In recent years, corporate fraud incidents have emerged in an endless stream, which has had a great impact on the international capital market and greatly reduced the trust of investors in enterprises and their senior management. The following is my research paper on the concept and function of internal control, for your reference, hoping to help friends in need.
In recent years, Sanlu, CAO, Huarui Wind Power and other events have caused investors and regulators to reflect and pay attention to the existing internal control system of enterprises. In this regard, measures such as improving the internal control environment, establishing a good information communication system and establishing a risk early warning system are put forward.
Keywords: internal control; Control the environment; Risk warning
In recent years, corporate fraud incidents have emerged in an endless stream, which has had a great impact on the international capital market and greatly reduced the trust of investors in enterprises and their senior management. The appearance of these phenomena has a direct and inevitable relationship with the effectiveness of enterprise internal control. How to establish an internal control system and ensure that the internal control system can be effectively implemented is a problem that every enterprise should pay attention to.
First, the concept and function of internal control
(A) the concept of internal control.
Enterprise internal control refers to the organizational mechanism and implementation procedures formulated by the board of directors, the board of supervisors, senior executives and all employees to ensure the integrity and authenticity of enterprise data through internal self-adjustment, restraint and evaluation on the basis of fully considering the internal and external environment. COSO Committee defines internal control as: "The board of directors, management and others should abide by relevant laws and regulations in order to realize the reliability of financial reports and the efficiency and effectiveness of business activities". The internal control of Chinese enterprises refers to the process implemented by the board of directors, the board of supervisors, the managers and all employees to achieve the control objectives.
From their concepts, the internal control framework system defined by COSO Committee in the United States is not the same as that based on accounting control in China, but they are similar. Internal control is a standardized management process, which restricts and standardizes the operation process of all aspects of the enterprise and department personnel through a series of specific practices, and is a kind of operating system specification.
(B) the role of internal control
1, which is beneficial to the establishment of post responsibility system.
A small accountant of the National Natural Science Committee embezzled 220 million yuan from public funds for 8 years, and was finally sentenced to a suspended death sentence. A small accountant can misappropriate huge funds because of the lack of strict internal control system within the unit. In order to achieve the purpose of supervision and control, enterprises should set up internal institutions in combination with business characteristics and internal control requirements, and in order to enable everyone to exercise their functions and powers correctly, internal management manuals should be compiled. At the same time, there should be corresponding supervision and inspection measures, such as the separation of incompatible duties, in order to find and correct problems in time.
2. It is conducive to establishing a modern enterprise system and improving the corporate governance structure.
The focus of modern enterprise reform in China is to establish a modern enterprise system and improve the corporate governance structure. An important link to improve the corporate governance structure is to establish a scientific and effective internal control system. In order to assess the performance of operators, we can comprehensively reflect the performance and business behavior of operators by improving the effective internal control system.
3. It is beneficial to avoid and reduce various risks and improve management efficiency.
In the increasingly fierce market competition, enterprises will face many risks in their daily operations, such as legal risks, political risks, operational risks and market risks. For example, on June 30, 2004, 165438+ China Aviation Oil (Singapore) Co., Ltd. caused huge losses of $554 million to the enterprise due to speculation. From the perspective of risk prevention, it can be said that an enterprise is a management process, that is, a process of constantly resolving the crisis. How to avoid and reduce various risks to the maximum extent and improve the effective operation of management is a problem that managers are very concerned about, and it is also a favorable guarantee for establishing and implementing an effective internal control system.
Second, the problems of internal control of enterprises
(A) the control environment is not perfect.
The control environment determines the tone of the enterprise and directly affects employees' awareness of internal control. Whether there is a good control environment has a great influence on the results of internal control implementation. The governance defects of listed companies generally include imperfect board structure, imperfect incentive mechanism for senior executives, insufficient attention to human resources construction, vague distribution of powers and responsibilities, imperfect internal audit institutions, and lack of anti-fraud mechanism.
For example, the shareholding structure of Sanlu Group consists of Shijiazhuang Dairy Co., Ltd., the largest shareholder, and Fonterra Group, the second largest shareholder, with a shareholding ratio of 56% and 43% respectively. The rest 1% is held by small retail investors. From the shareholding ratio, its shareholding structure is normal and reasonable, but the fact is that more than 900 old employees of Sanlu Group own about 96% of the shares, which is quite scattered from the actual ratio. In addition, Tian Wenhua also serves as the chairman and general manager of Sanlu Group. In practical work, he is the sole controller of Sanlu Group, and the balance between the chairman and the general manager is simply nonsense. Therefore, it is inevitable for individuals to act arbitrarily, and the internal control checks and balances mechanism of the company exist in name only.
