Abstract
Market economy is the fundamental economic formation for a modern company. Nowadays, competition faced by companies is more and more serious. To survive in the fierce market competition, companies need not only to know the development direction of the market but also enhance their internal management. Under these circumstances, companies’ internal control is especially important.The essential characteristics of market economy is legal economy. Laws and regulations are the basic rules that companies must follow. Consistent with this, the primary objective of internal control is to ensure companies’ operations compliant with applicable laws and regulations. However, most of existing studies about internal control focuses on the financial part and no one cares about the legal part. This study tries to complement this gap. Based on risk theory and legal function theory, this study will discuss the effects of lawyer’s service on company’s internal control and its mechanism from three parts.
Part one: The effects of different levels of lawyer’s participation in internal control on company’s ability of legal risk recognition. Risk theory argues that risk is objectivity and intelligibility. Legal risks also have two characters. Lawyers can participate in all five aspects of internal control (including control environment, risk assessment, control activities, information and communication, and internal monitoring). The multidimensional participation of lawyers in internal control can improve company’s cognition of law, improve company’s cognition of activity legality, and improve company’s ability to recognize legal risks. Therefore, I propose that the higher level of lawyer’s participation in internal control, the better recognition ability of legal risks for a company.
Part two: The effects of company’s recognition ability of legal risks on the efficiency of company’s internal control. Efficiency of internal control is the extent between the actual results and the internal control target. The main objective of internal control is to control risks (including legal risks). Only when a company recognizes the existence of legal risks and where they exist, can it find effective ways to reduce risks and ensure compliance with applicable laws, regulations and other objectives. Therefore, I propose that the stronger company’s recognition ability of legal risks has, the more efficient the internal control works.
Part three: The moderating role of leader’s execute power on the positive relationship between lawyer’s participation in internal control and company’s recognition ability of legal risks. The company’s cooperation is needed if the lawyer’s participation want to achieve the desired results. Leader’s execute power can ensure that lawyer’s suggestion have effect on company’s activities and ensure the effect of lawyer’s participation in internal control. So, I propose that the more powerful leader’s execution works, the stronger positive relation between lawyer’s participation in internal control and company’s recognition ability of legal risk forms.
Based on prior literature and theoretical analysis, I designed original research models and questionnaires, afterwards verified by empirical research. The results and contributions are as follows.
1. Lawyer’s Participation in internal control can improve company’s recognition ability of legal risks. The result reveals a positive relationship between the lawyer’s participation in internal control and the company’s recognition. It means that the higher level of lawyer’s participation in internal control, the stronger company’s recognition ability of legal risk gains. The improvement of company’s recognition ability of legal risks can benefit companies in finding solutions and reducing legal risks. This study suggests companies that they can improve their recognition ability of legal risk and reduce legal risks by inviting lawyers participate more in companies’ internal control.
2. I investigate ways to improve internal control from legal perspective. The stronger company’s recognition ability of legal risks has, the more efficient the internal control works. It shows that company’s recognition ability of legal risks is an effective factor that can effect internal control. Improving company’s recognition ability of legal risks can improve the efficiency of internal control and
then ensure the achievement of internal control objectives.
3. The more powerful the leader’s execution works, the stronger positive relation between lawyer’s participation in internal control and company’s recognition ability of legal risks forms. From theoretical perspective, the lawyer’s participation is helpful to perfect the fit of law and internal control theory, and provide unique legal perspective for management theory. From a practical perspective, improving leader’s execute power is helpful to enhance the benefit of lawyer’s participation in internal control.
| Date of Award | 21 Aug 2015 |
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| Original language | Chinese (Traditional) |
| Awarding Institution |
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| Supervisor | Ziguang CHEN (Supervisor) |
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- Standard