How Effective Is Mandatory Disclosure Of Internal Control Audit Report

The promulgation of the Sarbanes Oxley Act(SOX)has put more stringent demands and controls on corporate governance and internal control of American listed companies,and has formulated a series of new regulations.Among them,the requirement of external auditors to evaluate the effectiveness of corporate internal control is the most striking,and the concept of internal control audit arises at the historic moment.It has become a hot topic both at home and abroad.Over the years,there has been a debate among American academia on whether SOX plays a role in practice.China promulgated the "basic norms of internal control" in 2008,to encourage listed companies to voluntarily engage independent external auditors to audit the effectiveness of the operation of internal control and the voluntary disclosure of internal control audit report.Since 2010,the Ministry of Finance and other units have issued the "internal control audit guidelines" and other documents,requiring mandatory disclosure of internal control audit report among listed companies in batches.In order to ensure the correctness of the relevant regulations,it is necessary and urgent to evaluate the effect of internal control audit in china.The specific implementation requirements are as follows:Firstly,the state-owned listed companies should disclose the self-evaluation of internal control report and report of internal control audit in the year of 2012,along with the annual report of the company;Secondly,the non-state-owned company listed on the main board which meet a certain criteria should disclose the company's annual report,self-assessment of internal control report and report of internal control audit in the year of 2013;Thirdly,other companies listed on the main board should disclose their related reports in 2014.Mainly considering the high degree of sensitivity of analysts to the public disclosed information,this paper studies the implementation effect of mandatory disclosure policy of internal control audit report from the perspective of analysts'earnings forecasts.As the most professional information users in financial market,analysts can all effectively disclose information by using the market to predict earnings,therefore,through the study of whether internal control audit can affect the accuracy of earnings forecast,we can evaluate whether the mandatory internal control audit report disclosure is information content.First of all,this paper summarizes the relevant theory and literature.Then select a sample,construct a panel data,and separate the implementation effect of internal control audit through the DID double difference model.Because batches implementation of mandatory internal control audit report disclosure policy,a frame of "natural experiment" is constructed,the sample period affected by the policy of the sample as the experimental group,while samples which were not affected by the policy of the sample as control group,using fixed effect model to estimate the impact of mandatory disclosure policy on the accuracy of earnings forecast.In addition,in the sample period,due to the existence of voluntary disclosure of internal control report phenomenon,which may reduce the impact of mandatory disclosure on forecast accuracy,this paper divides the sample into the groups where there are no voluntary disclosure and where voluntary disclosure exists,respectively examine the effects of mandatory disclosure policy on accuracy of earnings forecasts.The results show that the mandatory disclosure policy on the whole can improve the earnings forecast accuracy,and results of non-voluntary disclosure group shows more obvious than voluntary disclosure group roughly.Finally,this paper points out the inadequacies of this study and the future research prospects.