(B) Risk management awareness is not strong.
Risk management refers to the ability to identify, evaluate and analyze the realization of internal control objectives in time, and take corresponding measures to reduce risks in view of various unknown factors in the management process, which is an important step in implementing internal control. At present, most listed companies in China do not pay enough attention to risk management and have not established a sound risk management mechanism. Risk management should be able to accurately identify internal risks and external risks. Even if the risk management mechanism is established, it cannot be well implemented, that is, the risk supervision mechanism is not perfect. For example, Zheng's lack of risk awareness is mainly reflected in two aspects: blind expansion and credit sales. When Zheng went public, the asset-liability ratio reached 68.9%, and by 2000 it had reached 65,438+059.14%. During this period, he also blindly acquired and expanded the company.
The triangular credit relationship with Changhong and CCB is the driving force for Zheng's rapid development and also leads to his predicament. Cheng also lost to Xiao He and Xiao He. Because of this, the manufacturer passed on the sales risk to Zheng, which eventually made it difficult to recover the company's funds. Accounts receivable are 762.64 million yuan, and other accounts receivable are 269.7359 million yuan.
(C) ineffective implementation of internal control.
Internal control is the specific way to control the implementation of activities. Control activities are a series of procedures and implementation plans formulated by management to ensure the smooth realization of established goals. Different risks lead to different forms of internal control defects. There are also great differences in control methods. First of all, listed companies should formulate perfect internal control design. If the internal control design is flawed, risks will still exist. If there is nothing wrong with the internal control design, it is an execution defect. When an internal control regulation cannot be well implemented, it is impossible to prevent risks simply by strengthening control.
In the daily business activities of listed companies, production and operation management according to the process is the most basic control means to ensure product quality. However, the operation of Sanlu Group in violation of business processes in the production process is conclusive. The "premature delivery of milk" incident showed consumers that Sanlu executives were indifferent to the illegal operation of their processes and ignored the interests of consumer groups, which made people strongly question the credibility of their brands. At the same time, after the milk powder incident, Sanlu Group took the way of pushing, dragging and hiding, delaying the fighter plane many times, and the internal control system was ineffective, which eventually led to the deterioration of the situation and out of control.
(d) Lack of effective communication and poor information flow.
Due to the multi-level management of listed companies, the information flow is often slow in daily work, and senior managers can't grasp the company information in time, which leads to the slow release of internal and external information, the failure to solve employee feedback in time, and the failure to implement company decisions on time. At the same time, listed companies are punished and condemned by the CSRC and the Exchange for their untimely or incorrect information disclosure, which hinders the further development of the company to some extent.
For example, Huarui Wind Power, known as the "retail meat grinder", confirmed its income in advance by forging documents in 20 1 1 year, which inflated the total profit of 20 1 1 year by 277 million yuan, accounting for 37% of the total profit in that year. On May 3, 20 13, the CSRC formally filed a case against Huarui Wind Power for allegedly inflating profits, inflating costs and inflating revenues. On September 14 of the same year, Huarui Wind Power executives were awarded informed criticism by the Shanghai Stock Exchange for allegedly manufacturing and disclosing false information, financial data and operating conditions that were not truthfully reflected in the annual report. 2065438+0165438 On October 20, 2005/KLOC-0, the CSRC finally imposed an administrative penalty of 600,000 yuan on the illegal case of information disclosure of Huarui Wind Power, and decided to take measures to prohibit five responsible persons from entering the market.
(E) The internal supervision system is not perfect.
Supervision system is an important means to ensure the smooth and effective implementation of internal control of listed companies. Listed companies generally include self-supervision, accounting control, internal audit and external audit. However, in practical work, internal supervision can not give full play to its role. In order to realize the key supervision of key points in listed companies, we can continuously supervise the overall internal control, submit inspection reports in time when problems are found, and put forward specific rectification measures.
