Dotoral thesis: Improving the internal control system in Vietnam National Chemical Group

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The objective’s objectives and research scope: This thesis focuses on researching the internal control system in Vietnam National Chemical Group (both the parent company and its subsidiaries).

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Nội dung Text: Dotoral thesis: Improving the internal control system in Vietnam National Chemical Group

1 2 INTRODUCTION period. In realizing the importance of this matter, the author has 1. Urgency of thesis’s topic chosen the following topic for the Dotoral thesis "Improving the In 2009, the Vietnam National Chemical Group was established internal control system in Vietnam National Chemical Group". on the basis of restructuring Vietnam National Chemical 2. Overview of researches about the internal control system Corporation. Due to the group’s large business scale and multi- Up to now, there have been many scientific researches about internal control system in different aspects and fields: industry operation, a strong internal control system in support of + Rationales about internal control systems in Vietnam and in the management activities is indispensable to ensure the group’s world have focused on clarifying concepts about internal control objectives, such as: protection of assets, assurance of information systems in companies, criteria and tools for assessing internal control reliability, application of regulations and operation effectiveness. systems and elements of the internal control systems However, the group’s formation was not based on capital + In Vietnam, researches on the application of the internal control accumulation and gradual scale development like other groups in systems in a specific unit in different industries and fields have also the world. Due to this, there were many shortcomings, such as: attracted interest of many authors in their doctoral theses: in banking reliance in subsidies, monopoly, low business efficiency in credit activities or medium companies. comparison to its advantages and state investment, ineffective + Recently, there have been a number of researches for doctoral outward investment. Ownership role and state management function theses about the internal control system whose research scopes are were not separated. Capital accumulation, concentration and control not limited to a particular enterprise but widened to an industry, an were still limited. A number of key management positions were economic group and the Ministry of Defence appointed for political reasons, not basing on business management + Organization of business activities under the economic group abilities. The information system had many shortcomings which model is still a new issue, which proves to have many shortcomings affected its effectiveness for decision-making process. Very few during the 10-year process. However, no research about internal units in the group had their appropriate own policies and procedures control at national groups as well as building it into system is for internal control. In addition, one of seven main contents available. There has also been no reasearch about "Improving the according to the group’s restructuring guideline issued by the Prime internal control system in Vietnam National Chemical Group". Minister for the period from 2012 to 2015 was enhancing the 3. The thesis’s objectives and research questions: group’s internal control activities. Due to these reasons, This research aims to develop theories about internal control improvement of the internal control system in Vietnam National systems in economic groups then assesses the system’s current situation Chemical Group has become an urgent matter in management, in Vietnam National Chemical Group and proposing orientations, which carries both theoretical and reality meanings in the current solutions for improving it in line with the group’s operations
3 4 Research questions: In achieving the above research objectives, 7. The topic’s research framework and structure research questions were given accordingly (see research framework) 4. The objective’s objectives and research scope Chapter 1 Answering the first research This thesis focuses on researching the internal control system in General theory about internal question: Vietnam National Chemical Group (both the parent company and its control system and internal control Characterisics of economic groups subsidiaries) system in economic groups concerning internal control system’s 5. The thesis’s research methodologies design and operation? Elements of - Methodologies of dialectical/historical materialism under internal control system in economic groups? International experience Marxism-Leninism are applied for sociological researches. The about internal control system in thesis applies methods of generalization, statistics, analysis of basic economic groups in some countries, principles about internal control systems in textbooks and documents. thus drawing lessons for Vietnam - Survey, observation, interview methods: The author designs the Chapter 2 questionnaire for survey and carries out intensive interviews. Reality of the internal control Answering the second research - Data processing method: from results of survey, observation and system in Vietnam National question: interviews , the author designs 14 charts for description, evaluation, Chemical Group Reality of internal control system’s statistics and comparison. design and operation in Vietnam - Data sources: The author used primary and secondary data. National Chemical Group? 6. New contributions of the thesis - About theoretical aspect: building internal control model as the theoretical framework for researching the internal control system at Chapter 3 Answering the third research Vietnam National Chemical Group. It brings up characteristics of Orientations and solution for question: organizational activities and capital define the design and operation of improving the internal control What group of solutions needed to the group’s internal control system. From the reality of organizing system in Vietnam National improve the internal control system internal control systems in economic groups in the world (such as the Chemical Group in Vietnam National Chemical Group U.S, China, Japan, Korea), the thesis draws some lessons for Vietnam. in accordance with its objectives - About reality aspect: basing on reality survey, analysis and assessment, the thesis proposes a group of solutions for improving Chart 1.1. The topic’s research framework the internal control system in Vetnam National Chemical Group.
