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《EurasianBusinessPerspectives》,2017,11（02）:

379-389

字数统计：

英文2788单词，16276字符；

中文5242汉字

外文文献：

PerspectivesonInternalControlandEnterpriseRiskManagement

AbstractGroundedontheliteraturereviewonEnterpriseRiskManagement（ERM）thispaperaimstoanalyzetheextentandtheeffectivenessofinternalcontrolaswellasERMandtoexploretheirconnectionwiththevaluecreation.AtheoreticallensisusedtodiscusswhethereffectiveinternalcontrolandERMenhanceperformanceandincreasevaluecreationability.ERMismostfrequentlydefinedwiththereferencetothe2004GuidancedocumentpublishedbyCommitteeofSponsoringOrganizationsofTreadwayCommission（COSO）.ProponentsofCOSO’sERMIntegratedFrameworkdescribethisframeworkas“aworld-leveltemplateforbestpractice”,andclaimthatERMusedbymanagementtoenhanceanorganizationabilitytomanageuncertaintyandtoconsiderhowmuchrisktoacceptasitstrivestoincreasestakeholdervalue.AdditionallytheInternalControl—IntegratedFrameworkisaviableandsuitableframeworkfordesigning,implementing,conductingandassessingtheeffectivenessofinternalcontrolandforreporting.TherelationshipbetweenvaluecreationandERMiswidelyinvestigatedinacademicliterature.EmpiricalstudiesonthevaluecreationabilitiesofERMandinternalcontrolsuggestthatthereisapositiverelationbetweenvaluecreation,internalcontrolandERM.Thesestudiesrevealthatfirmperformanceandvalueareenhancedbyhigh-qualityERMadoptionandimplementation.UsingdifferentidentifierofERMsuchasStandardandPoor’sriskmanagementratingsorpresenceofaChiefRiskOfficer,thefindingsofempiricalstudiesrevealthathigherERMqualityisassociatedwithlessresourceconstraint,bettercorporategovernanceandbetteraccountingperformance.Additionallyacademicstudiesindicatethattherisk-basedcommunicationisreinforcedwithERMimplication.

Keywords:

Enterpriseriskmanagement,Internalcontrol,Valuecreation

1.Introduction

Changingbusinessandoperatingenvironments,increasedcompetition,technologydriven,globalscaleandcomplexstructureofcompanieshaveincreasedtheimportanceofeffectiveinternalcontrolandriskmanagement.Enterpriseriskmanagement（ERM）isaprocessthatisviewedtodayasanindicatorforoptimalachievementofcompanies’missionandexecutionofitsstrategy.Thisisalsoacopingmechanismvis-`a-visnewdemandforreportingpurposesandadditionalcompliancemandateplacedonorganizationstohaveeffectiveinternalcontrolandriskmanagement.Ratingagenciese.g.Standard&

Poor’shaveincludedERMassessmentinratingsofinsurancecompaniessince2007.Furthermorethestakeholders’demandformoretransparencyandaccountabilityonthebusinessdecisionsandgovernanceforcesenterprisestohaveeffectiveinternalcontrolandERM.CommitteeofSponsoringOrganizationsofTreadwayCommission（COSO）hasreleasedtwoframeworksprovideguidanceformanagementinimplementingandevaluatingeffectiveenterpriseriskmanagementandinternalcontrolprocesses,leadingtotheimprovementoforganizationalperformanceandgovernance.TheseareCOSO’sInternalControl—IntegratedFrameworkandCOSO’sEnterpriseRiskManagement—IntegratedFramework.

COSOguidanceisrecognizedasbeinggloballyanditsintegratedframeworksareviewedasbeingtheprincipaltoolsthatenableorganizationstoenhancetheircapacityindealingwithuncertaintythatpresentsbothriskandopportunitywiththepotentialtoerodeorenhancevalue.

ProponentsofCOSO’sERMIntegratedFrameworkdescribethisframeworkas“aworld-leveltemplateforbestpractice”,andclaimthatERMusedbymanagementtostrengthenanorganizationabilitytomanageuncertaintyandtoconsiderhowmuchrisktoacceptasitstrivestoincreasestakeholdervalue.AdditionallytheInternalControl—IntegratedFrameworkisaviableandsuitableframeworkfordesigning,implementing,conductingandassessingtheeffectivenessofinternalcontrolandforreporting.COSO’sprincipalargumentisthattheessentialprerequisitesoffirms’longtermsuccessaregoodriskmanagementandinternalcontrol（DeLoachandThomson2014）.

Whileinternalcontrolhasbeenalwaysanimportantfieldforinternalandexternalaudit,riskmanagementhasbeenavitalconcernonthefieldsoffinanceandinsurancebutitisreceivedwidespreadattentionfollowingaccountingandcorporatescandalsinthebeginning2000sand2008globalcrisis（Wuetal.2015）.Section404ofSarbanes-OxleyActanditsimpactsandrepercussionsonglobalcapitalmarketshaveputthespotlightonCOSO’sInternalControlFrameworkandtherecenteconomiccrisishasheightenedconsiderablytheimportanceofERM（LandsittelandRittenberg2010）.

