The Influence Of Managerial Power And Internal Control On Audit Quality

Audit quality is an important indicator to measure the quality of accounting information.Auditors are often influenced by management during the audit process.On the one hand,management may interfere with the auditor’s independence.On the other hand,earnings management behavior will also affect the audit quality.The greater the managerial power is,the stronger the motivation and ability of obtaining private benefits are.Therefore,managerial power may become one of the important factors affecting the audit quality.Using managerial power to impair audit quality is an act of power rent-seeking.Internal control is recognized as an institutional arrangement to restrict power effectively.As the significant governance mechanism within and outside the company,there is also a mutual influence and interaction between internal control and independent audit.Whether the internal control has really played a role in supervising and constraining the managerial power in practice,and promoting the audit quality,which is one of the research issues in this article.Specifically,we select the data of A-share listed companies in Shanghai and Shenzhen in 2011-2016 as our samples.The absolute value of manageable accruals in earnings management is chosen to measure the audit quality,at the same time,the managerial power integration variable is designed to reflect the managerial power.In the next moment we study the impact of managerial power and internal control on audit quality with the empirical research method.Ultimately,these conclusions can be proved:(1)if the managerial power is greater,the company will have a lower audit quality.When the management have the excessive power,they will have the stronger motives of opportunism,and it is more likely to distort accounting information through earnings management in order to obtain high rewards,which will reduce the quality of earnings and signify lower audit quality;(2)The more effective the internal control,the higher the audit quality.A company has a consummate internal control,which means its operation conforms with the requirements of laws and regulations more easily,and means the less risk,step by step the audit quality will be higher;(3)A consummate internal control system can effectively restrain the managerial power,and thus to weaken the inhibitory effect of managerial power on audit quality.If the internal control system is fully implemented,the management can be availably supervised and restricted by each other,moreover the behavior of managers will be more standardized,the bottom line is that the managerial power will not impair the audit quality.