5 6 I.C CHAPTER 1: GENERAL THEORY ABOUT INTERNAL CONTROL SYSTEM AND INTERNAL CONTROL SYSTEM IN ECONOMIC GROUPS 1.1 Overview of control and internal control in management.. Reliability of Compliance of Efficiency of 1.1.1 Control in management financial reports laws and operations Control is closely related to the management and it plays an regulations important role in manager’s decision making. It is one of the five functions of management including: Goal setting and planning, Control Risk Control Information Monitoring operation organizing, coordinating and control. Through control, the environment assessment activities and managers recognize the shortcomings in the organizational system to communication propose timely corrective measures. Through control, the managers get sufficient information to make appropriate decisions in order to Chart 1.3: Structure of internal control according to COSO adapt to the environment and achieve their objectives.. 1.2 Internal control systems in company 1.1.2 Classification of control 1.2.1 The nature of internal control system By object of control: for prevention, detection and regulation. By The International Federation of Accountants ( IFAC ) has scope of control: internal and external controls. By content of control: offered this definition: "The internal control system is a system of policies and processes designed to achieve four objectives: protection organizational and accounting controls. By management subject of of assets, assurance of information’s reliability, compliance of laws control: direct and indirect controls. and regulations and efficiency of operation[ 72.82 ]. This definition 1.1.3 Internal control mentions relatively all aspects of internal control system and The internal control structure of COSO (The Committee of emphasizes the objectives of ensuring the operation’s efficiency in compliance with the law and regulation, reliability of information and Sponsoring Organizations) can be generalized by the following assets’s safety. This concept also coincides with the viewpoint of diagram "Internal control is a process governed by managers, board Alvin A.rens. Having high generalization characteristics, it can be of directors and the unit’s staff. It is established to provide a used for internal control system’s researches in various fields. It is similar in nature with the word “system” in Vietnamese, which reasonable assurance to achieve the following objectives: Reliability means a whole entity of ideologies, principles, rules coherently of financial report; compliance with laws and regulations; efficiency linked together. Thereby it is applied by the author in studying the of operations [111 , p. 186] internal control system in Vietnam National Chemical Group
7 8 1.2.2 Elements of Internal Control System economic subjects including the parent company and its units/ With the approach that the internal control system is a unified member companies with legal entity status that share an ownership entity of the elements of the same type and function closely linked relationship or a long-term relation in terms of economic benefits, together, the author chooses the IFAC’s viewpoint as a basis to technology, markets, other services and operations strategy in determine elements in the internal control system in economic groups different areas in order to enhance accumulation, concentration, in general and Vietnam National Chemical Group in particular as increase competitiveness and to maximize benefits. follows: control environment, information systems (accounting The role of economic groups is very important: Groups allows system) and control procedures. Organizational model of internal mobilization of material resources , labor and capital in society; control system is outlined in the chart below linkage to protect the domestic production; expansion in the global market; overcoming of capital limitations for individual companies; Control Policies IC System Control promotion of research, development and application of new science procedures and technology, widespread exchange of information and experience and improvement of economical efficiency .. 1.3.1.2. Classification of economic groups: By the method of formation: horizontal affiliation, vertical Control environment Information System Control Procedure affiliation, mixed affiliation. By ownership: private group, public - Management - Document system - Principle of work group, multi-possession group. By the nature of the affiliation: Specification - Account system and responsibility “hard” and “soft” affiliation. By the specialization characteristics: - Organizational assignment group with few business fields, multi-industry group. By the Structure - Booking system - Non-concurrent business scope: domestic group, transnational Group - HR Policies - Reporting system 1.3.2 Characteristics of economic groups influencing the design principle - Planning activities and operation of internal control system in a group - Principle of - Control Committee 1.3.2.1 Group organizational and operational characteristics - Internal Audit Division authorization and regarding the design and operation of internal control system - External Control ratification - In terms of legal status, an economic group has no legal entity Environment status it is only a combination of companies with legal entity status. - The organizational structure of groups is very diverse with no model pattern. But groups share some common features in Protection of Assurance of