Research On The Influencing Factors Of Enterprise Internal Control Deficiencies

Since 21st century,Accounting scandals have been disclosed frequently,such as Enron,WorldCom and CAO,which fully exposed internal control deficiencies and seriously harmed the interests of investors.The existence of internal control deficiencies makes it difficult to achieve internal control objectives successfully.Therefore,it is a pressing issue to figure out which factors in deed affect the existence of internal control deficiencies so as to reduce the incidence of it.Corporate executives play an important role in the process of building and running internal control.In China,the state-owned enterprises are controlled by "insiders"because of owners "absence",moreover,phenomena of identity coincidence and conspiracy often exist between managers and major shareholders in private companies,which makes the managerial power expansion.Due to the imperfect internal governance mechanism as well as the driving forces of pursuing profits and avoiding risks,may behave unethically,Due to the imperfect internal governance mechanism as well as the driving forces of pursuing profits and avoiding risks,corporate executives may behave unethically,due to the imperfect internal governance mechanism as well as the driving forces of pursuing profits and avoiding risks,corporate executives may behave unethically,and it is not rare to see internal control failures just because of management collusion fraud or overriding internal control.At the same time,under the background of accelerating market-oriented reform,the restriction of external institutional environment to the managerial power are strengthening,and it is not rare to see failures just because of management collusion fraud or overriding internal control.In view of the current situation and problems during the implementation of internal control,this dissertation first reviewed the existing literature,and then from the perspective of managerial power,based on the combined action reality of multiple factors in the process of enterprise internal control operation,the influencing factors of internal control deficiencies were investigated deeply by Mann-Whitney test,principal component analysis and Logistic regression analysis,the main research contents are as following:First of all,we studied the influence of managerial power on the governance capability of the board and audit supervision,and the further influence on internal control deficiencies.First,by selecting the four aspects of board characteristics:board independence,board stability,board heterogeneity and the duration of audit committee,we studied the relationship between managerial power,board characteristics and internal control deficiencies.The results show that board independence has no significant impacts on internal control deficiencies,board stability,board heterogeneity and the duration of audit committee are negatively related to the internal control deficiencies significantly,and managerial power can weaken the reducing effect of board characteristics on the existence possibility of internal control deficiencies;Second,we studied the influences of two aspects of audit supervision characteristics(internal audit and external audit)on internal control deficiencies.The results show that the stronger the independence of internal audit,the greater the scale of internal audit department,the higher of CPA audit quality and carrying out internal control auditing,the existence possibility of internal control deficiencies is lower,but managerial power can inhibit the audit supervision' reducing effect on the existence possibility of internal control deficiencies.Secondly,in combination with the institutional background of the market-oriented reform,from the angle of the influence of the institutional environment on executive power,we studied the regulation role of institutional environment on the relationship between managerial power and internal control deficiencies.First,on the basis of the above research conclusion,that is managerial power can weaken the governance effectiveness of the board and the audit supervision,we further studied whether and how managerial power influence internal control deficiencies,and studied the influence of the three dimensions of the managerial power(organization power,prestige power and ownership power)and the comprehensive index of managerial power on internal control deficiencies,results show that the organizational power,prestige power,and ownership power are positively related to internal control deficiencies,the comprehensive index of managerial power has a significant positive effect on internal control deficiencies,and compared with company-level internal control deficiencies,managerial power's influence on finance-level internal control deficiencies is more obvious.The improvement of the institutional environment can restrain the positive influence of managerial power on internal control deficiencies.Further,compared with protective industry,the inhibitory effects of institutional environment on managerial power in competitive industry are more significant;compared with the central state-owned companies,the inhibitory effects of the institutional environment on managerial power in local state-owned enterprises and private enterprises are more obvious.Finally,based on the above research conclusions,we put forward the relevant policy suggestions for Chinese enterprises to reduce the existence possibility of internal control deficiencies.