Internal Control, Earnings Management And Audit Opinion

Internal control and earnings management are two important factors that influence audit opinions,and have always been a hot topic in academic research.The literatures show that the defects of internal control are the important reasons that lead to the failure of enterprise operation,false accounting information,and the deception of investors and the public.Defects in internal control often trigger auditors to issue non-standard audit opinions;However,high-quality internal control can inhibit management's earnings management behavior of the management to a certain extent,and improving the quality of accounting information,triggering auditors to issue standard audit opinions.This paper puts internal control,earnings management and audit opinions into a research framework,and further explores the mechanism and path of the influence of internal control on audit opinions,so as to promote the improvement of accounting information quality and audit quality of listed companies.We selected the a-share listed companies in Shanghai and shenzhen from 2014 to2017 as the initial sample,screened a series of sample data,and found the relationship among internal control,earnings management and audit opinions through empirical research.At the same time,we divided the samples into two sub-samples,state-owned holding group and non-state-owned holding group,to analyze the relationship among the three under different property rights background.Finally,we draw a conclusion and put forward some recommendations.The empirical study shows that:(1)the higher the quality of internal control,the more likely the listed company is to receive standard audit opinions,that is,internal control can improve the quality of accounting information and trigger auditors to publish standard audit opinions;(2)the higher the quality of internal control,the lower the degree of earnings management of listed companies,so,high-quality internal control can effectively curb the earnings management of listed companies;(3)earnings management plays a part of mediating effect between internal control and audit opinions,that is,internal control can achieve the possibility of receiving standard audit opinions by inhibiting the earnings management behavior of the management;(4)According to the nature of property rights,compared with non-state-controlled listed companies,earnings management of state-controlled listed companies has a more significant partial mediating effect between internal control and audit opinions.The main contribution of this paper is to sort out the relevant data of internal control,earnings management and audit opinions of listed companies since 2014.It is first time to put internal control,earnings management and audit opinions into research under a framework,through the intermediary effect model we improved the study of the internal control,earnings management and audit opinions.Through research,we found that the internal control influences the mechanism and path of audit opinions,and provides empirical evidence for listed companies to restrain the earnings management behavior of the management by improving the level of internal control,and to promote the improvement of accounting information quality and audit quality.