Internal Control Information Disclosure And The Impact On The Value Relevance Of Accounting Information

The birth of Sarbanes-Oxley Act sounded the alarm over the world stock markets, and it also provided a reference for the practical value to our regulatory agencies. Foreign scholars studied mainly for the construction of the internal control system, the role of internal control and other aspects in the company before the Sarbanes-Oxley Act enacted. After the Sarbanes-Oxley Act enacted, investors and capital markets scholars began to turn their attention to internal control disclosure of information.The management of the company can make deep understand of own systems by take advantage of opportunities for internal control disclosure. Improve the internal control system, at the same time, the signal that the company is in good control environment is passed out to the market. It making it different from other companies, thereby increasing stock prices, lower financing costs and further improve the company’s own operating systems that would be the long-term interests of the company. Investors could use internal control disclosure of information about the company make the better understanding of the company’s internal governance structure and strategic direction. At the same time, you can also understand how the accounting information generated and if the accounting information is being manipulated in weak point of internal controls system. Then it helps to determine the credibility of accounting information or to measure the extent of the use of accounting information in their decision-making. Such an information transfer process to reduce costs arising from asymmetric information, thereby improving the efficiency of investment and optimize the allocation of resources in the capital market.Accounting information is objectively reaction of the company’s financial situation. It closely relates to improve its internal control system and effectiveness. Whether the internal control disclosure of information to become effective decision-making information after the country has promulgated a series of policies and regulations in the past years? Could it be passed to investors in the capital market to reduce the information asymmetry and effective internal control information? Could the information be used to determine the authenticity and reliability of accounting information? Whether it can increase the serviceability of accounting information when the investors make decision? Will it increase the accounting information value relevance? This article will be depend the actual situation of Chinese securities market and the national conditions to study the relationship between internal control information disclosure and accounting information value relevance. It also provides reference for Chinese policy makers to further the information disclosure systems of internal control.Chapter I IntroductionThis chapter describes the international and domestic background of internal control information disclosure. Making a brief description of the contact information disclosure and accounting information value relevance. Indicating that the point of this study, and the theoretical and practical significance of this study.Chapter II Literature ReviewThis chapter begins by scholars over the years to study the role of information disclosure of internal control, cost, defect classification, defect and the market response to make evaluation and conclusion. We found that there is little information on the relationship between the disclosure of internal control and accounting information value relevance.Then the accounting information value relevance research literature were reviewed and found that the majority of scholars to study the extent of reaction of specific accounting information to enterprise value, such as earnings information, the book value of the net assets, etc., but few studies internal control information delivery and improving internal controls can be able to have an impact on the accounting information value relevance.Finally, review the foreign researchers studied the relationship between internal control information disclosure and accounting information value relevance and found Chinese lack of the research between disclosure of internal control and accounting information value relevance.Chapter III Theoretical BasisThis chapter from the basic theory of the principal-agent theory, asymmetric information theory, signaling theory and information theory to derive a noise disclosure of internal control value relevance of accounting information inherent relationship. Conclude that the investor is to get further information company. They can not only learn through the internal disclosure of the company’s internal control design and implementation of control, better find their flaws and good local control via internal control structure to selectively accept the company valuable accounting information, making it more rational investment decisions, capital market efficiency is improved, so that the share price to better reflect the value of the company.Chapter Ⅳ Analyzes the TheoreticalThis chapter begins with the background of our system and internal control of listed companies in recent years, the disclosure summary and analysis, and draw conclusions. First, Introduction of Enterprise Internal Control Guidelines, making regulatory bodies for listed company’s internal control information disclosure requirements have further deepened the internal control disclosure of information in the form and content. Second, Internal control deficiencies is the problem of company’s internal control system cannot be ignored. The related policies and regulations on internal control deficiencies identified should be make a specific requirement. Third, Internal control audit in China is still at a preliminary stage of development, many listed companies did not disclosure the internal control audits report because of reduce cost, especially small and medium listed companies, it limited by lack of financial resources.Then make a theoretical analysis of the correlation relationship between disclosure of internal control and accounting information value relevance. The market listed company by passing judgment on the behavior of the signal. The information user could capture relevant information and react to such reaction in the share price performance of the capital market changes, so the internal control information will be used to evaluate the nature of accounting information quality of the merits of an important reference. The internal control information disclosures are giving investors a way to be able to identify other information. If the company there is a good internal control system and disclosure information to investors, then investors will fully believe that the accounting information in the financial statements are reliable, in order to make a good decisions. Chapter V Empirical StudyThis chapter use the internal control disclosure date of listed companies in China market between years of2010to2012. Hypothesizing, modeling, and testing the relationship between disclosures of internal control and accounting information value relevance on Chinese stock market by empirical methods, and combined with Chinese national conditions and give a reasonable explanation.Chapter VI Conclusions and InadequateAccording to theoretical and empirical research of the foregoing, this paper summarizes the research findings to develop follow-up research and provide a reference to Chinese regulatory agencies.First, after the release of a series of regulatory policies, the amount of internal control information disclosure of listed companies increased year by year.Second, only internal control self-assessment report does not provide sufficient assurance of accounting information.Third, the internal control deficiencies means greater chance of management override the internal controls, thus reducing the value relevance of accounting earnings.Fourth, Enterprise Internal Control Guidelines roughly divided internal control deficiencies in significant deficiencies, significant deficiencies and defects in general, but given too much freedom of listed companies, making their classification are not comparable, the investors believe their own judgment on the impact of internal control deficiencies rather than the information from the company.Fifth, the internal control deficiencies for rectification will make listed companies to pay the corresponding costs and may even reduce its book profit, but beneficial to the long-term development.Through innovative research, concluded with a reference sense. Considering the paper shortage, the researchers hope to be able to continue to improve in subsequent studies, in order to contribute modest improvement of China’s capital markets.