Listed Companies in Chinas internal audit and corporate governance trends

1、 Listed Companies in China's internal audit and corporate governance trends Abstract: The current international environment, Chinas listed companies is facing many difficulties and challenges, how to improve corporate governance to enhance sustainable management ability to be a hot topic, in

2、ternal audit has been an important corporate governance into their area of practice. This paper described the development trend of internal audit and corporate governance based on corporate governance, internal audit participation in the reality of doing, on how to properly locate the area of corpor

3、ate governance to achieve an innovative internal audit were discussed. Keywords: corporate governance; internal audit; relations and positioning; Innovation Model Corporate governance intended to imply a “binding”, and refers specifically to the internal audit since ancient times, “supervision”, all

4、 point to “compliance.” As shareholders, the emergence of a new culture and development, corporate governance of common concern to the international focus, its meaning expanded to “restrain and motivation”, the internal audit is like a tree rooted in the ancient, modern flower 1, meaning extended to

5、 the “supervision and services”, both the expansion of surface they are related to the “value” associated with “motivation” is to create value as a target, “service” while the purpose is to preserve or contributed to “value.” Thus, corporate governance and internal auditing between the “source” to h

6、ave a long and continuous stretches. One of the leading edge of corporate governance The 20th century, 30s, the U.S. stock market crash caused the mass of different standards of corporate governance, a large number of Securities and Exchange Surveillance laws and regulations were introduced, because

7、 of corporate governance determines the capacity of the sustainable development of the enterprises themselves, but also of the entire capital market, normative as well as the economic order, Therefore, corporate governance are increasingly subject to government regulatory agencies and the community

8、concern. Company and shareholders, creditors, managers, employees, customers, government and other stakeholders, are inextricably linked, the company must pass from the top down allocation and exercise of the responsibilities and rights, monitoring, evaluation and incentive board of directors, manag

9、ement and staff to ensure that the companys goals to achieve, while the different requirements of stakeholders to coordinate and agree on goals, which is corporate governance. Is divided into corporate governance, corporate governance structure and corporate governance mechanisms, corporate governan

10、ce structure is the framework for corporate governance and control system, objective decision making for a clear corporate strategy, defining the right of the operator responsible for major business decisions and other important affairs of the rules to be followedand procedures, corporate governance

11、 mechanism will provide for clear responsibility and authority over the specific means, such as the employment mechanism, monitoring mechanism and incentive mechanism. The development of corporate governance practice has approximately grouped into two categories: First, the internal governance model

12、s to Japan, Germany and other countries represented, emphasizing the major shareholder and major creditor of the co-regulation, also known as the “creditor-oriented model of governance”, is the worlds Comparison of convergence of the model, Chinas state-controlled enterprises like this model of corp

13、orate governance; second is external governance model to the United States, Britain and other countries represented by the stock market trading activity on the formation of the operator constraints, also known as “shareholder-led type of governance model, “Chinas overseas (British) state-owned enter

14、prises listed on Zexu more attention to this pattern. 2, and internal audit related to Corporate Governance Research Whatever model of governance, corporate governance structure and governance mechanisms are inevitably results of operations as well as the value of the company, its significance is mo

15、re far-reaching for public companies. Just as the Organization for Economic Cooperation and Development (hereinafter referred to as OECD) “Principles of Corporate Governance,” described, a good corporate governance should have four conditions: maintain a good internal control system; insist on check

16、ing the design and implementation of internal control evaluation effectiveness; truthful disclosure of internal control outside the status quo; to maintain a strong internal audit role. In order to balance stakeholders, many national governments or the securities regulatory authority has issued a re

17、gulation or regulations made mandatory corporate governance requirements, the most stringent than the U.S. “Sarbanes - Oxley Act” (hereinafter referred to as “ SOX Act “), which is involved in a professional supervision, corporate governance, securities market regulation and other reforms important.

