The Research On The Influence Of Effectiveness Of Internal Control To Financial Statement Restatements Of Listed Companies

Nearly years, financial restatements emerged frequently, more and more companiesrevamp their mistakes in the financial statements formerly disclosed for a year or a fewyears. The occurrence of large amount of financial restatements, reduced the efficiency ofresource distribution, caused heavy losses. In addition, as a correcting mechanism of falsefinancial reports, financial restatements mirror the strengthening of government regulationas well as the worries of the quality of financial reports. Therefore the study on financialstatement restatements is imperative.Internal control system guarantees the operation of a company by using its fiveelements, and limits the quality of company’s financial statements. Valid internal controlplays a key part to the quality of company’s financial information. So we attempt to findthe causes of financial restatements from the perspective of internal control, and to furthertest whether the financial restatements can be prevented by internal control.Based on internal control, this paper choose substitution variables of internal controlfrom different angles, and compared the financial restatement companies with thenon-financial restatement companies, and then does empirical research on influence oflisted company’s internal control to financial restatement.Firstly, this paper takes the current situation of financial restatements as the startingpoint, and then defines the some concepts of financial restatements. Based on existingstudy results, we carried on the literature review. Secondly, this paper analyzes theinfluence of listed company’s internal control to financial restatement by using theprincipal-agent theory and information asymmetry theory and mechanism design theory.And then does empirical research on influence of listed company’s internal control tofinancial restatement by using the empirical data on the capital markets. At last, this papergives some recommendations to upgrade the qualities of accounting information accordingto the study. Study shows that financial restatement has a negative correlation with the quality ofinternal control. That is the more effectiveness of internal control, the less likely to occurfinancial restatement. So effective internal control can limit the appearance of financialrestatements, and this conclusion supports our proposition.This article provides empirical evidence to improve the quality of financialinformation and limits the appearance of financial statement restatements by reinforcingthe construction of internal control system...