A first line would be implementing management and internal controls; a second strengthening security, financial controls, risk . Enterprises should attach importance to R&D activities, scientifically formulate R&D plans according to the requirements of market development and technological progress, and strengthen the management of the whole process of R&D activities. analysis, B) controls that have been determined by the auditor to be For model 2, the correlation coefficient between the explanatory variable (IC) and the explained variable (SCPS) is 0.243 (p < 0.01), implying that internal control can be a driving force for CSR practices. and contractors, D) controls that compensate for another controls potential Strong internal controls can keep a company healthy by helping to achieve four key business objectives: Safeguarding assets. Shi et al. Economics and Management School, Wuhan University, Wuhan, Hubei, China. The influence of internal control on innovation performance can be divided into two viewpoints, namely the promotion theory of internal control and the paradox of internal control. However, the internal control of some enterprises has not been really implemented. And after calculation, the effect size of the intermediary effect is about 5.49% (i.e. (2018) [20]. Similar to traditional FS organizations, a robust governance infrastructure should have 'three lines of defense'. The promotion of enterprises innovation ability depends on the effective input mechanism, and the integration of human capital and material capital into the innovation activities is often determined by the internal system of enterprises [19]. As shown in column 4 of Table 6, the coefficient on IC is positive and significant (0.022, p < 0.10). (2013) [68], Tian and Wang (2014) [69], the number of patent applications of enterprises is adopted to measure the innovation performance. The effective internal control has a spillover effect, which not only affects the production and operation of enterprises themselves, but also affects all stakeholders. Where, M_PATENT represents an enterprises annual innovation performance. But they are only preliminary analyses because the other factors that affect the explained variables are not included. The coefficient on L.ROA is positive and significant (2.103, p < 0.01), indicating that the good accounting earnings can provide more financing for innovation investment. And in the state-owned sample, the coefficient on IC is not statistically significant (0.012, p > 0.10). The minimum of ROA is -0.116, and the standard deviation of LER (GROWTH) is 1.059 (0.326). ________. The effective internal control prevents various risks in the process of technological innovation through the reasonable risk assessment, control and prevention [15, 16]. (2018) [71], and adopts SCPS as the measurement index of CSR performance. Risk Management and Internal Controls Maintaining a robust risk and control framework Group internal control system The processes which the Board has applied in reviewing the effectiveness of the Group's system of internal control are summarised below: Operating companies, with the oversight of their sector boards, carry out a detailed risk . For the control variables, the mean (standard deviation) of R&D is 4.42% (4.259), and the maximum (minimum) of R&D is 26.90% (0.07%), indicating that the proportion of R&D input in the operating revenue varies to a certain extent, and the emphasis of different sample enterprises on R&D business is obviously different. The coefficient on ICFCSR is positive and significant (0.003, p < 0.10), indicating that there is a synergistic effect between internal control and CSR activities, so it is appropriate to analyze the intermediary effect of CSR activities between internal control and innovation performance. On this basis, the continuous variables are Winsorized with twoway 1% quantiles, to avoid the adverse effect of abnormal observations on the analyses. On basis of standardizing R&D behaviors, the transformation and effective utilization of R&D results should be promoted to continuously improve the independent innovation abilities of enterprises. Abstract: This paper describes how to efficiently solve a robust optimal control problem using recently developed primal-dual interior-point methods. On basis of improving CSR performance, enterprises should establish the good corporate image and deliver the better reputation information to stakeholders, and then obtain and maintain the lasting competitive advantages. In this regard, SCPS is determined as formula (1). The mean of DUAL is 24.37%, and the board of supervisors shall be composed of at least 3 supervisors and at most 7 supervisors. The promotion theory of internal control may be more suitable for Chinese national conditions [28]. 1)An effective and robust system of internal control For model 1, this study distinguishes between the state-owned and non-state-owned samples. The results show that the enhancement of the effectiveness of internal control is conducive to improving innovation performance, which comes from the supervision and motivation of internal control during the implementation of innovation projects, reducing those inefficient R&D projects, and strengthening the efficiency of innovation activities to improve innovation performance. The promotion theory of internal control holds that the strengthening of internal control contributes to the improvement of technical innovation output [22, 23]. In the regression analysis, in order to maintain the dimensional consistency, the natural logarithm of 1 plus the variable is taken and denoted as LnGPATENT. This study aims to investigate the impact of the internal control system (Control environment, Communication, Risk management, Control activities and Monitoring) on organizational effectiveness in . A robust control system, comprising effective internal control, risk management and audit, is fundamental to better governance, safeguarding of taxpayers' money, and to preserving public trust. And the coefficient on LnASSET is negative and significant (-0.173, p < 0.05). (2018) [51] believe that CSR activities have an inverted U-shaped influence on enterprise technological innovation, which can effectively promote enterprise innovation within a