Assurance of Assurance of management structure: according to the multi- block model in which assets reliability of the compliance with efficiency of a company holds a key role. information laws and regulations operation - In term of the business scale and scope: most groups operate in a very large scale and wide range Chart 1.4: Organizational model of internal control system - In term of affiliation and capital management: the main links in 1.3 Internal control system in economic groups a group is through capital investment relations 1.3.1 Overview of economic groups - In term of business sector: the groups carry out diversified and 1.3.1.1 Concept and roles of economic groups multi-sector operation to diversify risks From different concepts, author comes up with a concept of an - In term of ownership: multi-mode of ownership, parent company economic group as below: An economic group is an entity of and subsidiaries
9 10 1.3.2.2 Characteristics of capital in an economic group regarding the In Korea, the Chairman’s responsibilities are equivalent to these design and operation of internal control system of the Board members. In each group, there is a corporate office - Diversity of capital ownership in group directed by the President with the function of strategy planning and - Distinction in ownership and operation of capital to a certain extent. development, coordination of joint activities. This, however, is not an - Transparency in adjustment of capital structure independent legal entity. In the internal control system, the audit - Subject to regulation of the financial management mechanism committee reports to the Board and owners about the operations of - High-risk characteristic of capital in the group subsidiaries. The “pyramid-style” human resource policies always 1.3.3 Distinction between internal control systems in a group and push all members to strive for high results in their position. an individual company 1.4.2 Some lessons for the internal control systems in Vietnamese - Distinction between a group and an individual company economic groups - Distinction between internal control system in a group and in an An audit committee is necessary for the control environment. A individual company unit of internal audit is required under the Board of Supervisors at all 1.4 Experience of the internal control systems in some levels of the group to provide early warnings of risks, financial international economic groups monitoring and assessment of effectiveness and efficiency of the 1.4.1 Overview of the internal control systems in some international internal control system.The State-owned groups (public groups) need economic groups a clear distinction between the function of business management and In the U.S: the organizational structure of groups is as follows: public administration, between objectives of business efficiency and the parent company establishes a Board of Directors, the Board - on state management for economic regulation. The parent company behalf of the company- has the right to decide all matters related to identifying and implementing goals, tasks and rights of the company. assigns representatives to its member companies. For human resource The Board of Directors includes internal members and independent policies, the management mode for « lifetime recruitment» in Japan members. The Board usually forms several committees in which the should be applied flexibly in combination with the pyramid –style members of the Board are in charge of, including: finance, human policies in Korean to push all members to strive for high work results resource and audit committees. The control of groups in the United Conclusion for chapter 1 States focuses on three aspects: cost, capital and debt In chapter 1, thesis clarifies the following contents: In China: the group and parent company carry out both capital - Specialization to clarify basic theoretical issues about internal management and direct production and trading functions. The parent control systems in companies Analysis of different opinions about company directly assigns representatives to the management bodies of internal control system, thereby offering a organizational model of respective subsidiaries with governing and coordinating power. internal control system as the theoretical framework for studying the Internal audit is an important element in the group’s financial internal control system in Vietnam National Chemical Group supervision system. However, to boost the efficiency, it is necessary - Analysis of the group’s organizational and operational to clearly define the relationship and responsibilities of this unit with the Board of Supervisors.. characteristics influencing the design and operation of the internal In Japan: organizational structure in the groups, parent companies control system. Distinctions between internal control system in and subsidiaries share quite close links in exchange of informations, groups and individual companies are presented to offer a deeper view strategies, business plans through the Board of Directors. The human on the design and operation of internal control system in groups. resource policies in groups apply the management mode for « lifetime - Study of experience in organizing internal control systems in recruitment» which encourages everyone in the groups to do their best some economic groups in the world (such as the U.S, China, Korea) for survival and for development of the groups.. to draw some lessons for Vietnamese groups.
