Social Trust、the Accounting Profession's Independent Director Reputation And The Internal Control Quality

Internal control is located in the central nervous system of the enterprises,which is the inner mechanism of modern enterprise to improve the management、corporate governance and to avoid risk,what is the focus of academic research.How the internal control system can be effectively implemented and what factors influence the play of internal control is a hot issue that scholars from all walks of life have been exploring.Most of the previous studies have focused on the influence of explicit factors,such as media supervision,audit committee and board characteristics on internal control,while ignoring the influence of hidden factors such as reputation,values and management concepts on internal control.In addition,independent directors in finance(accounting)specialty are responsible for improving and supervising internal control in accordance with the articles of association.Therefore,This paper explores the mechanism of its internal control from the perspective of independent directors' reputation of accounting profession and the informal system of social trust.This paper selects all the A-shares data of listed private companies in China from 2009 to 2015 as a sample to examine the impact of the independent directors' reputation of finance(accounting)profession(abbreviated accounting independent director reputation and professional independent director reputation)and the informal system of the social trust on the quality of internal control(Full name Internal control quality),and further explores interactions of accounting independent directors' reputation and the social trust on internal control.This paper finds that:(1)the reputation of independent directors of accounting profession has a significant positive impact on the quality of internal control,and the impact of the high reputation accounting professional director who serve as director of the audit committee on the quality of internal control is more obvious.(2)The level of social trust in enterprises is positively correlated with the quality of internal control.(3)Further,exploring mechanism on the different degree of social trust lead to distinction of the influence of Independent Directors' Reputation on Internal Control,discover that with the improvement of the level of social trust,the positive impact of accounting professional independent director's reputation on internal control has been strengthen.This paper uses the internal control flaw scale to replace the Dibo index,a variety of measurement methods on independent director's reputation,and the second-stage regression,psm and other methods to control endogeneity,the conclusion remains the same.The results of this paper confirm that the reputation of accounting professional independent director possess heterogeneity and can ameliorate company's internal control quality.at the same time,In the incomplete stage of formal system such as laws and regulations,social trust as a complement and cooperation of the formal system,which also plays an important role in internal control construction.