Five elements of internal control consciousness: (1) control environment: the key to determine an organization's internal control consciousness is the basis of other elements, including human ability, integrity and moral values; Management philosophy and management style; The way of power and responsibility distribution and personnel organization development; The attention and guidance of the board of directors. (2) Risk assessment: the organization faces various risks from outside and inside. The premise of risk assessment is to establish goals, which are determined and coordinated at different levels. Risk assessment is to analyze the risk factors that affect the realization of the goal and provide the basis for how to manage these risk factors. As the economic, industrial, regulatory and operational conditions are constantly changing, it is necessary to establish a mechanism to identify and deal with the risks brought by such changes. (3) Control activities: Control activities are policies and procedures implemented by management instructions. These policies and procedures ensure that necessary actions are taken to deal with risks that affect the achievement of organizational goals. Control activities occur at all levels and in all fields of an organization, including authorization, review, inspection, re-inspection, separation of responsibilities and asset security (authorization, verification, reconciliation, business performance review, asset security and separation of responsibilities). (4) Information and communication: In order to make people in the organization perform their duties effectively, it is necessary to confirm, capture and communicate relevant information in time. Management, finance and compliance information generated by information system is the basis of business operation and control. Information system includes not only internal information, but also external related information. Information must be communicated effectively among all components at all levels of the organization. Everyone should know clearly from the top management that control responsibility must be taken seriously, and everyone must understand their role in internal control and their relationship with others. Everyone should have the means to communicate information upward. At the same time, we must communicate effectively with outsiders, including customers, suppliers, regulators and shareholders. (5) Monitoring: Internal control needs monitoring, which is the process of evaluating the effectiveness of internal system operation. Monitoring includes continuous monitoring activities and individual evaluation or a combination of both. Operation monitoring is monitoring during use. The frequency and scope of individual assessment mainly depend on the effect of risk and operation monitoring. Defects in internal control should be reported to superiors, and serious problems should be reported to senior management and the board of directors.
The disclosure of internal control information means that the management authorities evaluate the effectiveness of internal control design and operation according to certain standards, and transmit the evaluation results to external information users in the form of internal control reports.
The Necessity of Internal Control Information Disclosure
1, Interpretation of Information View
The allocation of any resources is the result of a specific decision, and any decision of people is based on the given information. Therefore, the fundamental problem in economic activities is not the optimal allocation of resources, but how to maximize the use of different interests scattered in society.
Generally speaking, the securities market only provides us with price information, that is, the main purpose of financial reports is information about income and its composition. Accounting earnings information is a highly generalized information, which is influenced by many factors such as the choice of accounting methods and the strength of internal control of enterprises. According to the research conclusion, the proportion of classified information given by users of accounting information is more important than that of summarized information, because if useful information with summarized data is provided to users, users will have to spend more cognitive costs, that is, analyzing and explaining information and rejecting irrelevant information. According to this theoretical explanation, if internal control information is disclosed separately, the total cost of information disclosure process can be reduced and the efficiency of information disclosure can be improved. Internal control information belongs to qualitative information, but it should be noted that qualitative information is not necessarily less relevant than quantitative information, and monetary information is not necessarily important, so the importance of internal control information disclosure is self-evident. More and more investors have realized that an enterprise with investment value not only needs good business performance and development prospects, but also must have a good internal control system. To some extent, the failure of internal control is more risky than the decline of operating performance. This is because the influence of internal control on financial information is fundamental and procedural, which is directly related to the reliability of accounting earnings. In the securities market, there is a high degree of asymmetry in accounting information, which is mainly due to the information disclosure method adopted by enterprise managers. In order to win capital, a precious and scarce resource, high-quality enterprises will try to eliminate information asymmetry through some form of "signal transmission". Disclosure of relevant internal control information is usually regarded as a good "signal", which distinguishes high-quality companies from low-quality companies. The effective market will respond positively to this and the company's share price will rise. "Signaling" theory is also one of the basic theories of voluntary information disclosure.
2. Explanation of agency view
According to agency theory, the disclosure of internal control information is a way for management to relieve fiduciary responsibility. Resource owners provide economic resources to enterprises, and enterprises are managed by managers. Their fundamental purpose is to preserve and increase the value of assets, which is realized by managers through corporate behavior. Therefore, there is a principal-agent relationship between the owners and users of resources, and the management authorities bear the entrusted economic responsibility of protecting the safety and integrity of assets. Theoretically, this kind of responsibility includes not only behavioral responsibility, but also reporting responsibility, and a behavioral responsibility needs corresponding reporting responsibility. Because enterprise management authorities are responsible for designing and implementing the internal control system of enterprises, they also have the corresponding responsibility to report internal control. One of the consequences of principal-agent is its influence on the relationship between management and investors, specifically, how to solve the opportunistic behavior of agents, reduce the agency cost and reduce the losses caused by adverse selection and moral hazard to clients. The specific measures are as follows: first, provide incentive contracts to management, so as to link the interests of management and shareholders more closely; Second, provide public disclosure of enterprise information, so as to eliminate the position of management authorities with super information. According to Yimin Xiong Zhi's viewpoint, accounting is "a system that is convenient for all interest groups to fulfill their accounting responsibilities smoothly". No matter what measures are taken, internal control information is an important means to supervise contract execution and evaluate the results of contract execution. Therefore, it is necessary to transmit the relevant information of internal control to the contracting parties, that is, to disclose internal control information to external information users.