Research On The Relationship Between The Characteristics Of The Audit Committee Of Listed Companies And The Remediation Of Internal Control Weaknesses

The occurrence of several major financial fraud cases in the world was related to the internal control weaknesses of enterprises.This phenomenon had led to the promulgation of a series of laws and regulations related to internal control all over of the world,especially the promulgation of the Sarbanes-Oxley Act of 2002.The internal control system of China was established in 2010.The disclosure and remediation of internal control weaknesses has become a hot issue in domestic research.The audit committee has supervisory responsibilities for internal control.Compared with the United States,China has only introduced the audit committee system for more than ten years.The establishment and applicability of the system should be continuously explored and improved,and its governance effect on internal control needs to be tested..Based on principal-agent theory,information asymmetry theory and corporate governance theory,this paper makes assumptions and tests the relationship between audit committee characteristics and internal control remediation.Taking the listed companies with internal control weaknesses in Shanghai and Shenzhen in 2013-2016 as samples,I construct the ologit model,and test the relationship between the characteristics of the audit committee and internal control based on whether the characteristics of audit committee is specified by laws and regulations.Since the audit committee is a whole under the influence of various characteristics,the study of a certain aspect of the audit committee does not verify the impact of the audit committee on the internal control defect repair as a whole.Therefore,this paper attempts to study the audit committee as a whole and test the relationship between audit committee and remediation of internal control weaknesses through direct and indirect verification.The conclusions of this paper are as follows:(1)As for the characteristics specified by laws and regulations,the larger the audit committee,the more time they can invest in internal control weaknesses,thus remediation of internal control defects need less time.The improvement in the independence of audit committee members is not conducive to the remediation of internal control deficiencies.(2)Among the characteristics of the audit committee not being specified by laws and regulations,the older the members of the audit committee,the richer the experience,the more favorable the remediation of internal control weaknesses.The higher the average shareholding ratio of the members of the audit committee,their interests are more consistent with the long-term interests of shareholders and the company,and the more favorable the remediation of internal control weaknesses.The improvement of the status of the audit committee members on the board of directors can expand the influence of the audit committee and significantly promote the remediation of internal control defects.The part-time of the audit committee will distract members'energy.Under the constraints of time and energy,the higher the proportion of part-time,the more unfavorable the internal control defects are repaired.(3)The audit committee as a whole has a significant impact on the remediation of internal control weaknesses,and the changes of the committee members affect the daily work,which is not conducive to the promotion of internal control defects.In view of the fact that the improvement of the independence of the audit committee is not conducive to the remediation of internal control weaknesses,this paper has carried out an extended test to explore the reasons for this result.The study found that for companies with material internal control weaknesses,if the members of the audit committee are all independent directors,the independent directors are not good enough to understand the company,which is not conducive to the remediation of internal control defects.The independent directors of the audit committee are unable to perform their duties of remediation internal control defects due to their part-time reasons.The theoretical significance of this paper is reflected in two aspects.This paper can enrich the domestic theoretical and empirical research on internal control weaknesses,and re-discuss the impact mechanism of the audit committee and internal control weaknesses.This paper also can enrich the research on the governance effect of the audit committee and provide new empirical evidence for improving the operation of the audit committee.The practical significance of this paper is to guide listed companies to pay attention to internal control weaknesses from the perspective of audit committee,which is beneficial to listed companies to improve corporate governance.There are 3 drawings,19 tables,and 125 references in this paper.