Factors Related To The Fraud Of Internal Control Self-Assessment Report

In 2012,Ministry of Finance of the People's Republic of China and China Securities Regulatory Commission jointly issue an act on the implementation of the internal control system,it requires all main-board listed companies should disclose the management's self-assessment report and internal control audit report from the year of 2014.It is a sign that the main-board has entered the mandatory stage of internal control information disclosure.The essay focuses on the 2015 management's self-assessment report and internal control audit report.It tries to find the difference between the two report to select the sample of company's fraud and its cause.The difference includes the different number of the internal control deficiencies the two reports disclose and different opinions they conclude.What's the purpose of the study on the fraud?For the investors,the essay's findings can help them find out which report convey the real information and make the right investment decision.For the government,the essay's findings can test whether the internal control regulation system makes sense,and provide guidance on how to put out macro-economic policies and measures to improve the effectiveness of internal control regulation system.At last,the findings test whether the system can motivate the company to indeed improve its level of internal control.The essay uses the "Risk-Pressure" model and Reputation Model which is put forward by Ashbaugh-Skaife and Kreps separately to study the distinction.In addition,the essay use the dynamic game theory and empirical method to study the company's fraud.The results are listed as follows:As a whole,the current internal control disclosure is only aimed at meeting regulatory requirements not reflecting the truth.It is common that main-board listed companies make fraud.The existence of formalism and opportunism on internal control disclosure cannot meet the policy goal to improve the enterprise's internal control system or promote value.The factors influence the fraud of internal control self-assessment report in the following way:Firstly,in the aspects of directorate governance factors,more independence or a higher pay effectively restrains the fraud of company's self-assessment internal control report.Secondly,in the aspects of corporate characteristic factors,a company with higher quality has a lower possibility of fraud and vice versa.The big size enterprise has the lower possibility of fraud.Company in financial distress which has negative earnings or high debt ratio has a higher possibility of fraud.Company which has been punished or involved in a material assets restructuring over the past year is more likely to make the fraud.Thirdly,in the aspects of external regulatory factors,the audit and the manager's litigation risk interact neither as complements or substitutes,they don't work well to restraint the fraud.Dominant audit suppliers are more likely to uncover any known internal control deficiencies,but has little impact on the management to disclose them accurately.The government exerts little pressure on manager's litigation risk.Fourthly,the fraud has industry-specific features.The company in the industry of Chemicals,Pharmaceuticals,Computer and Electronic Manufacturing or Real Estate has a higher possibility of internal control fraud.At last,due to the lack of post-mortem mechanisms,investors' irrational interpretation and management information exclusive,the internal control mandatory regime appears reverse conditioning effect.In the long-term,the adverse accumulation will make the regime meaningless.The investors will make adverse selection and the capital market will suffer from a recessive failure.How to make the current regulatory system more effective deserves consideration.