Internal Control,External Audit And Stock Price Crash Risk

Because of the new round of the stock market tumbled in China and the high-frequent occurrence of financial crisis,Stock Price Crash Risk has became a hot topic in the academic and theoretical research.The slumping of share price will lead to crash risk.Causes of the share price collapse is nether external influence enterprise operating performance nor outside investors' irrational behavior of operation,but hidden negative information in the process of trading or the result of the adverse information disclosed gradually.Stock Price Crash Risk will have great harm to the interests of investors,the development of the company and even the stability of the capital market.In China,which started late in capital market and developed imperfectly,the phenomenon of stock price slump is more frequent,and it is urgent to seek effective means to curb the risk of stock price collapse.High-quality internal control can improve the reliability of financial reporting and information transparency of listed companies to ease the management of information asymmetry between investors and managers.Internal control can also supervise the management of the company and inhibit the management's self-interest behavior.In summary,high-quality internal controls have a significant negative impact on stock price crash risk.Audit is also an important part of corporate governance.When listed companies hire high-quality,high-reputation accounting firms to audit,to reduce the degree of information asymmetry to achieve the possibility of reducing the risk of stock price crash.In recent years,laws and regulations about internal control and external audit have been promulgated,such as The Basic Standard for Enterprise Internal Control,The Guidelines for the Evaluation of Enterprise Internal Control,The Guidelines for Internal Control Auditing of Enterprises,and so on.Internal control construction,external audit services in China have entered a new period of law.It is necessary to test the governance effect of internal control and external audit.This paper studies the role of internal control and external audit in stabilizing the market.We try to study the impact of internal control on stock price crash risk,external audit on stock price crash risk.And how the internal control and external audit will act on the stock price crash risk together.Firstly,we summarize the research results of stock price crash risk,the internal control and the external audit.Second,we review the principal-agent theory,information asymmetry theory,stock price crash risk theory.We analysis the theory and put forward three research hypotheses.Then,we choose A-share listed companies in China as the research objects,and test the effects of internal control,external audit separately and jointly on the risk of stock price crash.The result shows:(1).The higher the quality of internal control,the lower the risk of stock crash will be;(2).The higher the quality of external audit,the lower the risk of stock crash will be;(3)The interaction between internal control and external audit plays a complementary role in the risk of stock price crash.When internal control quality is higher,external audit has an inhibitory effect on stock price collapse risk.High quality external audit exerts an external governance effect in company.At the end of the article,we summarize the limitations of the research process,put forward the possible direction of the follow-up study.At last,we make some suggestions to improve our quality of internal control and external audit.We also make some suggestions on how to stable the stock price and the captial market.