Study On The Effects Of Internal Control Quality Over Accounting Information Transparency

As we all know, transparent accounting information plays an important role in alleviating information asymmetric, maintaining the orderly development of capital markets. However, a decade ago, the "opacity index" survey from PwC shows that the transparency of China is only better than South Africa. The result made everyone not only stunning but also thought-provoking. With the decade passing, the capital market in China has been further developed and improved; Accounting standards in China have achieved international convergence; China has successively issued the basic norms and guidelines of internal control in recent years and the construction of internal control is booming. Thus, how well does the transparency of accounting information in China? How does internal control quality influence the transparency of accounting information?From the existing research at home and abroad, the studies that internal control affects accounting information quality mainly focus on the reliability and value relevance. There are also a considerable number of studies concentrating on the relationship with internal control and accruals quality. However, rarely study hunts from the view of accounting information transparency. It is worth mentioning that accounting information transparency is precisely significant for investor’s decision-making as well as investor protection. From the reality of urgency and importance of investor protection, basing on gradual improvement of our internal control construction practice, the paper examines how internal control quality does impact on accounting information transparency. I hope this paper is useful for the relevant regulator, theorists and practice to understand the meaning of accounting information transparency, as well as the impact of internal control on the accounting information transparency.Above all. the paper does theoretical analysis. After some exploration of the definition of accounting information transparency and its elements, the paper gets the view accounting information transparency is that information users can see the essence of the business through the accounting information received. Transparent accounting information should be passed to investors in a timely manner and clearly reflected the actual business activities of enterprises. Thus, transparent accounting information contains fairness, timeliness and clearness. Therefore, there are three assumptions from three aspects in order to test the impact of internal control quality on the fairness, timeliness and value relevance. During empirical test, through statistics analysis, the study makes clear the time trend of internal control and earning quality of listed companies in Shanghai Stock Exchange in China. What’s more, with comparative analysis, Chow test, Vuong test and multiple regressions to test hypotheses, the study finds that high-quality internal control can effectively reduce accruals earnings, promote accounting information recording and recognizing timely, but to the value relevance, the study doesn’t get the unanimous conclusion.The paper consists of six parts:The first part is the introduction. By combining the highly demand of transparent information in China’s capital market and the institutional background of internal control laws and regulations in which listed companies lie, the paper raises study significance. Then we sort out the literature review on internal control and accounting information transparency. Lastly, we propose the framework and main content.The second part is the theoretical analysis of internal control influencing accounting information transparency. We define related concepts such as transparency, accounting information transparency, financial reporting transparency and discuss their connections. Next, the paper describes how does internal control affect accounting information transparency theoretically with principal-agent and incomplete contract theory.The third part is the empirical design of internal control affecting accounting information transparency. On the basis of theoretical analysis in Chapter two. this section contains hypotheses, sample selection, variable design and model construction. The fourth part is the empirical test. This section includes descriptive statistics of internal control and accruals quality, multiple regression of internal control affecting fair characteristic of accounting information transparency, grouping regression of internal control affecting timely recognition and measurement as well as value relevance, the significant difference test of coefficients and goodness of fit among the groups and multiple regression with whole sample. Finally, by using the variable substitution and other methods, I do the robustness test.The fifth section is about the empirical conclusion and suggestions. According to the empirical result, I draw conclusions and based on the conclusion, this paper gives some reasonable and practicable suggestions.Last, in the sixth section, the paper describes the limitation and shortcomings as well as the research direction in future.The innovation of this paper is mainly reflected in:(1) Analyzing in theory and summarizing previous studies, we get the elements of accounting information transparency. In this paper, we adopt "walking with two legs" way. On the one hand, from the theoretical analysis, that is, from the connotations of accounting information transparency, I get the elements of accounting information transparency. On the other hand, by fully drawing on previous empirical researches, after discrimination and removed, the study concludes that accounting information transparency includes fairness, timeliness and value relevance. I believe it will better interpret accounting information transparency.(2) This paper makes full use of voluntarily disclosing information of internal control in listed companies. By using the disclosure content, we try to get an objectively measurement to measure internal control quality. The measure is different from the study conducted from the perspective of internal control weaknesses, and also different from some studies to establish the evaluation system.