The Effect Of Internal Control Auditing On Financial Reporting Auditing

The objectives of financial statements auditing and internal control auditing are be different, but the two can be integrated. The reason is that the internal control audit can enhance the CPA's assessment of the level of control risk, thus improving the quality of financial statements auditing. This study collects the data of listed companies in Shenzhen Stock Exchange which released the internal control audit report between 2006 and 2009, using accrual quality as the measurement of audit quality, tests the relationship between the internal control audit and financial reporting audit, and the relationship between the integration of these two kind of audit and the quality of financial reporting audit.First, this study compares the audit quality of financial reports between the companies which disclosed the internal control audit reports and the rest companies listed in SSE; Secondly, to avoid self-related issues,this study tests the change of accruals of the companies which disclose the internal control audit report at the first time,and the findings can reflect tests the relationship between the internal control audit and financial reporting audit on the other hand. In addition, we research the relationship between the integration of these two kind of audit and the quality of financial reporting audit, using the interval between the issue date of internal control audit and financial statements audit as the measurement of the integration degree.Finally, the study finds that to some extent, the internal control audit can't improve the quality of the financial reporting audit significantly, and the integration doesn't improve the quality of the financial reporting. This finding can provide the evidence on the relationship between the internal control audit and financial reporting audit, and the relationship between the integration of these two and the quality of financial reporting audit. Meanwhile, in practice, this study can provide the evidence on the effect of our policies related in internal control audit, but also help the improvement of our policies related in the internal control audit.