11 12 CHAPTER 2: REALITY OF THE INTERNAL CONTROL 2.1.2.2 Capital characteristics of Vietnam National Chemical SYSTEM IN VIETNAM NATIONAL CHEMICAL GROUP Group 2.1 Chacteristics of Vietnam National Chemical Group regarding Capital is monitored by representatives and adjusted according to the selection of research object different period. Capital is mobilized in many ways: issuance of 2.1.1 The establishment and development of Vietnam National bond, treasury bill, promissory notes; borrowing from financial Chemical Group institutions, other financial organizations and individuals outside the The Vietnam National Chemical Corporation was established group. Outward investment must conform to legal regulations in following Regulation No. 835/TTg dated Dec 20, 1995 of the Prime accordance with the parent company’s strategy and planning Minister on the basic of merging two corporations: Fertilizers and 2.1.3 Selection of surveyed companies under the group Basic Chemicals Corporation and Industrial and Consumer Chemicals * Survey subjects: The parent company and member companies Corporation. In 2006, Vietnam National Chemical Corporation of the group (30/47 companies accounting for 63,8%) as changed its operation model into the form of parent company- representatives concerning the degree of capital ownership and subsidiaries. In 2009, the Prime Minister approved the pilot scheme on trading sector, [Annex 13] the establishment of Vietnam Industrial Chemical Group and the *Design of questionnaires: At the parent company: 112 questions decision on the establishment of Vietnam National Chemical Group as [Annex 20]. At the member companies: 128 questions [Annex 12] the parent company. In 2010, the parent company - Vietnam National *Survey objectives, to collect information about the group’s Chemical Group - was changed into a Limited Company owned by the internal control system State according to a decision by the Prime Minister. *Survey methods: Questions in the survey form include both open 2.1.2 Characteristics of the Vietnam National Chemical Group and closed types, coupled with interviews and observation to evaluate affecting the internal control system the existing level of internal control system 2.1.2.1 Operational characteristics of Vietnam National Chemical 2.2 Design and operational reality of the internal control system Group in Vietnam National Chemical Group - About the group’s establishment method: based on re- 2.2.1 Control environment’s reality in Vietnam National Chemical Group arrangement, restructuring of Vietnam National Chemical Corporation - About management: internal control is highly appreciated in the - About legal status, Vietnam National Chemical Group does not parent company. Though having capital trading function, have legal entity status; only the parent company and its subsidiaries management bodies have not undergone appropriate risk research have such status and evaluation processes. - About simple organization structure: the parent company is the - Organizational structures in parent and member companies are level-1 company; its subsidiaries are level-2 companies suitable. However, a number of units in member companies still carry - About affiliation and ownership: subsidiaries and affiliates in out concurrent functions and there is no corresponding job the group exit under the three following forms: limited company, description for each position. joint stock company whose over 50% of charter capital owned by its - Human resource policies are established in parent and member parent company and joint stock company whose under 50% of companies. But there is a lack of connection between training charter capital owned by its parent company. instittues and companies in the group’s human resource plan. - About scale, the group enjoys scale advantage in terms of - Companies take the initiative and pay attention to planning capital, assets, human resources and number of subsidiaries. activities. However, the parent company’s co-ordination of planning - About varied business scopes and fields: the groups operates in among member companies is unsatisfactory. Instead of being active 4 main sectors and two other sectors related into main sectors in plan buildings, member companies base their plans on previous
13 14 term’s planning. The majority of staff has not undergone planning enhancing staff’s sense of self-criticism. No specific regulation in training, thus resulting in loose connections between plans. Most documents about authorization of document signing is in place in the companies do not carry out risk assessment in the planning process. majority of companies. - Control mechanism is organized; the control committees in parent 2.2.3.1 Reality of applying basic control principles in design and and member companies were restructured. However, operation of peration of control procedures in Vietnam National Chemical Group control committees is not effective. Specific rules on reward and - Principles of work and responsibility assignment: carried out between penalty are unavailable. the Board of Directors, Member Council and Board of Management in - Internal control systems are not built in parent and member the