The Research Of Internal Control Weakness Remediation And Earnings Quality

On 2012 August, the Treasury Department of PRC has published "the Listed Companies Internal Control Disclosure Standard", which requires all Listed Companies registered on Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange(SZSE) need to build their internal control system since 2012. Controlling the complexity of Listed Companies, internal control resources, corporate governance, audit quality and accounting conservatism, the research of internal control weaknesses and remediation and their relationships with earnings quality is necessary. From this point, the disclosure of internal control weaknesses has become an essential problem.This dissertation organized the researches of earnings quality, internal control weaknesses and remediation, the relation between internal control weaknesses and earnings quality. Based on agency theory and the theory of signal transmission, I have done a research on the sample of the stock market of Shanghai and Shenzhen from year 2012 to 2014. Statistical methods such as:Descriptive Analysis, ANOVA, Spearman and Pearson Test, Tobit Regression Tests have been used to examine the relationship between internal control weaknesses and earnings quality. Also, the relation between internal control remediation and earnings quality has been tested either. The results of the research are: (1) Comparing with the normal sample, the sample with internal control weaknesses has lower earnings quality. (2) The remediation of internal control weaknesses can increase the quality of earnings quality.This dissertation has combined the theoretical study with the empirical research, and offer suggestions on the policy of internal control weakness and their remediation. Because the selection of the sample is based on the mandatory disclosure of internal control weakness, so the result of my result is newer and more specific, it also provides evidence on the future study on this topic.