CFO Power, Internal Control And Financial Restatement

In recent years,financial fraud scandals have occurred in China's capital market,and quality of financial reports of listed companies has not been properly resolved.At the same time,we also find that the phenomenon of corporate financial restatement is getting worse.Financial restatements are intended to supplement or correct omissions or errors in previous financial reports,but frequent restatements exacerbate the problem of low quality financial information.As the leading producer of financial reports,the CFO knows the true state of financial information best.Therefore,when listed company restates financial report,the first thing that comes to mind is whether the CFO has fully performed its due responsibilities in the process of compiling financial reports.The key to fulfilling responsibilities lies in the matching power,so the CFO power has a crucial impact on financial restatement.In addition,the internal control system,as an important part of the modern enterprise management framework,is the institutional guarantee for high-quality financial reporting.As the financial leader of enterprise,whether it is internal control requirements or division of responsibilities,to a certain extent,it determines the effectiveness of the internal control mechanism operation,which in turn affects the quality of financial reporting.In view of this,this article takes A-share listed companies with financial restatements from 2014 to 2018 as a sample object to verify whether the CFO power can affect the occurrence of financial restatements of listed companies,and further clarify the transmission mechanism of CFO power on financial restatement,that is,to test the mediating effect of internal control.Through the use of multiple linear regression and logistic regression analysis methods,this paper obtains the following research results:(1)CFO power has a positive impact on reducing the probability of financial restatement of listed companies.That is,the higher the CFO power,the lower the probability of corporate financial restatements;(2)The CFO power is significantly positively related to the internal control of the enterprise,indicating that the CFO power has a positive effect on promoting the level of internal control of the enterprise;(3)Internal control plays some of intermediary role in how the CFO power affects the financial restatement,that is,the CFO power via improving the overall internal control of the enterprise,reduces the probability of financial restatement;(4)In further analysis,it was found that compared with listed companies in regions with low levels of marketization,some of the intermediary effects of internal control in the CFO power's impact on financial restatement are even more remarkable in regions with more developed markets.The research results in this paper indicate that listed companies should clearly define the CFO's functional positioning and grant corresponding powers to ensure that they maintain their due independence in the exercise of their functions and give full play to their governance effectiveness.At the same time,it is also necessary to strengthen and perfect the internal control system of the enterprise,and ensure that the internal control procedures are implemented.In addition,China should further accelerate improvement of the financial restatement information disclosure system,improve the unified financial restatement disclosure standards,and standardize the financial restatement of listed companies.