The Effects Of Policy On The Mandated Internal Control Audit

At the turn of the century,the outbreak of the American Enron,Xerox,WorldCom and a series of major financial scandals severely hit the investors and public confidence on the American capital market.In order to boost investor confidence and avoid making the same mistake,the United States Congress passed the Sarbanes-Oxley Act in 2002.SOX404 requires clearly that the certified public accountants should audit the management's self-assessment report on the effectiveness of the internal control and issue a report.The introduction of the SOX Act has triggered a wide range of hot debate on the implementation of the cost and effect,and the United States academic community has launched a large number of in-depth studies on this issue.The results show that the implementation of SOX404 has achieved remarkable success in improving the quality of financial reporting,protecting the interests of investors and so on.China's Ministry of Finance and other four Ministries jointly issued the "basic norms of internal control" and "corporate internal control supporting guidelines" in 2008 and2010,forcing to audit the corporate's internal control over financial reporting.Since2011,the implementation of mandatory internal control audit has lasted 5 years,how is the effect? This paper attempts to explore the impact of mandatory internal control audit policy from a comprehensive perspective,and test it empirically.In the part of theoretical analysis,this article first explains the definition and scope of internal control audit,reviews the development process of mandatory internal control audit in China,and then carries on the simple induction to the implementation of the mandated internal control audit policy since 2011.Secondly,explains the necessity of the implementation of the mandatory internal control audit policy based on the principal-agent theory and the information asymmetry theory.In addition,this paper analyzes the possible impact of mandatory internal control audit policy from the level of enterprises,accounting firms and investors,and then constructs a comprehensive analysis framework of mandatory internal control audit policy effect.In the empirical part,this paper selects the companies listed on the main board in shanghai and Shenzhen in 2011 and 2013 as research sample,using the difference-in-difference model to carry out empirical tests,and then obtain the four dimension effects of mandatory internal control audit.The results of this paper are as follows:(1)The implementation of the mandatory internal control audit policy can effectively suppress the earnings manipulation motivations and capabilities of the management and other internal staffs,thus significantly improving the quality of accounting information;(2)After the implementation of mandatory internal control audit,corporate operating performance are significantly increased;(3)The implementation of the mandatory internal control audit policy can effectively protect the interests of investors and then boost investors' confidence;(4)The quality of financial statements audit has not been significantly improved after the implementation of the mandatory internal control audit.The main innovation of this paper is that:(1)This paper attempts to constructs a comprehensive analysis framework on the effects of mandatory internal control audit policy from three dimensions,which broadens the breadth and depth of existing research.And the study of the existing literature on the effect of internal control audit policies are more scattered,rarely discussed from a comprehensive perspective.(2)This paper attempts to explore the implementation of the mandatory internal control audit policy on accounting firms and investors,which enrich the internal control audit research perspective,which enrich the internal control audit research perspective.