Research On The Correlation Between Disclosure Of Internal Control Information And The Financial Performance

After the Enron Case, the financial fraud becomes the focus of the world capital market, and financial scandals emerged continuously in the listed companies both at home and abroad. These financial scandals are results of internal control failure and opaqueness of the disclosure of internal control information. The U. S. Congress enacted Sarbanes-Oxley, strictly regulated the construction of internal control and disclosure of internal control information. in2008, the Ministry of Finance, P. R. China issued the Basic Standards for Enterprise Internal Control(C-SOX)aimed at strengthening and regulating the enterprise internal control, improving the enterprise management level and risk-prevention capacity, and encouraging the voluntary disclosure of the self-evaluation report on internal control of the listed companies and of the verified opinions of the office. This shows that internal control has become an international issue. Therefore strengthening disclosure of internal control information plays an important role in enhancing the enterprise internal control consciousness and building a healthy internal control mechanism.The information technology industry belongs to high-risk industry, on the one hand the content of higher science and technology enable the industry developed rapidly in recent years, on the other hand make it a high-risk industry. The information technology industry faced with the constantly changing market demand, which made the industry need innovation technology to cater for the needs of the consumers. Therefore the information technology industry is of high management risk, and the internal control is crucial for the industry. The Information demanders also pay more attention to the disclosure of internal control information. So, what are the latest conditions of the disclosure of internal control information in the information technology industry? The financial performance is one of the goals of the enterprise; would the company with outstanding financial performance strengthen the disclosure degree of internal control information? And would the full disclosure of internal control information drive enterprises to strengthen internal control in order to improve financial performance? The paper concentrates on the above issues.This study selected internal control information in the annual report of the listed companies in the Shanghai A-share information technology industry from the year2008to2010as the research object, combined the COSO internal control theories with theories in information economics, adopted statistical analysis methods such as descriptive statistics, frequency analysis, correlation analysis and regression analysis to have an empirical correlation analysis between the disclosure of internal control information and the financial performance of the sample company. Research shows that the extent of disclosure of internal control information in the information technology industry increased year by year, but companies of high information disclosure degree is still a minority, which shows that the voluntary disclosure enthusiasm of the internal control information among listed companies is not high. Research also shows that the financial performance and disclosure degree of internal control information of listed companies in the information technology industry influence and facilitate with each other. That is to say, the company of high disclosure degree of internal control information is also of a good the financial performance, conversely, if the financial performance is better, the disclosure degree of internal control information is high.The major contributions of this study include the following several aspects:1. Based on high-risk industries. In the existing researches, all A-shares or gem companies are selected as the research object, the fact that different system risks in different industries will affect the research results has not been taken into consideration. The paper selects the whole information technology industry as the research object, the influence of industry risk on the research results will get into minimum.2. Research ideas. In addition to analyze the influence of disclosure degree of internal control information on the financial performance based on the latest available data, ideas are transformed, and the influence of the financial performance on the disclosure degree of internal control information is studied in the paper. The research shows that the disclosure degree of internal control information and financial performance of a company influence and facilitate each other. Therefore, in practice neither should be discriminated.