دانلود رایگان مقاله انگلیسی افشای داوطلبانه کنترل ضعف داخلی و کیفیت درآمد: شواهد از چین - الزویر 2017

abstract

Using a sample of 1059 listed firms that voluntarily provide internal control reports in the period 2010–2011, this paper investigates the relationship between voluntary disclosure of internal control weaknesses (ICWs) and earnings quality in China. Our results show that earnings quality, measured by absolute discretionary accruals, is significantly associated with voluntary disclosure of ICWs. Furthermore, our results demonstrate that both accounting-related and non-accounting-related ICWs affect earnings quality. This study contributes to the internal control literature by extending the evidence for ICW disclosure to an emerging economy and examining the impact of disclosure of different types of ICWs on earnings quality. This study demonstrates that the control of non-accounting-related ICWs is critical for enterprise risk management.

7. Conclusion

This paper investigates the relationship between voluntary disclosure of ICWs and earnings quality in the unique environment of China. We find that internal control is an effective tool for controlling enterprise risks, and earnings quality, measured as the ABSDA, is positively related to the disclosures of ICWs. The more ICWs disclosed, the higher the value of ABSDA. In terms of different types of weakness (accounting-related versus non-accounting-related ICWs), our results demonstrate that earnings quality is significantly associated with disclosures of both accounting-related and non-accounting-related ICWs. These findings should be of particular interest to regulators in the United States and around the world. Our results provide strong supporting evidence to the current debate on whether the requirement for management and the auditor to evaluate internal control over financial reporting under SOX should be expanded to non-accounting-related areas.

Our research provides a valuable and timely study on the likely outcomes of implementing SOX-type regulations, that is, the Basic Standard, in China from 2012. Since 1978 when China carried out its economic reforms and implemented an “open door” policy, the Chinese economy has grown rapidly, at an annual growth rate of 10%, and has been integrated into the global economy. Many Western systems have been introduced into China over recent years. Some of them have been well adopted, while others are not so well blended into the institutional environment of China. Some of these systems are said to be adopted in form only, and not in substance, such as the corporate governance system (Firth et al., 2007). In this paper, we examine the impact of the introduction of internal control reporting in China. Our initial assessment of this reform proves to be positive, implying that internal control reporting has the potential to be well integrated into Chinese listed firms.