Research On The Influence Of Listed Company’s Linear Internal Framework On Financial Reporting Quality

Financial reports of listed companies can reflect the enterprise’s financial position and operating results for a certain period of time from different angles. The external information users can get relevant information by reading enterprise financial report, and correspondingly make economic decisions. But in recent years, financial scandals and fraud casesemerge endlessly all over the world. False financial report not only make stakeholders who make decisions based on it suffer losses, but also make the listed company itself in trouble or even in face of a crisis of survival. As a result, for both internal and external stakeholders’ interest and enterprise own development, improving the quality of company’s financial report is very important.To ensure the quality of financial reporting, to protect the interests of the stakeholders and maintain the sustainable development of company, the company should strengthen both internal and externalgovernance. In the external environment, the enterprise implements governance through market economic environment management, legal environment management, product or element market competition, control power competition, the media and independent external audit. In the internal environment, the enterprise mainly rely on the restriction relationship of shareholders’ meeting, board of directors, board of supervisors, managers, and institutional investors to play a positivegovernance role. In the internal environment governance, enterprises can evaluate and supervise the disclosure of financial reporting by setting up the audit committees and internal audit organizations. This article choses453companies listedin Shenzhen stock exchange main board in2012as research samples, in order to find how the different characteristics of the audit committees and internal audit institutions of listed companies can influence financial reporting quality.After the analysis of relevant theories, this article selects the independence, speciality and activity of the audit committee, the independence of the internal audit institution, whether the internal audit report is disclosed, the degree of implementation of internal audit institution’s functions and powersas independent variables, and select the company size, share proportion of the largest shareholder and the rate of return on equityas control variable.Then together with financial reporting quality as dependent variable, all the variables are used to construct a model for logistic regression analysis. The results show that audit committee independence, speciality, internal audit functions and powers vary positively with the quality of financial reports of listed companies. However, audit committee activity, the internal auditor independence and whether internal audit report is disclosed don’t have a significant correlation with financial reporting quality. Therefore, considering howaudit committee and internal audit institution plays the role ofimproving the quality of financial reporting, this paper suggests to improve the quality and quantity of independent directors in audit committee, to improve the quantity of audit committee members with financial specialty and the degree of internal audit institutions’functions and powers,so that listed companies can make the internal audit framework more efficient toensure the interests of the stakeholders andthe long-term development of this enterprise.