The Empirical Research On Factors Influencing On Internal Control Deficiencies From The Perspective Of Corporate Governance

In recent years, the financial frand of listing corporation both at home and abroad,such as the United States Enron event, WorldCom,China Aviation Oil, has fully suggested the lack of corporate governance mechanism and the weakness of internal control system. Based on the experience of “Sarbanes-Oxley Act”, China's Ministry of Finance with other four ministries also successively promulgated the “Basic Standards for Enterprise Internal Control” and “Enterprise Internal Control Supporting Guidelines”,which require that all of our Main- board Companies must evaluate the effectiveness of internal control and disclose its self-assessment report. Previous studies have focused on the impact factors of internal control deficiencies disclosure, and achieved fruitful results,but few scholars have explored the influence factors of internal control defects. As an opportunity, this paper studies the factors causing internal control deficiencies,from the internal governance structure and external governance characteristics.In this paper, the effect of corporate governance on internal control defects was discussed from both theoretical and empirical aspects. The theoretical part firstly includes the literature review at home and abroad on relationship between corporate governance and internal control, identification of internal control defects and influence factors of internal control defects. Then the theoretical part introduces the definition of corporate governance and internal control defects and the theoretical basis for the analysis. In empirical part, we selected 1238 listed companies from 2012 to 2014 on the Shenzhen Stock exchange as the research object. By means of variable design and model building, the effects of corporate governance characteristics on internal control defects are tested empirically. The results show that: The higher the proportion of non paid supervisors or executive annual salary is,the less internal control deficiencies exists. The company which is issued a standard audit opinion are less likely to have internal control deficiency. The more shareholder meetings usually means that companies have more problems in internal control system. The company with characteristic of president and manager as one person was more likely to have internal control deficiency. In addition, listed companies hiring higher quality external audit institutions to audit are more likely to disclosure internal control defects.Based on theoretical analysis and empirical conclusions, this paper further puts forward a series of suggestions, in order to provide reference for improving the governance structure of China's listed companies and preventing internal control defects.