The Impact Of Internal Control On Earnings Management

From the 1980s, Western accounting academics began to study on earnings management. As the securities market in Western countries developed and improved earlier, the data easier to obtain, and this provides favorable conditions for the empirical research. Because the earnings management is a common phenomenon, thus earnings management becomes one of the key issues of the Western accounting theory. The research of earnings management of accounting theoretical study is accompanied by the gradual development of securities markets since the 1990s, many scholars have used empirical or normative research methods to start the research on earnings management, and achieved fruitful results. Earnings management is the source of the economic problem "principal-agent" mechanism, principal and agent conflict of interest occurs leading to earnings management. In addition, internal control problems caused by the "principal-agent" system becomes the one of the objects of theorists. Internal control committees to operating efficiency, reliability of financial reporting and compliance related laws, the reliability of financial statements is the accounting information was reliable, and earnings quality of the information is a reflection of the quality of accounting information. Therefore, this article analyzes internal control on the impact of earnings management from the point of view that if the effectiveness of internal controls could have an impact on earnings information, and how to impact earnings management, this is a development view on the issue of earnings management.This paper is based on 721 annual reports 2009 of companies listed in Shanghai, the article firstly analyses the surplus management of samples by JONES MODEL, and then takes the normal accrued profits of listed companies as the dependent variable. The article takes data about internal control as independent variable which are obtained from assurance report of internal control, internal control self-assessment report and the punishment views of SFC by manual methods because there is lack of related data in our database. Due to the chimeric relationship between corporation governance structure and internal control, variables about corporation governance structure are taken as the controlled variable. Through regression analysis, effective internal control can inhibit the company's earning management; improve the quality of earnings information. Based on the regression results, this paper proposes internal control relevant policy recommendations from two aspects of improve internal control mechanisms and improve the quality of information disclosure of internal control. I think that only continue to improve the internal control mechanisms and improve the quality of information disclosure of internal control, the company's earnings quality can be further improved, so that China's stock market can be a more orderly and develops healthier.