Research On Theimpact Of Internal Control Quality On Real Earning Management

With the improvement of internal control norms and guidelines,more managers choose to have a real secret earnings management for earnings manipulation.The relationship between he quality of the internal control and the real earnings managementand how the relevant degree is concerned,has become a matter of great concern to the public.In addition,for the Chinese listed companies in economic transition and advocating power supremacy,the concentration of executive power is widespread,leading to lack of internal governance mechanism,whether the relationship between internal control and the real earnings managementis affected also worthy of attention.Based on the review and evaluation of domestic and foreign research results,this paper analyzes the relationships among executive power,internal control quality and realearnings management by proxy theory,information asymmetry theory,incomplete contract theory and executive echelon theory.This paper chooses the listed companies of Shenzhen A-share listed companies from 2013 to 2015 as the object of study,and uses Roychowdhury(2006)real earnings management measurement model to measure the degree of real earnings management.The paper chooses the dibo internal control index to measure the internal controlquality,selects ROE,asset-liability ratio,revenue growth rate and so on as the control variables,carries on the multiple regression analysis to verifies whether the internal control quality affects the management real earnest management behavior;On this basis,calculates from the factor analysis the executive power comprehensive score,divides the entire sample into two groups: the centralized sample group and the non-executive centralized sample group.It further studies whether the centralized management of the listed companies affects the relationship between the internal control quality and the real earnings management.The results show thatthe quality of internal control can significantly inhibit the real earnings management behavior;in the case of non-executive centralization,the reverse relationship between internal control quality and real earnings management is significant;in the case of centralization,the relationship between internal control quality and real earnings mangement is not significant,indicating that executives may above the internal control over earnings manipulation.In view of this,this paper puts forward some policy suggestions to improve the quality of internal control and to suppress the real earnings management from two aspects: strengthening the internal control construction and improving the company's internal governance.The innovation of this paper is the impact of group inspection on the relationship between the quality of internal control and the management of real earnings.