Internal control development in China

The implementation of enterprise internal control system in China began in the late 1990s. The definition and content of internal control have also evolved several times. The relevant provisions are found in a number of laws and regulations. But until June 28, 2008, when the Basic Specifications for Enterprise Internal Control were issued, there was no widely accepted internal control standard system like COSO report.

Independent Auditing Standard No. 9 - Internal Control and Audit Risk (December 1996) was the first to put forward the definition and content of internal control (i.e. control environment, accounting system and control procedures), but it looks at internal control from the perspective of financial report auditing, and the definition of the content of internal control remains in the United States. The "internal control structure" stage (from the end of 1980s to the beginning of 90s). In 2000, the Accounting Law, which was revised and passed by the National People's Congress, for the first time required all units to establish and improve their own internal accounting supervision system from a legal point of view, and put forward the requirements of separation of powers, mutual restriction, property investigation, internal audit and so on. But after all, the Accounting Law is not a special law for internal control, it neither puts forward the concept of internal control, nor can it guide the practice of internal control.

In June 2001, the Ministry of Finance promulgated the Internal Accounting Control Standards - Basic Standards (Trial Implementation). As a supplementary regulation of the Accounting Law, it positioned the internal control in the internal accounting control, taking into account the control related to accounting. This norm is conducive to the implementation of enterprises, but it needs to be further matched with the rapid development of modern corporate governance and risk-oriented audit theory and practice.

In 2006, China's new Audit Standards for Certified Public Accountants (CPAs) put forward the evaluation method based on COSO framework, which describes the internal control system from the aspects of the auditee's control environment, risk assessment process, information system and communication, control activities and supervision of control activities. The formal issuance of the guidelines has made a significant step forward in connection with international internal control. However, this criterion is only from the audit point of view, and can not be used as a direct basis to guide the design and implementation of internal control.

In the past two years, China has continuously absorbed the achievements of the United States in the construction of internal control norms, and made great efforts to adapt to the actual development of Chinese enterprises. Some internal control norms have been published successively: In November 2005, the State Council explicitly proposed the establishment and improvement of internal control in its Opinions on Improving the Quality of Listed Companies. In June 2006, SASAC promulgated the Guidelines for Comprehensive Risk Management of Central Enterprises; in the same year, the Shanghai Stock Exchange promulgated the Guidelines for Internal Control of Listed Companies on the Shanghai Stock Exchange; and the Shenzhen Stock Exchange promulgated the Guidelines for Internal Control of Listed Companies on the Shenzhen Stock Exchange; in December 2007, the Ministry of Finance promulgated the Guidelines for Internal The Basic Standards of Enterprise Internal Control, published in June 2008, is the correct step taken by the Chinese government to promote China's economic development at the right time and in the right direction. But unlike the U.S. requirement for fair financial reporting, China's internal control norms place greater emphasis on asset preservation. Because there are serious losses of assets in China's listed companies and non-listed company.