parent and member companies (one-member limited and joint stock companies companies). They are implemented properly between departments and - Many shortcomings exist for external elements of legal documents: for subordinate units capital building for state economic groups are limited; state capabilities - Non-concurrent principle: most companies in the group do not clearly in management and supervision are outpaced by reforms in financial regulate non-concurent works. mechanisms for state companies and state economic groups. - Principles of authorization and ratification: carried out at the parents 2.2.2 Reality of information system in Vietnam National Chemical and member companies as well as subordinate units. Authorized Group individuals must implement work approval and must be held responsible 2.2.2.1 Information system of companies for what they approved. Information is mainly exchanged via documents, phones and 2.3.3.3 Reality of controlling principle activities in Vietnam National network. However, the information system does not assist management Chemical Group bodies in identifying and coping with risks as well well maximizing At the parent company: Concerning capital control, financial business opportunities. No appropriate mechanism is in place for regulations are established in most companies. However, there is no outside information collection. appropriate regulation on capital control in the group. Concerning 2.2.2.2 Accounting information system control of representatives, control regulations are in place but many Attention is given to the parent and member companies’ shortcomings exist: many rights are assigned without an effective accounting information systems, which meet the management control mechanism; remuneration is not reasonable; concurrent requirements. At member companies, however, the formation of positions exit; there is no frequent information exchange between document rotation process is not specified by documents; delegation representatives and the parent company. on document signing is unclear. At member companies: Concerning the account system; a number of companies do not - Purchasing control: criteria and procedures for evaluating and use their accounts appropriately; accounts do not provide assistance selecting suppliers are not regulated by written documents; selection for preparing company’s management report. is still based on relations, thus sometimes resulting in many risks in There is a lack of attention regarding the record and report system purchasing process. 2.2.3 Reality of control procedures in Vietnam National Chemical - Sales and payment collection control: most one-member limited Group companies do not have sales promotion policies, unlike joint stock 2.3.3.1 Principle control procedures in Vietnam National Chemical companies with better, more effective and flexible sale policies. Group Control procedures from placing order, putting goods out, making Control procedures are established but focus is only given on invoice, delivery and payment are cumbersome with many stages; regular activities, not abnormal ones. Objective control procedures therefore application is still slow. Co-ordination is missing between are not applied such as suggestion box. No method available for different units in carrying out their work.
15 16 - Inventory control: surveyed companies have not established incomplete. Regarding organizational structure, concurrent and inventory procedures by documents, which makes it hard for assigning overlapping situations in functions, responsibilities still exist. works and checking inventory properly. A number of companies do Appointment of responsibilities is not regulated by specific not review the current status of their materials and inventories for documents. Regarding human resource policies, they have not categorizing unsold goods/materials with poor quality and having displayed effectiveness. There are no policies to encourage appropriate solutions. employees’ devotion to their companies. Regarding planning, - Fixed assets control: companies have yet paid attention to assets initiative has not been taken in assessing the reality for planning. numbering or coding, which creates difficulties for asset control and Planning procedures are not constructed properly. The quality of classification. In addition, companies in have not planned on building planning activities is not good with the lack of synchronization. and maintaining a system of daily and unusual reports about usage and Regarding internal audit, such important system has yet been built by current status of fixed assets. companies in the groups.Regarding control system, its role and Control of discharge into the environment: the task of responsibilities have not been brought into play and no proper training environment control in the group is carried out well. However a few is available. Regarding control from the outside, control mechanism companies still do not pay attention to controlling environmental do not focus on control of the implementation of state ownership. waste. They had to pay fines to the government for environmental There is a lack of consistency, synchronization about the state’s pollution. When pollution occurred, timely recovery measures were management role with focus on trivial and separate matter only. not carried out, resulting in serious consequences. - Information system: communication of information in the 2.3 Assessment of the reality of internal control system in group’s companies are not smooth or even slow at times. There are Vienam National Chemical Group. also many shortcomings in accounting information system. 