An Empirical Study On The Factors Related To Disclosure Of Internal Control Deficiencies In Limited Companies

In recent years, the occurrence of the "Enron" and a series of financial fraud cases exposed serious problems that exist in the internal control of listed companies. In order to enhance investors’confidence in listed companies, the United States in2002issued the Sarbanes-Oxley Act, internal control from the U.S. listed company information disclosure by the voluntary disclosure phase of the transition to mandatory disclosure. June28,2008, the Ministry of Finance, Securities Regulatory Commission, China Insurance Regulatory Commission, the Audit Commission, and the China Banking Regulatory Commission jointly issued the "Basic Standards for Enterprise Internal Control", this specification is based on the relevant provisions of the U.S. Sarbanes-Oxley internal control promulgated on the basis of enterprise Internal Control basic specification requires listed companies to issue an internal control self-assessment report to determine the effectiveness of internal controls, and intermediaries based verification report on internal control self-assessment report. In2010, Ministry of Finance jointly issued by five ministries listed company’s internal control supporting the three guidelines, marking China’s internal control information disclosure by the voluntary disclosure stage of the transition to mandatory disclosure. Considering the development of internal control in China is still in the initial stage, the guidelines first company listed on the inside and outside at the same time the implementation on January1,2011, Shanghai and Shenzhen listed companies began on January1,2012. The important goal of Internal control of listed companies is to ensure the reliability of financial reporting and the effectiveness of internal control deficiencies, affected the reliability of financial reporting. Therefore, the study listed companies internal control determinants and management of the impact of the presence of defects found, and it is very necessary to disclose internal control deficiencies factors. According to the above China promulgated the regulations and guidelines, they are well defined by enterprises in the internal control self-evaluation report that should be timely disclosure of internal control deficiencies exist. The status quo as we delve into the company’s internal control deficiencies disclosure by a great convenience.Review of Chinese scholars in recent years for the deficiencies in internal control disclosure of influencing factors found that most objects are a company listed on the Main Board, lacking of research on small plates listed company’s internal control deficiencies. The research enterprise of its internal control deficiencies identified and is under the premise of disclosure. This article draws on previous studies, according to the China promulgated the "internal control guidelines on the definition of internal control, according to public release of the severity of the violation notice is divided into general defects, deficiencies and significant deficiencies, and its assignment, such an approach can effectively avoid disclosure of internal control deficiencies facing evasive, deliberately concealing the self-selection problem, in turn, can reduce the misjudgment of the severity of the deficiencies in internal control.The paper selected the2009-2011small plates listed companies for the study. First made a more detailed introduction about deficiencies in internal control disclosure of relevant research at home and abroad, combined with domestic and foreign literature Review. Followed by theoretical analysis of the deficiencies in internal control of listed companies disclose influencing factors. The theoretical analysis of this section introduces the basic concepts of internal control and internal control deficiencies, and proposed internal control deficiencies Information Disclosure on basic theory, principal-agent theory, signal transduction theory, asymmetric information theory and efficient market theory, and analysis of the current situation and existing small plates listed companies deficiencies in internal control information disclosure. Followed by small plates listed on2009-2011data for the study, by constructing the Logit regression model of small plates listed company’s internal control the defects influencing factors and impact on management and disclosure of internal control information influencing factors of empirical research. The following conclusions can be drawn:small plates listed company’s board of directors holding ratio, the less likely companies to disclose internal control deficiencies, but the correlation is not significant, probably due to the small and medium-sized enterprise board in the legal environment is not mature, the Board play Its role is subjected to various restrictions. The larger the company, have the ability to invest more resources for the construction of internal control, the smaller the possibility of internal control deficiencies; Loss greater the proportion of small plates listed companies are more likely to disclose internal control deficiencies; Revenue growth positive correlation with the disclosure of internal control deficiencies; Merger and reorganization and disclosure of internal control deficiencies related. Company issued Qualified Opinion, disclosed deficiencies in internal control information is more likely. Expected engage external auditors for the size of the listed companies of the "Big Four" accounting firms generally have a large scale, strong economic strength characteristics, these companies have enough deficiencies in internal control of listed companies prone to the phenomenon of change of Certified Public Accountants; resources to strengthen the internal control system, the company disclosed the possibility of internal control deficiencies are relatively small, but not significant negative correlation between the company hired "Big Four" firm and disclosure of internal control deficiencies regression results show that, for the following reasons: high-quality accounting firms, Statistics small plates listed companies external auditors, more than95%of the corporate audit agency for domestic accounting firms. Finally, according to the conclusions of the empirical tests related recommendations for improvement.There are two major innovation of this paper.First:This article select the the2009-2011small board of listed companies related to the number of data to study the internal control deficiencies Disclosure on, filling the blank on small plates listed companies in the past deficiencies in internal control Disclosure on.Second:This article is mainly based on the Shenzhen publicly violation penalties announcement to distinguish whether a company has internal control deficiencies, and based on punishment announcement divided internal control defect severity in-depth study to further disclosure by the internal control deficiencies, solved issued by the enterprise internal control self-assessment report facing evasive, self-selection problem.This study limitations are following two aspects.First:China’s small board of listed companies in the period2009-2011did not perform supporting companies listed on the guidelines, the regression results may be one-sided.Second:This article explanatory variables internal control deficiencies disclosed publicly available to the SFC and the Shenzhen Stock Exchange announcement of non-compliance as the basis for classification, divided into general defects, deficiencies and significant deficiencies, and for small plates listed potential internal control deficiencies no exposure can not be obtained, the general will not receive a public reprimand, unpublished violation notice small plates listed companies identified as there is no internal control deficiencies that is limitation.Third, the choice of explanatory variables of the model has limitations. The design of the model variables may exist due to the workload and level of incompleteness.