For example, in the Cao incident, Singaporean companies were basically monopolized by Chen Jiulin, and OTC transactions were not conducted in accordance with the company's rules and regulations. The group company can't manage and control the business of the Singapore company, and can't find his hands and feet in the company's operation through the financial statements. It is impossible to supervise and stop his various violations of the company system. For Chen Jiulin, the internal control system is just a decoration, which is not binding on it, and ultimately leads to huge losses.
Third, improve the internal control of enterprises
(1) Improve the internal control environment. The keynote of an enterprise is determined by the control environment, and it also affects the control consciousness of all employees in the enterprise. Control environment is the basis of the other four elements, which provides the basic structure and rules of internal control. The control environment includes the integrity of employees, the management style and concept of enterprises, the method of responsibility authorization and division, personnel policy and practice, management control methods, internal audit and so on. The governance of listed companies is mainly achieved through the mutual restraint of senior leaders such as the board of directors, the board of supervisors, the owners and senior managers. To improve the internal control environment, we should start with strengthening the management functions of the board of directors, such as perfecting the board structure, clarifying the responsibilities of the board of directors, giving play to the role of independent directors and improving the independence of the board of directors.
(2) Establish an effective risk management system.
Clarify the risk management objectives, set up an independent risk management department, independently evaluate the risks of listed companies, introduce professional identification methods, such as fault tree analysis and environmental analysis, and establish a sound risk management system. Conduct in-depth professional ethics education for all employees of the company and strengthen risk awareness. Conduct ideological and political education for relevant personnel, analyze typical cases, strengthen self-discipline and enhance sense of responsibility.
In order to continuously improve employees' professional knowledge and business ability, we can carry out continuous and effective professional knowledge education, and finally achieve the goal of all employees being competent for their jobs and reducing operational errors in business processing. At the same time, we can cultivate employees' early warning ability for abnormal situations in production and operation and reduce risk losses. We can set up a major risk early warning mechanism and an emergency mechanism as special measures to control activities, and at the same time formulate corresponding emergency plans to deal with major risks or emergencies that may occur at any time, so that emergencies can be properly resolved in time.
(c) Improving the implementation of the internal control system.
For listed companies, no matter how perfect the system is, it will be empty talk if it is not strictly and thoroughly implemented. Therefore, it is necessary to formulate a complete, rigorous and reasonable internal control system, which can be implemented in daily operations, otherwise the system will be like a dead letter. Listed companies should establish a strict accountability mechanism or accountability system to clarify the specific responsibilities of each employee, thus forming a scientific and effective balance mechanism, and at the same time using high-tech means to improve the efficiency of internal control. At present, the use of network internal control has become an efficient means to implement internal control, such as fingerprint identification and password verification. At the same time, for the key points in internal control, special control measures should be formulated to prepare for the complete and comprehensive implementation of internal control.
(d) Establish an effective information exchange system.
Broadly speaking, effective communication is the all-round transmission of information. In order to ensure the smooth transmission of information, all employees of the company should actively cooperate and participate, and at the same time adhere to the principle of prudence and be responsible for the accuracy of information. Senior leaders should also keep information flowing with subordinates, communicate with employees in time, understand their ideas and listen to their opinions and suggestions. Clarify the collection, integration and processing flow of internal control related information to ensure the accuracy, timeliness and smoothness of the company's information communication system.
(v) Strengthening the internal supervision system.
Perfect and effective internal control supervision is the guarantee for the normal operation of the internal supervision system. In order to monitor the internal control system, it can be achieved through continuous monitoring behavior, independent evaluation and the combination of the two. In order to do a good job in internal audit, the audit objectives must be clear and feasible, standardize audit methods, enhance the credibility of internal audit, ensure the independence and authority of internal audit, and at the same time conduct pre-audit and in-process audit to ensure the reliability and integrity of information and ensure the orderly development of the company in accordance with the company system at all stages. Strengthen the management concept of senior leaders, enhance the supervision consciousness of employees and establish an effective incentive mechanism.
References:
[1] Wang Jindong Huang Huiying. Analysis of internal control of listed companies in China from Sanlu incident [J]. Enterprise Technology Development, 20 10.7.
[2] Song Yun. On the measures to strengthen the internal control of listed companies [J]. Management, 20 10. 10.
[3] Yao Feng. Problems and countermeasures of internal control of listed companies [J]. Modern Commerce, 20 1 1.5.
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