2.3.1 Strong points of the internal control system in Vietnam - Control procedures: incomplete control procedures and National Chemical Group. violations in designs of procedures are still in place. - Control environment: companies in the groups have favourable Regarding control of some basic activities: In the parent internal control environments to maintain and organize the internal company, control of representatives proves to be not effective and control systems with a view to bringing into plays its effectiveness in does not bring its assigned responsibilities and role into full play. management activities. Leaders at parent and member companies Regarding capital control: no suitable regulations about capital demonstrate regular concerns, direction, and willingness to think, do and control in the group is available; the groups’s financial capability is approach new knowledge in management in general and in control of weak. In member companies: Purchasing control: there are no activities in particular. effective control policies and procedures for suppliers; Sales and - Accounting information system: accounting activities are carried collection control, control of liabilities and markets is not effective out quite in sync with business characteristics in each filed of enough; Investory control: inventory procedures have not been operation. designed; no policy in handling unsold goods is available; Fixed - Control procedures: companies have carried out activities and asset control: review and evaluation of fixed asset usage have not operations with complementary effects in order to create a continuous received the group’s proper attention. internal control system. - Risk assessment system: The group has yet carried out risk 2.3.2 Some shortcomings of the internal control system in Vietnam assessment and analysis National Chemical Group. - In recent times, a number of companies in the groups displayed - Control environment: Reagrding management, awareness about inefficient business operation despite enjoying the government’s control of a number of leaders in member companies is still incentives and resources. Their management capability, effectiveness
17 18 and efficiency are still limited. The government’s mechanism and CHAPTER 3: DIRECTIONS AND SOLUTIONS TO IMPROVE policies have not kept pace with reality. Outward investment is still INTERNAL CONTROL SYSTEM IN VIETNAM NATIONAL carried out. Internal competition is still present within the group. CHEMICAL GROUP 2.3.3 Reason for shortcomings of the internal control system in Vietnam National Chemical Group. 3.1 The necessities and directions for completing the internal Objective reasons: The group’s establishment and development control system in Vietnam National Chemical Group are based on administrative decisions rather than capital 3.1.1 The advantages and disadvantages during the establishment accumulation and concentration. No focal unit in charge of and development of Vietnam National Chemical Group ownership and state management is available. Many mechanisms and Advantages: The business result and orientation for development of policies do not distinguish between business role and public duties, resulting in low business efficiency and effectiveness. This is because the group has received approval from the Prime Minister; the the group is given the role of ensuring social securities, battling arrangement and legal bases for operations of companies within the inflation and economic downturn. group are mostly sufficient. Subjective reasons: The group’s management and operation Disadvantages: Regulations by the law regarding operations of the activities are weak with a lack of transparency. No appropriate company are scattered and have not been sufficiently organized, leading attention is given on business capability in the personnel mechanism. There is a lack of focus on recruting and training staff. to limitation in their effectiveness. Several products have not received Responsibilities about management results are not associated with the attention. Regarding business capital and product characters, producing management bodies.There are no assessment activities on the and selling fertilizers require a large amount of investment capital and effectiveness of internal control. Passive reviews of documents and current capital while having slow capital turnover with low investment regulation is still prevailing. Knowledge about internal control effectiveness; the fertilizer market is seasonal and relied on farmers’ system of management bodies is limited without proper training. earnings. Rubber and chemical products are in high and unequal Conclusion for chapter 2 competition with imported products due to imitation goods, fake