Effect Of Defects On Accounting Conservatism Internal Control Of Listed Companies

As the financial fraud cases happened frequently and the promulgated of "basic norms of internal control" in China, internal control is becoming an important concern to the majority of scholars. One of the goals of the internal control is to improve the quality of financial reporting and accounting conservatism is an important protection mechanism to enhance the quality of financial reporting information. Studying whether internal control deficiencies would affect accounting conservatism and which level of the internal control deficiencies would affect accounting conservatism can not only provide guidance suggests for enterprises to achieve operational, financial reporting and legal compliance objectives, but also effectively promote the healthy and orderly development of Chinese capital market.The paper first reviewed the related research, put forward research content and research objectives, and then proposed research hypotheses on the base of the related theory, finally we choice two models to make regression analysis of the assumptions and made some suggestions to improve the internal control. The latest data of the A-share listed companies in Shenzhen board from2010to2011was selected for analysis and quantification of internal control deficiencies by the method of content analysis, and the internal control disclosures directly or indirectly in non-financial information of Business publication. Further, substituting the data into the measurement model for accounting conservatism, and dividing the relationship between internal control and accounting conservatism with two different models, we draw the following conclusion:(1)The company with internal control deficiencies has significantly lower accounting conservatism than company without;(2) Internal control deficiencies in company-level and account-level are both effective on accounting conservatism. Not only such, internal control deficiencies in company-level has significantly higher accounting conservatism than internal control deficiencies in accounting-level. Finally, this paper gives some recommendation to improve the internal control deficiencies and makes prospect of future research.