sign the contract in violation of regulations,and the major shareholder “one single large shareholder” lacks the check and balance mechanism.The risk awareness of internal control personnel is weak,and the main members of the board of supervisors lack the independence for the selection of major shareholders.At the same time,this part proposes suggestions for improving the internal control defects of ST Dakong's external guarantees.We believes that ST Dakong should adopt the establishment of an anonymous report mailbox to supervise the violations of senior executives,internal audit comprehensively conduct risk-oriented audit,and the board of directors introduces minority shareholders to balance the major shareholders,Improve the quality of the internal control staff,introduce creditors' supervisors into the board of supervisors,and enhance the independence of the board of supervisors.