What Type Of Executive Corruption Can Be Suppressed By Internal Audit?

China's corruption and anti-corruption action has become a hot issue concerned by the world.The enterprise is the worst-hit areas of corruption as well as the government?So far except for some studies that investigate potential causes of executive corruption from the perspective of regulation on executive compensation or power of executive,there is little research on management corruption at the corporate level.Using data of Chinese listed firms over the period 2007-2012,we build an interactive two factors model of internal audit quality which is comprised competence and independence.We examine whether internal audit can inhibit the management corruption.we also discusses whether the governance effects of internal audit to corruption for different position of management are the same.In the end,we also investigate if the internal audit can prevent the occurrence of corruption by internal control.The empirical results show that:(1)There is no significant relationship between management corruption and internal audit quality.Specifically competence is negatively associated with the management corruption,while independence and management corruption have no significant relationship.(2)Internal audit quality has no significant relationship with corruption of high position managers,but is negatively correlated with corruption of low position managers.High position managers can rain influence on internal auditors by appointing and removing of the internal auditors;changing internal audit plan and results,or affecting the internal audit staff performance evaluation and compensation to on the internal audit department,so as to internal auditors might not be loath to reveal the corruption of the high position managers.(3)Beside daily audit and special audit management,we also find evidence that internal control is the paths through which internal audit affects the corruption of low position managers.The proportion of the total effect attributable to internal control is about 4 percent to 8 percent.Using Heckman two stage least squares method to control “self-selection” bias,our main results are consistent.