goods In chapter 2, the thesis presents the following contents: It and trade fraud. The government’s policies caused high rise in inflation summarizes the establishment and development of Vietnam National and interest rate. Regarding trade fraud problem, the production and Chemical Group. The author analyzes characteristics of business sales of fake goods, low-quality goods, goods with trade fraud seem to operation and capital in the group to clarify its impact on the design and application of internal control system. Basing on the survey of 30 be increasing in number as well as sophistication. companies in Vietnam National Chemical Group, the thesis analyzes 3.1.2 Challenges for management and the need to complete the representative models to display the reality of internal control system internal control system of Vietnam National Chemical Group in the group. It provides assessment of the existing level and The legal base defining the internal control system within companies effectiveness of the internal control system’s elements in the in one group has not been systemized into legal documents. Financial group.On the other hand, the thesis also presents deep analysis of basic activities in the parent and member companies. From that, the activities have been lacking integration and in small scale; there are author assesses strong points and shortcoming of the internal control many documents with overlapping or contradicting contents. The system. Such assessment serves as the basic for proposing solutions information system has not been used sufficiently and timely in to improve the internal control system (as specified in Chapter 3) assisting management decision making. Control procedure is
19 20 insufficient and only concentrating on previously seen activities while recruiting capable candidate with abilities and levels matched the missing the irregular activities; thus lacking the initiative. In regulation specialization of each department. Developing a top professional team No. 2097/QD-TTg approving the scheme of Restructuring Vietnam with high profile personnel, especially those in management and Chemical Organization period 2012-2015, one of the seven important technology. objectives is to increase internal control. Regarding the planning activity: the planning activity for the 3.1.3 Directions for completing the internal control system in parent company needs to fulfill two roles: blending and combining Vietnam National Chemical Group Completing the internal control system must ensure the the plans from each member company. Procedures for planning and effectiveness and practicalness; the complete element parts; the monitoring the execution of plans need to be built. The Planning harmonious solution for all relations, avoiding overlapping while Division in the parent company and planning departments in member ensuring the feasibility and economical aspect of the system. It must companies need additional functions in recognizing, analyzing, aim at the group’s wholly restructuring; respect the characteristics of assessing and monitoring risks. the group; ensure the State executing its ownership rights within the Regarding the monitor mechanism in the parent and member laws, not to interfere deeply and directly into the operation of the companies: the efficiency of the control committee needs to be group. It must be compatible with the requirements and the improved. professional skill level as well as the available equipment. 3.2.2 Solutions for improving the information system 3.2 Solutions to improve the internal control system in Vietnam Regarding the improvement of information system at parent and National Chemical Group 3.2.1 Solutions for control environment member companies: Building an internal network system to easily Regarding management characteristics of parent and member receive and send out information. Researching on the ERP management companies: Raising management’s awareness and views regarding application software. the internal control system; recognition and assessment of risks; Regarding the improvement of accounting information system at business management in the coming time for better execution in member companies: Raising the managers’ awareness about the group’s restructuring; the importance of assessing internal control importance of accounting activities. Regulations, forms, and system’s effectiveness, business culture building within the company. application area for receipts should be issued in official documents. Regarding the organization: Requiring the study and creation of Regarding the accounting ledgers: Some companies using the “Table of Prescription of Responsibility” for each position in the journal voucher model should change to the general journal model. group. Responsibility need to be delegated between the head and Regarding the accounting report system: Research and build an deputy level to avoid too much workload. integrated management report system. A model for accounting Regarding the human resource policy: Restructuring the human management operation should be built along with the financial resource policy in units of the parent company; putting priority in accounting system.
