Correlation Studies On Earnings Management And Internal Control Information Disclosure Of Investment Property

The promulgation of New Accounting Standards for Enterprises on February15th2006, represents a significant step for China towards the convergence with International Accounting Standards, hence, it is considered as an important milestone in the history of accounting development. Compared with the original Accounting Standards, great changes have taken place in Investment Property Criteria, which requires accounting and reflecting the investment property separately, meanwhile, introducing the follow-up measurement model of fair value, and entitles the enterprise more choices for the follow-up measurement models. However, capital market is not perfect, and lack appropriate regulations and guidance for the valuation model in the new Standards, so it is difficult to determine the fair value.All of these provide maneuverable space for earnings management.In recent years, with a large number of financial fraud cases, the internal control and information disclosure attracted more and more widespread concern at home and abroad. After Sarbanes-Oxley Act of USA, China have promulgated a series of laws and regulations on internal controls successively. Scholars have gradually increased the study of the information disclosure of internal control, but the domestic research has focused on the present situation of internal control information disclosure and its influencing factors. The article uses empirical research to explore the relationship between the earnings management of investment property and internal control information disclosure. It expands the study scope of the disclosure of internal control and provide empirical support for theoretical research.This article choose the listed companies that adopt Fair Value as the follow-up measurement model for the investment property in Shanghai and Shenzhen stock markets (2007-2010). Choose the extent of earnings management of investment property as the explanatory variable and construct the index of disclosure of internal control information.Choose Index of internal control disclosure and internal control deficiencies as explanatory variables; Then, choose asset size, asset-liability ratio, the proportion of independent directors, the number of setting up "Four Committee", Return on Total Assets and other factors as control variables. Then test the relationship between investment property earnings management and internal control information disclosure through multiple linear regression model. Finally draw the following conclusions:It shows a significant negative correlation between the information disclosure of internal control and the extent of earnings management and investment property. That’s to say, the information disclosure of internal control can effectively suppress the earnings management of listed companies.