certain critical point, but hinder enterprise innovation beyond that critical point. Likewise, proper controls quickly identify errors and fraud if they occur. After T test with sample data, it is found that the difference between the mean of internal control index of state-owned enterprises and that of non-state-owned enterprises is 4.927, which is not statistically significant. From the perspective of the effectiveness of internal control, this study analyzes the influence of internal control on innovation performance and internal control on corporate social responsibility (CSR), and then analyzes the intermediary effect of CSR between internal control and innovation performance. This implies that CSR performance has been integrated into the construction process of internal control. The good accounting surplus, appraisal expectations for senior executives and scale advantage are the positive factors to enhance the efficiency of enterprise innovation. In the non-state sample, the coefficient on DUAL is positive and significant (0.305, p < 0.01). In the process of technological innovation, the design, testing and use of innovation links are inseparable from the support of stakeholders. LSDV method is adopted to analyze model 1model 3, and the null hypothesis that the coefficients of all individual dummy variables are zero is rejected, indicating the existence of individual fixed effect. But internal control is implemented late in China, and the overly strict system is not established. Table 2 reports the descriptive statistical results of variables. Hypothesis 3 above is verified again. The robust Hausman tests for model 1model 3 show that the Sargan-Hansen 2 are 315.722 (p = 0.000), 415.706 (p = 0.000), 329.610 (p = 0.000), respectively, indicating that the fixed effect model should be adopted instead of random effect. During the observation period, the external auditors take a positive attitude towards the legality and fairness of financial reports of nearly 98.40% of the sample enterprises, which ensures the reliability of the data used in this study. In this study, the percentage of R&D investment in operating revenue is adopted to evaluate the R&D investment intensity, to investigate its influence on enterprise innovation performance. For formula (1), C = C1+C2+C3+C4+C5-C6+C7+C8-C9. In order to realize long-term interests, major shareholders tend to encourage enterprises to better carry out CSR activities. Data Availability: All relevant data are within the manuscript and its Supporting Information files. It includes not only the effectiveness of preventing, finding and correcting the major misstatements in the financial reports, but also the effectiveness of restraining the executive behaviors and thereby reducing agency costs [72]. The data set used in this article for discussion and analysis. Wang et al. The Characteristics of Effective Internal Control. When enterprises strategically undertake social responsibility, they achieve growth through product and process innovation [2]. The meanings of C7, C8 are the finance charges and donation outlay, respectively. Hypothesis 3 above is preliminarily supported. There are many factors affecting the innovation ability of enterprises, but internal control is undoubtedly an important factor [73]. (2019) [52] believe that there is a positive association between CSR and innovation performance in high-polluting firms. The framework of a good internal control system includes: Control environment: A sound control environment is created by management through communication, attitude and example. As shown in column 3 of Table 4, in model 2, the coefficient on the explanatory variable (IC) is positive and significant (0.064, p < 0.01), indicating that the improvement of the effectiveness of internal control promotes the performance of CSR activities. The paradox of internal control holds that the excessive institutionalization often leads to the rigid management, which is not conducive to the implementation of flexible technological innovation [24, 25]. The external stakeholders often have some new, non-redundant professional knowledge and skills, which can be used to supplement the internal knowledge of enterprises, thus helping to improve the technological innovation of enterprises [59, 60]. Where, in the numerator of formula (7), M1 represents the cash paid to distribute dividends or profits. The operation mode, operation management and supervision of state-owned enterprises and non-state-owned enterprises are not the same, and there are some differences in the efficiency of technological innovation and CSR activities. Also, scholars have elaborated on the relationship between internal control and CSR activities to a certain extent [17, 18]. CSR activities play an important role in the sustainable development [14]. The good social reputation of enterprises will enhance their competitiveness in an invisible way. Enterprises carry out CSR activities through various commercial and social practices, bringing sustainable and just benefits to stakeholders, which promotes the welfare of society, and protects the members of organizations. This guideline clearly states that enterprises should fulfill their social obligations and responsibilities in the process of operation and development, including production safety, product quality, environmental protection, resource conservation, promotion of employment, and protection of employees rights and interests. The descriptive statistics for single variable and correlation coefficients between variables are presented above. These reported results of correlation coefficients ensure the rationality of model 1 and model 3 above. Then, under the current background of internal control construction, how does internal control affect the status of technological innovation? Some scholars have shown that internal control effectively prevents various risks in the process of technological innovation through the reasonable risk assessment, control and prevention [15, 16]. The coefficient 1 in model 2 refers to the effect of internal control (IC) on the intermediary variableSocial contribution per share (SCPS). And in model 3, the coefficient 1 is the direct effect of internal control (IC) on the explained variable (LnPATENT) after the effect of the intermediary variable (SCPS) is controlled. The improvement of CSR performance helps to obtain the information and resources needed in the process of technological innovation [50, 51]. B) will eliminate all risks related to entity objectives. To improve the innovation ability, enterprises should attach importance to the internal system. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Then, the corresponding variables in the original model 1model 3 above are replaced again. The specific value of FCSR is the ratio between the cash flow paid for shareholders, creditors, employees, customers, consumers, suppliers, communities, other stakeholders and the average of total shares in the current period. For full functionality of this site, please enable JavaScript. In the Application Guidelines for Internal Control No. The goal of corporate governance has experienced a process from the maximization of profit to the maximization of shareholder equity, and then to the maximization of stakeholder benefit. However, in state-owned enterprises, internal control does not give play to a significant impact on the performance of technological innovation. The intensification of R&D investment will be an important factor in improving innovation performance, but this positive effect is only reflected in the non-state sample. Barnett and Salomon (2012) [37] found that the relationship between CSR performance and enterprises financial performance is U-shaped, enterprises with low CSR performance have higher financial performance than enterprises with moderate CSR performance, but enterprises with high CSR performance have the highest financial performance. From 2008 to 2010, Chinese five ministries and commissions, including the Ministry of Finance, successively issued the Basic Norms for Enterprise Internal Control and the Supporting Guidelines for Enterprise Internal Control, promoting the development of the construction of internal control. The disclosure of SCPS information helps the public to have a more comprehensive understanding of the true value that enterprises create for their shareholders, employees, customers, creditors, communities and the society as a whole. (2011) [73] and Chen et al. it is part of the organization's internal control system and depends on its effectiveness Besides, the coefficients on L.DTL are negative and significant (-0.014, p < 0.01; -0.006, p < 0.10). The robust Hausman tests for model 1- model 3 show that the Sargan-Hansen 2 are 107.432 (p = 0.000), 101.228 (p = 0.000) and 112.548 (p = 0.000), respectively, indicating that the fixed effect model should be adopted. In constant voltage and frequency (VF) control-based islanded microgrids, the nonlinear load can easily cause voltage harmonics and degrade the power quality of the islanded microgrids. (2017) [78], adds the marketization index of the registration place of listed enterprises (Marketization) as a covariate, and screen out the treatment group and control group. The essence of innovation is the innovation of human knowledge, science and technology. As shown in columns 2 and 3 of Table 5, in the state-owned sample, the coefficient on the explanatory variable (IC) is not statistically significant (0.008, p > 0.10). Optimal & Robust Control generally refers to that broad class of control systems that encompasses the most of Mechanical Systems, Servo systems, Aerospace Applications, etc. (2018) [51], measures the innovation performance of an enterprise in the current year by dividing the annual number of patent applications by the average of the current years patent applications in the industry to which the enterprise belongs, which helps to increase the comparability of innovation output among enterprises in different industries. 1)An effective and robust system of internal control The specific calculation method of FCSR is shown in formula (7). D) can only provide an entity with reasonable assurance in This study expounds the mechanism that internal control and CSR influence enterprise innovation performance, and enriches the existing literature on the relationship between internal control and innovation performance. International Journal of Financial Studies 10: 71.https:// . For instance, Ntim and Soobaroyen (2013) [17], Li et al. 1 2/1 = 0.0480.086/0.068). Accordingly, the statistical results of the fixed-effect model are shown in columns 4 and 5 of Table 5. Generally, the internal control can be taken as an institutional system of risk management. (2018) [71] is referenced. In the implementation of internal control, the relationship between institutional control and flexibility should be dynamically balanced, the content and proportion of each control element should be refined, and the formalization of institutional construction and management rigidity should be avoided. The higher the total score, the higher the level of fulfilling social responsibility, and the higher the enthusiasm to take social responsibility. (2014) [70] and Li et al. Internal controls are not stand-alone practices. However, the standard deviation of IC is 128.960, and the maximum (minimum) of IC is 863.140 (0.000). 10Research and Development aims to promote enterprises to achieve the independent innovation, enhance their core competitiveness, effectively control the risk of R&D activities, and promote the strategy of long-term development. A guide to effective internal controls | Deloitte Luxembourg | Audit Solutions A guide to effective internal controls over financial reporting From risk assessment to monitoring Discover the potential benefits of effective internal controls over financial and non-financial reporting (ICFR) The elements of internal control include the internal environment, risk assessment, control activities, information and communication, and internal supervision. The Hexun is a subsidiary of China securities market research and design center. Besides, in the state-owned and non-state samples, the coefficients on LnASSET are positive and significant (0.292, p < 0.05; 0.338, p < 0.01). For model 3, in the state-owned sample, the coefficients on IC and HXCSR are not statistically significant (0.041, p > 0.10; -0.002, p > 0.10).
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an effective and robust system of internal control