18、 SOX Act in the “Internal Audit position or role” of the content requires listed companies to establish audit committees, giving it more responsibility than ever before in order to ensure its independence. National Association of Securities Dealers and the New York Stock Exchange again in November 2

19、003 issued a “final rule of corporate governance”, defined in detail the Boards responsibilities: to obtain and review the annual report submitted by independent directors; with the regulatory authorities, the independent auditors together to discuss the companys annual audited financial statements

20、and quarterly financial statements; discuss the companys earnings release, financial information, earnings guidance, etc.; discussion of risk assessment, risk management policy; separately with management, internal auditors and independent auditors to meet regularly to discuss related problems; to e

21、stablish a clear on the employment of current or former independent auditor of the policy; periodic reports to the Board. In order to meet the newly revised regulatory requirements to ensure that the normal role of the Audit Committee, it must actively play the role of internal auditors in the organ

22、ization will focus turned to corporate governance. In 1996, the International Institute of Internal Auditors (hereinafter referred to as IIA) on the “internal audit Future: The Delphi study” special report for the internal audit professional to open up a new direction of development in 1999 based on

23、 reports by IIA as a revised internal auditing professional standards, not only gives a new definition of internal audit, but also emphasized the essence of todays internal audit, that is concerned to assess the improvement and participation in risk management, internal controls and corporate govern

24、ance, for the organization to add value. Third, corporate governance in Chinas Listed status of Internal Audit Since 2000, conform to the international economic environment changes, the majority of our listed companies to start building a modern corporate governance structure and establish a decisio

25、n-making, implementation and monitoring of mutual checks and balances between the governance mechanism, establish a performance-oriented incentive and restraint mechanisms, and Meanwhile, the domestic and legal policy on corporate governance studies have been greatly improved, but compared with the

26、international advanced experience, there are still many inadequacies: First, ownership structure of the “l(fā)ow-cost equity financing” and lead to weaker binding on the operator and so on; 2 is an internal governance mechanism of the “board of directors, board of supervisors, the Audit Committees super

27、vision of the companys economic activity is still not clear,” and so on; The third is the performance constraint mechanism of the “l(fā)ack of effective checks and balances within the company and supervision of persons”; four in the management of the legal laws and regulations, “the lack of relevant cor

28、porate governance principles and standards” and so on. In this environment, governance, the audit committee or the proper role of the internal audit and unworkable. (A) the supervision of the companys information disclosure weakness Chinas current corporate governance guidelines and information disc

29、losure system, the relevant regulatory requirements for internal controls monitoring the international arena not as robust or rigorous. The framework of information disclosure, for example, the current system does not require listed companies to disclose addition to the actual controller other than

30、the ultimate control of the people and the control of the relationship between the listed company, there is no clear pricing policy, related party transactions related to information disclosure and internal restraint mechanism 2 . According to the 2003 survey showed that Shanghai and Shenzhen listed

31、 companies in the two cities per occupied 143 million. Two consecutive years of loss-making listed companies, 70% is the controlling shareholder acts of misappropriated funds. Therefore, most of the periodic reports of listed companies is rarely mentioned in the implementation of internal control an

32、d corporate risk management to assess the situation and this will inevitably weaken the protection of minority rights and interests of small shareholders, it is noteworthy that domestic auditing standards and no clear emphasis on internal audit the disclosure of information related to the functions

33、of monitoring and evaluation. (Ii) monitoring the activities of limited corporate governance The majority of our listed companies are former state-owned enterprises restructuring and the reorganization of the formation of holding companies among the shareholders bear the commission and social respon

34、sibility, but also bear the survival of the company dealing with the important task of the remaining issues, corporate governance is hard to avoid the expense of some stakeholders of , the audit committee or internal audit of its internal persons identity can not ensure that the company goal of a ra

35、tional choice of governance. Domestic firms out of control due to the process of corporate governance, financial fraud incidents caused a profound lesson, Joan China source, Guangxia, Zhengbaiwen, red light industrial, dawn of shares and other dance scandal reflects not only the internal control iss

36、ues, and more are embodied in deviate from the objectives of corporate governance and corporate governance checks and balances weakened by deep-rooted problems. (C) The execution of internal controls under the supervision Failure to resolve the companys internal control executive power issues, diffi

37、cult to support corporate governance, incentive and restrictive mechanism. Chinas listed companys internal control at a relatively low level, due to internal control failure which led to frequent cases of fraud, most organizations motives (for example, cosmetic results) and a collective accounting f

38、raud through fraud, while the reason for this is the organization of internal control failure, weak control environment will inevitably lead to a lack of internal audit independence, therefore, the internal audit is limited to certain areas of the annual audit opinion on the terms of reference or ma

39、nagement recommendations on the companys internal control the level of implementation of continuous monitoring can not be achieved. (D) internal audit status and the importance attached nowadays Management of Chinas listed companies, the scope of internal audit and the results reported to exert a gr