21 22 3.2.3 Solutions for improving control procedures carrying the group’s characteristics. Controlling the planning of Principles for assignment of duties, non-concurrent position, market development. Controlling re-organization and reform of the delegation and approval in the design and operation of control enterprise, initiating the equitisation process. Controlling the procedures should be applied fully and adequately. The control research, application and investment of new technology meeting the procedures for principle activities in member companies need to be environmental standards. Controlling the restructure of member improved, including purchasing, selling and cash receipt control, companies, intiating the cooperative assignment with no internal stock control, fixed assets control. competition. Controlling the development of high quality personnel 3.2.4 Improvement of management mechanism for representative for the group. from the parent company 3.3 Proposals to execute solutions for improving the internal A thorough management mechanism needs to be applied to select control system in Vietnam National Chemical Group representative with adequate ability and ethic. For companies with 3.3.1 To the State less than 50% capital owned by the group, representatives must be The State needs to continue improving the legal policy system people from the company with important positions such as head of regarding the management and usage of state properties at economic accounting, vice manager, head of department or head of control group. A research on establishing a general department for controlling committee. Redistribution of representatives’ income needs to be and monitoring corporate finance under the Ministry of Finance’s done. Work needs to be assigned to the right person with right management should be done in order to manage and monitor the specialization. Specific and regular period reporting is designed. group’s operation. A more thorough distinction between State Additional criteria for selecting representatives are required. Rotation management functions and executing owner’s right function; and responsibility auditing of representatives must be done. Deadline separation between owner’s rights and proactive business operation for issuance of guidelines from the Board of Directors is added. rights should be carried out. The information disclosure mechanism 3.2.5 Improvement of capital control in Vietnam National on state economic groups is implemented. A control mechanism needs Chemical Group to be built with enough authority and objective, transparent goals and Further consolidation and development of foundation for the evaluation criteria. monitor and control mechanism. Enhancing operation management 3.3.2 To the authority bodies capability for management officers in the group. Maintaining an An internal auditing association should be established to carry out appropriate capital structure. Ensuring financial transparency and research and issue a standardized system for internal audit. Training timely, sufficient and accurate provision of information. Building and researching facilities need to increase the teaching and fostering financial plans to execute main assigned missions and tackle financial of knowledge about internal audit system to assist companies and issues during the restructure process. managers. 3.2.6 A number of solutions for improving internal control in 3.3.3 To the Vietnam National Chemical Group accordance with the group’s restructure guidelines until 2015 Controlling investment in major business fields; avoiding focus The group needs a clear understanding about elements of the in outward investment. Controlling investment in new products internal control system in order to sufficiently and appropriately design
23 24 policies and executes procedures. The parent company needs to be the CONCLUSION connecting bridge in holding seminars, discussion, meetings for In analyzing different viewpoints about the internal control member companies to exchange experiences about the internal control system, the thesis has generalized and proposed a model system as system. The parent company needs to guide member companies in the theoretical framework for research in Vietnam National Chemical reaching a final agreement in appropriately improving the internal Group. It provides analysis of the group’s operational and capital control system; modifying, adjusting and improving the internal characteristics influencing the design and operation of its internal management regulatory system. Research needs to be carried out on control system. Researches on experiences in operating such system establishing a specialized division with the focus on development of at large groups in the world such as the United States, China, Japan chemical industry, fertilizers, plant protection chemicals and the field of pharmaceutical chemistry. A representative management model and Korea have resulted in some lessons for Vietnam. compatible with the group’s operation model needs to be implemented. The thesis states the advantages and disadvantages of economic environment. Through survey, selection of survey subjects Conclusion for chapter 3 and deep analysis, the author brings out the reality of the group’s This chapter presents the following points: Improving internal control system. Then, the follow-up analysis and assessment elements of the internal control system and the management help draw strong points and shortcomings that require correction to mechanism of representatives. Appropriate and efficient control ensure the system’s objectives. Also, the necessity and orientation method needs to be applied to secure and develop State capital. The needed for improving the group’s internal control system are stated. thesis proposes several solutions for improving internal control in To ensure the accuracy and feasibility of proposed contents, the thesis accordance with the group’s restructure guidelines until 2015 to has discovered the reasons for existing issues of the internal control decision from the Prime Minister. In order for these solutions to be system in Vietnam National Chemical Group basing on theoretical applied, the thesis also presents a few proposals to the State, the research along with international experiences in designing and authority bodies and the Vietnam National Chemical Group to create operating the internal control system at international groups. The favorable environment for establishing and completing the internal author has presented detailed contents for improving the internal control system. control system by each element, capital investment and control, management mechanism for representatives of the group’s capital investment in other companies and a number of solutions for improving internal control in accordance with the group’s restructure guidelines until 2015. Its also states a few proposals to the State, the authority bodies and Vietnam National Chemical Group to create premises and foundation for applying said contents into practice Sincerely Thank You!.