Internal-control-and-risk-management

Pages: 58 (14467 mots) Publié le: 22 février 2011
Internal Control and Risk Management
– A Basic Framework

FOREWORD
Since the formation of the Corporate Governance Committee in 1995, the Hong Kong Institute of Certified Public Accountants is proud to have been playing a leading role in promoting greater awareness and higher standards of corporate governance in Hong Kong. The Institute believes that good corporate governance is fundamentalto attracting investment, stimulating economic growth and reducing the cost of capital. It is also vital to Hong Kong’s role as one of the world’s major financial centres and the premier international capital market for Mainland China and the region. We are supportive, therefore, of the Stock Exchange of Hong Kong Limited’s recent amendments to the Listing Rules to introduce the Code on CorporateGovernance Practices (“the Code”) and the requirements in relation to the Corporate Governance Report. These changes will raise the bar for listed companies in Hong Kong in terms of their corporate governance practices and disclosures. This guide on internal control and risk management has been developed at the invitation of the Stock Exchange, with the primary objective of providing generalguidance and recommendations on a basic framework of internal control and risk management. It draws on important overseas studies, which are acknowledged benchmarks of international good practice while, at the same time, takes into account the current situation of the Hong Kong market. We believe that the principles and recommendations contained in this guide should help listed companies to understandand implement the requirements in the Code relating to internal control, and to devise their own internal control procedures that have regard to the specific circumstances and characteristics of their business. Enhancing corporate governance is not simply a matter of imposing rules and laws but about promoting and developing an ethical and healthy corporate culture. I hope that this guide makes itabundantly clear that establishing a sound system of internal control and reviewing its effectiveness is not an exercise in learning how to comply with unwelcome and onerous regulatory requirements but, rather, it is about implementing mechanisms that will help a company to achieve its corporate objectives and fulfil the expectations of its shareholders and stakeholders. At the basic level, theguide emphasises that, as a precondition for having effective controls, a company must ensure that it has clear objectives that are agreed by the board and well-understood by the senior management and employees. The company should then identify, assess and prioritise the risks that could prevent it from achieving those objectives, and establish processes to manage them effectively. It must alsohave in place early warning indicators so that if things go off course, the situation is quickly identified and brought to the attention of the appropriate people for action. For this to happen, there also needs to be good communication and an effective flow of information, both internally and with external parties, such as auditors and regulators. Finally, ongoing monitoring and reviews of thesystem are required because the business environment and conditions continue to change. Unfortunately, there are far too many companies where some, or all, of these elements have been lacking and, indeed, some of them have failed because of it, despite having, on paper, good business prospects. Some have grown too fast, and generally outrun the ability of their internal control and risk managementmechanisms to cope, others have failed to install proper internal checks and balances and have thus failed to identify the early signs of problems, and yet others have succumbed to the force of personality of dominant board members and controlling shareholders, whose ethical values fall short of market

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Internal Control and Risk Management
– A Basic Framework

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