40、eater influence on the awareness level of the value of internal audit is not high. First of all, most of the companys audit committee has not been fully authorized program or project approval a mere formality; Secondly, the internal audit function of mostly limited to the traditional audit of play,

41、and some even to the exclusion of financial control; the same time, internal audit and external audit as 2 night in the parallel vessels, there is no crossover point, communicate with the external audit replaced by other departments; Also, the internal auditors of the companys internal IT control sy

42、stem access is restricted, and the general employee information poor communication channels, etc.; In short, there is no internal audit participation in corporate governance to create a favorable environment. (E) internal audit staff knowledge of the structure and competence of the problem Part of t

43、he lack of internal audit staff competencies. Internal audit staff work experience is mostly limited to in a single area of expertise, although the structure of knowledge and business skills than in the past has been great progress, but there is some discrepancy compared to international counterpart

44、s. U.S. SOX Act explicitly require internal auditors of listed companies in the United States should assist in the management of the companys IT application controls and IT general controls assessment and issued by the report, but our internal audit team really familiar with the lack of Jidong IT fi

45、nance, audit, operations and other comprehensive knowledge of the structure of talent. According to the status quo analysis, our domestic policy environment and the overall framework of corporate governance, yet improved governance tools within the company has yet to be optimized, and internal audit

46、ing in the field of corporate governance, restructuring and innovation is also faced with many difficulties. Fourth, Chinas corporate governance and internal audit and development of the relationship between As Chinas business market environment, especially the legal environment for the gradual impr

47、ovement of the governance of listed companies in China has entered an effort to promote corporate governance, marked by specialization compliance stage. Domestic and foreign-related fields of research are emerging, for internal audit to the appropriate position in corporate governance and provides g

48、uidance on the innovation, internal audit staff should seize this rare opportunity to constantly and actively explore. (1) support collaborative relations within the Corporate Governance Good corporate governance relies on four main elements of the synergy achieved. In July 2002, IIA said: “a sound

49、a sound corporate governance structure on the premise that the establishment of effective corporate governance system, the synergy between the board of directors, executive management, external audit and internal audit”, the audit committee or internal audit institution responsibility for collaborat

50、ive relations within the four elements, making the synergy between corporate governance and project supporters. Effectiveness of corporate governance depends largely on the ethical and cultural construction, IIA professional standards of “corporate governance direction” and that “Internal Audit shou

51、ld strengthen the management of professional ethics to persuade . .”, the Audit Committee to launch an independent self-assessment procedures, through internal audit institutions of governance structures and policies, corporate culture and ethics, and so assessments comments or suggestions to help t

52、he board and the management culture of good corporate culture, internal controls and risk management awareness. IIA “Practice Notice” also pointed out the internal audit of other synergies: can be carried out by the leadership term economic responsibility auditing, or assist in the effectiveness of

53、the discipline inspection departments to monitor the evaluation, to remind the executive management to strengthen accountability, improve management level, to persuade the operators of legitimate business; through equity or fixed-asset investment performance audit, to persuade the management to comp

54、rehensive consideration in decision-making short and long term interests of the company and seek the return on investment; through the financial budget or operating results of the audit, evaluation or proposed company true, a comprehensive financial report issued or external disclosure of informatio

55、n. Internal audit can also be in-house on the international and relevant domestic laws, guidelines, interpretations and advisory role to play. (B) to evaluate the activities to improve corporate governance effects of Internal audit bodies should give priority to corporate governance, audit object, I

56、IA newly revised professional standards relating to “internal audit in corporate governance activities in the important position of” and guide for our Zhidianmijin, but also for the internal audit department provides to the companys stakeholders to prove its true value of new opportunities, internal

57、 audit can continue to cure “project audit experts” and other roles. Evaluation of corporate governance should be based on environmental management as a starting point to evaluate the companys overall governance structure, policies, ethics, auditing activities of the Committee, confirming whether th

58、e company has a complete set of governance, risk and compliance environment; Second, the emphasis on the governance processes, procedures and technologies Evaluation: the individual assessment of internal audit can assist in anti-fraud procedures, a corrupt motive or the appearance of disclosure, in order to provide clues fraud incident investigation report and recommendations; internal audit staff to access and understand the companys internal characteristics of professional or technical fields, you can pay for the HR management advi