Conclusion
In conclusion, this research examines the influences of board characteristics on specific internal control problems and weakness remediation before and after the enactment of China SOX. China’s new regulations and unique setting provide a good research opportunity. Most American papers (e.g., Krishnan, 2005; Zhang et al., 2007; Lin et al., 2011) have studied the associations among audit committees, management and internal control. According to China SOX, the boards of directors accept the main responsibility for internal control. Therefore, we hypothesize that the education, training, experience, certification and integrity of board members are related to internal control weaknesses. We also expect that dominant shareholder nature and board behavior have an influence on the correlation between the board and internal control. H1 (board member characteristics) and H2 (characteristics of chairmen) are supported to some extent. The findings suggest that the individual characteristics (education, experience, certification, integrity and training) of Chinese board members and board chairmen are related to internal control weaknesses and weakness remediation. Their relationships are direct and are not affected by board behavior but are influenced by ownership nature. The results provide strong evidence that board members play an invaluable role in Chinese internal control. In light of the current debate on the quality of Chinese boards of directors and the effectiveness of China SOX, our findings provide market regulators and stakeholders in China and other countries with timely evidence regarding the likely outcomes of similar standards in their jurisdictions. Our study indicates that requiring boards of directors to accept responsibility for internal control with the help of the boards of supervisors and management could benefit internal control.
