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Intelligent reflecting surface (IRS) is envisioned as a promising hardware solution to hardware cost and energy consumption in the fifth-generation (5G) mobile communication network. It exhibits great advantages in enhancing data transmission, but may suffer from performance degradation caused by inherent hardware impairment (HWI). For analysing the achievable rate (ACR) and optimizing the phase shifts in the IRS-aided wireless communication system with HWI, we consider that the HWI appears at both the IRS and the signal transceivers. On this foundation, first, we derive the closed-form expression of the average ACR and the IRS utility. Then, we formulate optimization problems to optimize the IRS phase shifts by maximizing the signal-to-noise ratio (SNR) at the receiver side, and obtain the solution by transforming non-convex problems into semidefinite programming (SDP) problems. Subsequently, we compare the IRS with the conventional decode-and-forward (DF) relay in terms of the ACR and the utility. Finally, we carry out simulations to verify the theoretical analysis, and evaluate the impact of the channel estimation errors and residual phase noises on the optimization performance. Our results reveal that the HWI reduces the ACR and the IRS utility, and begets more serious performance degradation with more reflecting elements. Although the HWI has an impact on the IRS, it still leaves opportunities for the IRS to surpass the conventional DF relay, when the number of reflecting elements is large enough or the transmitting power is sufficiently high.