Audit Committee Characteristics, Financial Reporting Internal Control Deficiencies And Accounting Information Quality

The quality of accounting information directly related to the order of capital markets, and the fundamental way to improve the quality of accounting information is to establish and improve the corporate governance structure. In recent years,domestic and international accounting practitioners have exposed a series of financial fraud cases, making the investors, creditors and other stakeholders in the capital markets,and even the majority of potential investors and the public are beginning to realize the importance of accounting information quality. Audit committee system, internal control system based on financial reporting are two important institutional arrangement to ensure the accounting management system effectively running, their establishment and improvement has considerable importance for improving the quality of accounting information.Therefore,as an important part of internal governance mechanisms, the role of the audit committee system and internal control system based on financial reporting,with the introduction of international and domestic bills,norms and institutions, has been widely popular and recognized.As an important part of internal governance mechanisms, one of the important functions of the Audit Committee is to ensure the quality of financial information used by internal owners and operators, as well as financial statements disclosed to foreign companies.The establishment of the audit committee system builds a good system environment to the running of accounting information systems. The Audit Committee affects the operation of internal control system based on financial reporting in listed companies, and also affects the quality of accounting information of enterprises by its governance function in the formation of financial reporting and disclosure processes.Internal control system based on financial reporting is an important means for enterprises to achieve their true and reliable financial information disclosure. Business owners and operators are responsible for building and running the effective internal control system based on financial reporting. Meanwhile by the daily supervision, they minimized the probability of internal control deficiencies. Because sound financial reporting internal control can ensure the compliance with corporate financial information and relevant laws and regulations, ensure the quality requirements of reliability and relevance, effectively prevent the impact of false and inaccurate information on accounting information quality.Firstly, the article systematically summarize and evaluate the foreign and domestic literatures of characteristics of the Audit Committee, financial reporting internal control deficiencies and accounting information quality, refine and detailed analysis relevant and important conclusions which have quite different proposition in the current theoretical discussion and empirical validation, and the logical ideas which yet have not be considered. On the basis of literature review, combined with our more special social system background, use the basic research samples of companies listed on the main board of the Shenzhen Stock Exchange in 2008-2012, empirical tests the relationships in the audit committee characteristics, financial reporting internal control deficiencies these two internal governance issues,and the quality of accounting information. Firstly, empirical research found a positive correlation between the quality of accounting information of listed companies and the audit committee characteristics of independence, professionalism and the level of duties and powers protection was not significant in the empirical regression. On this basis, the article introduced variable of the investors legal protection degree, and combined the variable with the audit committee characteristic variables to constitute cross variables. The conclusion is that there is a significant positive correlation with the cross variables and the quality of accounting information of listed companies.And the correlation shows a different level of significance when the investors legal protection degree shows differences in different regions. Secondly, when listed companies have internal control deficiencies based on financial reporting, the quality of accounting information is relatively low.However,in the non- mandatory disclosure stage, the higher quality of accounting information appears in the listed companies which voluntary disclose internal control self-evaluation reporting, as well as appears in the listed companies which have the initiative to engage intermediary institutions to audit internal control and issue audit reports. Finally, the listed companies which have a stronger independence and professionalism of audit committee, and a higher implementation degree of responsibilities and power protection, there is a low probability of internal control defects based on financial reporting, and these listed companies are more willing to voluntarily disclose their internal control self-assessment report and take the initiative to engage intermediary institutions to audit internal control and issue audit reports.The article contains eight parts, general contents are summarized as follows:Chapter 1 Introduction. Firstly introduce the research background, purpose and significance of the article.And then listed research content and methods by a block diagram. Finally clarify the innovation and shortcomings of the article.Chapter 2 foreign and domestic literature review. This section respectively discussed the characteristics of audit committee, internal control deficiencies based on financial reporting and accounting information quality. Vein combing and experience summary with foreign and domestic research. Finally, the paper briefly commented foreign and domestic research profile of the three research questions.Chapter 3 article carry out the basic theoretical analysis. This section explored the theoretical basis of the audit committee system separately from the theory of corporate governance, internal control theory. Article explored the theoretical basis of financial reporting internal control deficiencies separately from the principal-agent theory and the theory of signal transmission.Article explored the theoretical basis of the accounting information quality from contract theory, asymmetric information theory, efficient market hypothesis theory.Chapter 4 article use normative research methods, logic demonstrated the characteristics of audit committee’s influence on the quality of accounting information of listed company, respectively from the characteristics of independent strength, professional ability as well as the responsibilities and rights protection,and then put forward the following empirical assumptions proposition.Chapter 5 used normative research method, logic discussed the influence of the internal control deficiencies based on the financial reporting to the accounting information quality of listed companies. In this part, first of all, this paper defined the financial reporting internal control deficiencies recognition standards. On this basis, this paper analysed the influence of the internal control deficiencies based on the financial reporting to the accounting information quality, and then put forward the following empirical assumptions proposition.Chapter 6 first combed "the Basic Norms of Enterprise Internal control" the related provisions of the audit committee. On this basis, this paper logic demonstrated the influence of the audit committee characteristic to the internal control deficiencies based on the financial reporting, and the influence to the internal control deficiencies information disclosure, respectively from the independent strength, professional ability as well as the responsibilities and rights protection, and then put forward the following empirical assumptions proposition.Chapter 7 empirical analysis. First introduced the author selected sample, data sources, operational definition of variables and selection method, and the logistic regression models are determined by the nature of the dependent variables. On the basis of descriptive statistics, this paper applied the regression empirical analysis to the audit committee characteristics and the quality of accounting information, financial reporting internal control defects and the accounting information quality, the audit committee characteristics and the financial reporting internal control defects. Finally this paper carried on the related robustness test.Chapter 8 is the policy suggestions and research conclusion. According to the conclusions of the empirical analysis in the previous chapter, this paper proposed policy recommendations and the final conclusions. Finally this paper summarizes the article study limitations and future research direction.