Comparison of Internal Control Between Public Companies of China and USA

Two key elements which resulted in financial fraud of public companies from the U.S: management share and option holding as well as lack of restriction to management are analyzed, followed by comparison between Sarbanes-Oxley Act of 2002, 1992 COSO Report, 2004 COSO Report and Internal Control Guidance to Public Companies in Shanghai Securities Exchange, revealing that new theory of integrated framework of internal control has been accepted in China while in the mean time there's absence of legal action against management committing fraud. It is thus conclude as to Chinese financial market and public companies that, i) monitoring of management in public companies is necessary to balance between motivation and restriction; ii) there should be severe supervision; iii) enforcement must be enhanced; iv) effectiveness of internal control regulation need to be verified and integrated framework need to be improved.