BALANCING ACT: AN IN-DEPTH LOOK AT HOW INTERNAL AUDIT ENHANCES DEVELOPMENT AND SECURITY IN STATE-OWNED ENTERPRISES

Abstract

Internal audit, as an impartial validation and advisory function, holds a pivotal role in enhancing the stability, safety, and sound functioning of state-owned enterprises (SOEs). It achieves this by assessing and enhancing the efficiency and effectiveness of internal controls, risk management, and corporate governance processes. SOE internal audits, a vital component of our national audit framework, contribute significantly to the strengthening, expansion, refined management, reform, and innovation within enterprises. These audits employ their supervisory and evaluative functions to uncover and resolve developmental issues while concurrently offering consultancy and support in critical areas such as risk prevention and internal control evaluation, thus effectively bolstering the value of state-owned assets.

However, several factors, including unexplored audit methodologies, management risk preferences, and limitations in information availability, hinder internal audit from realizing its full potential in overall enterprise development and security. This article examines the current landscape of internal audit in Chinese SOEs, its value-added role in development and security, shortcomings, and underlying causes. It also proposes relevant strategies to enhance the value-added role of internal audit within state-owned enterprises.