GroundedontheliteraturereviewonERMthispaperaimstoanalyzetheextentandtheeffectivenessofinternalcontrolaswellasERMandtoexploretheirconnectionwiththevaluecreation.AtheoreticallensisusedtodiscusswhethereffectiveinternalcontrolandERMenhanceperformanceandincreasevaluecreationability.Theremainderofthepaperispresentedinthreesections.Section2expandsupontheCOSOIntegratedFrameworks.Thisisfollowedbytherelatedliteraturethatprovidesanoverviewofempiricalresearchfindingsoninternalcontrolandenterpriseriskmanagement.Thefourthandfinalsectionprovidesaconclusionprovidingsomefinalcomments.

2.COSOIntegratedFrameworks

Whetherappliedindividuallyortogether,COSOframeworksaretheprincipalguidanceusedbyorganizationstoaddressinternalandexternalpressuresplacedonthemtohaveeffectiveinternalcontrolandriskmanagement.Originallyformedin1985,COSOisvoluntaryprivatesectorinitiativededicatedtoimproveorganizationalperformanceandgovernancethrougheffectiveinternalcontrol,enterpriseriskmanagement,andfrauddeterrence.ItssponsoringorganizationsaretheInstituteofInternalAuditors,theAmericanAccountingAssociation,andtheAmericanInstituteofCertifiedPublicAccountants,FinancialExecutivesInternational,andtheInstituteofManagementAccountants.

COSO’sfirstInternalControlFrameworkisreleasedin1992andisadmittedwidelyasarecognizedstandardfordevelopingandmaintainingeffectiveandefficientinternalcontrol.OnMay14,2013,asaresultofmultiyearproject,COSOupdatedthisFrameworktoincludeenhancementsandclarificationsforusers.

COSO（2013a,p.3）definesinternalcontrolas“aprocess,affectedbyanentity’sboardofdirectors,management,andotherpersonnel,designedtoprovidereasonableassuranceregardingtheachievementofobjectivesinthefollowingcategories:

–Effectivenessandefficiencyofoperations

–Reliabilityoffinancialreporting

–Compliancewithapplicablelawsandregulations”.

Thereisagrowingsupportforthegeneralargumentthattheeffectivenessofinternalcontrolisacrucialandchallengingsystemfororganizations.COSO’sInternalControlFrameworkisdevelopedinexpectingtohelpandsupportorganizationstodesign,implement,conductandassessthesesystemsofinternalcontrol.Components,objectivesandentitylevelspresentedthreedimensionsofinternalcontrol.ThesearepresentedinTable1.

Table1Threedimensionsofinternalcontrol

Components

Objectives

Organizationallevels

Controlenvironments

Operations

Entitylevel

Riskassessment

Reporting

Division

Controlactivities

Compliance

Operatingunit

Informationandcommunication

Function

Monitoringactivities

Source:

COSO（1992）

Thestrengthoftheinternalcontrolsystemistoimproveorganizations’achievementsoftheirobjectivesthroughprovidingeffectivenessandefficiencyoftheiroperations,reliabilityoftheirfinancialreportingandcompliancewithapplicablelawsandregulations.Internalcontrolsystemneedstobeassessedregularlytocheckitseffectiveness.Thereare17relevantprinciplesassociatedwiththeinternalcomponents.ThesearepresentedinTable2.

Table2Principlesofinternalcontrol

17Principalsbyinternalcontrolcomponents

Controlenvironment

1.Commitmenttointegrityandethicalvalues

2.Oversightofthedevelopmentandperformanceofinternalcontrol

3.Establishmentofstructures,reporting,authoritiesandresponsibilities

4.Commitmenttocompetence

5.Accountability

6.Suitableobjectives

7.Riskidentificationandanalysis

8.Assessmentoffraudrisk

9.IdentificationandanalysisofsignificantchangeControlactivities

10.Selectionanddevelopmentofcontrolactivities

11.Selectionanddevelopmentofgeneralcontrolsovertechnology

12.Deploymentthroughpoliciesandprocedures

13.Useofrelevantinformation

14.Internalcommunication

15.Externalcommunication

Monitoring

16.Conductofongoingand/orseparateevaluations

17.Evaluationandcommunicationofdeficiencies

COSO（2013b）InternalControlIntegratedFrameworkPoster

AnotherareathatCOSOprovidesguidanceisriskmanagementthatorganizationsneedtoeffectivelydealwithuncertaintyforoptimalachievementoftheirmissionandexecutionoftheirstrategy.ERMIntegratedFrameworkisdevelopedasaprocess,ongoingandflowingthroughtheenterprisethatcomprisesaligningriskappetiteandstrategy,improvingriskresponsesoftheentityandseizingopportunities.AccordingtoArnoldetal.（2015）,thisstrategicapproachtotheriskmanagementconcentratesontheopportunitysideofriskidentificationandresponse.

ERMisdefinedbyCOSO（2004,p.4）as“aprocess,affectedbyanentity’sboardofdirectors