[On the Effectiveness of Enterprise Internal Control] The effectiveness of internal control

The measure of the effectiveness of internal control The concept of internal control, that is, internal control, originated in the United States. It was originally defined as an organizational plan to protect assets, check the accuracy and reliability of accounting data, improve operational efficiency, encourage employees to abide by established management policies, and all coordinated judgment calligraphy and measurement tools adopted within the enterprise. It includes three parts: 1) control environment; 2) accounting system; 3) Control program. Delay is defined as a process, including the following objectives: 1) management benefit and effect; 2) Reliability of financial report; 3) Comply with relevant laws and regulations. In China, internal control self-inspection is an important form of enterprise internal control, including internal control accounting self-inspection and audit department self-inspection, as well as self-inspection conducted by management departments at all levels to reduce their own risks. Undoubtedly, the internal control system of enterprises is conducive to exposing the shortcomings of enterprise management and correcting their own mistakes, so it plays a very important role in supervising the business activities of enterprises. However, due to the rapid expansion of enterprise scale, poor risk control awareness of decision makers, insufficient attention to internal control, non-compliance with laws, irregular rules and regulations, and lax law enforcement still exist. The effectiveness of internal control needs to be strengthened, which is studied in this paper.

Problems existing in internal control of enterprises

The two tentative regulations on internal control issued by the Ministry of Finance and the Independent Auditing StandardsNo. 19-Internal Control and Audit Risk issued by China Institute of Certified Public Accountants only provide principles for the establishment, improvement and evaluation of internal control, but their directionality, operability, universality and evaluability are insufficient. As a result, the effectiveness of internal control and audit has the following problems: 1) Some enterprises have shortcomings and weak links in their internal control systems. In recent years, when our auditors tested the effectiveness of the implementation of the internal control system of more than ten state-owned enterprises in Northeast and Northwest China, they found that more than 35% enterprises did not master some key control points when designing the internal control system, which led to the interruption of the whole chain or the emergence of short-board loopholes, which led to problems in the actual operation of internal control. 2) The design of internal control system is perfect, but the implementation is not effective, mainly because the leaders have insufficient understanding of internal control and insufficient attention to employees. The design of internal control system and process is important, but effective implementation is more important. If the implementation is weak, the perfect design system can only be a dead letter. In the process of testing the effectiveness of some enterprises' internal control systems, it is found that 25% of enterprises' internal control systems are well designed, but they have not been seriously implemented or poorly implemented, which leads to problems in the actual operation of internal control. 3) The effectiveness of audit supervision is not enough. Some enterprises have a sound internal control system, but the actual implementation of the control system lacks audit supervision or weak supervision. Some enterprises do not attach importance to the establishment of audit institutions, and the function and role of audit are limited. They don't entrust auditors to conduct compliance tests for a long time, which makes the effectiveness of system implementation lack of verification. 4) Lack of follow-up audit, audit opinions can not be put in place. After the internal control audit found the system defects, put forward suggestions for improvement and issued an audit report, it was shelved. Check the same unit again next year and find that the original problem still exists. The reason is that the audit results are not consolidated.

Face up to the effectiveness of internal control

As mentioned above, the effectiveness of internal control should attract the attention of enterprise management and auditors. The stricter the internal control, the better. Only effective internal control is the best. For enterprises, internal control should be effective. The effectiveness here requires that the internal control of enterprises can effectively prevent the occurrence of errors and fraud, resulting in efficiency and benefits. A good internal control system must ensure the following three goals and realization: first, the effect and efficiency of operation (operation goal); Second, the reliability, integrity and timeliness of finance and management (information-oriented goals); Third, comply with existing laws and regulations (compliance objectives). These three goals meet different needs, and they cross and restrict each other. Therefore, the internal control system of an enterprise should be coordinated with each other and must not contradict itself. There should be both a restrictive role and a coordination mechanism to promote the overall function.

Measures to improve the effectiveness of internal control

Improve the internal control environment of enterprises

The quality of internal control environment directly affects the construction and implementation of internal control mechanism of enterprises, and also affects the operation and overall strategic measures of enterprises. The most important thing to strengthen and improve the internal control environment of enterprises is to establish a good management system.

There are two main types of enterprise management: one is the distribution of interests between the enterprise and shareholders, who have the right to entrust the management right of the enterprise to the top managers of the enterprise, who should proceed from the interests of shareholders to optimize the internal control mechanism of the enterprise; The other is the shareholders and senior managers of the enterprise, who should fulfill their commitments to shareholders and be brave enough to assume their own responsibilities. A good enterprise internal control mechanism is an important guarantee to achieve enterprise management objectives.

Establish a major risk early warning mechanism

Strengthen risk assessment at the level of business activities. Fully implement the risk assessment of major business of enterprises, and establish a unified and complete database of important risks of enterprise business activities.

Implement the risk management reporting system

Establish a top-down major risk assessment and reporting mechanism, actively promote the cultivation of risk management culture, determine control priorities, and achieve dynamic management of major risks.

There are two most important tasks of risk report: First, strengthen investment audit. Audit is the last procedure before investment decision, because the end of investment decision means the end of investment project and the start of construction project. Therefore, it is very important to strengthen the audit constraints on project decisions and ensure the correctness of investment decisions. The second is to pay attention to decision-making risk avoidance. The biggest difference between enterprise investment projects and other long-term investment construction projects lies in their high risk. This kind of risk comes from the uncertainty of various internal and external factors of investment projects. Establishing risk assessment management mechanism will become one of the important contents of deepening reform.

Establish a unified management system

The development of an enterprise needs a perfect management system, and a good management system contributes to the improvement of the internal control mechanism of the enterprise and the formulation and revision of internal control standards. Through such a management system, employees in the enterprise can see the internal control mechanism of the enterprise more clearly, define their own responsibilities, strengthen self-management and know the information they need in their work in time, so that their working status will not be relaxed, so that employees can better participate in their work and plan the management system better.

Effectively supervise the internal control mechanism of enterprises.

Many large enterprises have rich rules and regulations, but some of them have already fallen behind the times, and many good systems have not been accommodated. For the above situation, if there is no effective supervision and inspection mechanism, the internal control mechanism of enterprises can not be well implemented at all. Today's supervision and inspection mechanism should set an example and pay attention to self-supervision. Managers at all levels should also pay attention to the supervision of the internal control system in the daily management process, effectively use the internal control system, continuously improve the management level of the internal control mechanism, and reduce the occurrence of various risks.

(Liu Fang: Huangshi Jade Wanda Gold Card Co., Ltd.; Peng Yiqian: Hengli Enterprise Management (Hangzhou) Co., Ltd.)