Research On Influence Of Heterogeneity Of Institution Investors On Internal Control Auditing

The value of the audit is to achieve the added value on accounting information. Whenthe audit began to involving into the internal control area, the governance role played byaudit is entering into a brand new era. One of the important effects of internal controlauditing is to enhance and optimize the supervision mechanism of internal control, and alsoensure the internal control executive effectively in the company. After a series of financialscandals caused by the failure of internal control, the internal control audit has become thefocus of the society. At present, with the rapid development of institutional investors, boththeorists and practitioners begin to study the positive impact of institutional investors oncorporate governance. In this paper, we will use the internal control audit as researchobject and adopt the empirical analysis methodology. Based on the internal control auditdisclosure of the listed companies of China in2012, I want to study the influence of theheterogeneity of institutional investors on internal control auditing.Firstly, this paper will review the important literature both home and overseas of theinternal control audit and heterogeneous institutional investors, and also reference theexperts and scholars’ comments on this topic. All of these lay the foundation for thetheoretical analysis and empirical test of this paper.Secondly, this paper analyses the influence of the heterogeneity of institutionalinvestors on internal control auditing from the perspective of economic, mainly using theprincipal-agent theory, signalling theory and asymmetric information theory. Thetheoretical analysis shows that the pressure-resistant institutions will have a positiveimpact on the internal control audit.Then, through the theoretical analysis, we bring forward that the impact of theheterogeneity of institutional investors on internal control audit should be based on threeassumptions. For this paper we collected the related data of the2012listed companies andmainly use the descriptive statistics, correlation analysis and logistic regression methodsfor empirical test. Finally, we found that: on one side, the change of shareholding ratio ofpressure-sensitive institutions have limited impact on listed companies to voluntarilydisclose their reports of the internal control audit; but, on the contrary side, the listedcompanies would like to satisfy the demand of the pressure-resistance institutions, thehigher of shareholding ratio they have the higher degree they are willing to disclose their reports of internal control audit. That’s to say, heterogeneity of institutional investors willaffect the internal control audit.Finally, on the basis of the theoretical analysis and empirical analysis,recommendations are followed: We should concentrate our efforts to achieve the scale anddiversity of institutional investors; actively guide the institutional investors to play a moreimportant role in corporate governance, to be an activist shareholder; cultivating excellentteam of institutional investors.