Research On The Necessity Of Disclose Non-Financial Reporting Internal Control Deficiencies

Disclosure of non-financial reporting internal control information is a unique institutional arrangement in China.Internal control system of China started late compared to foreign countries,but since the five departments including the Ministry of Finance and so on issued the Basic Standards for Company Internal Control in 2008.After the promulgation of a number of regulations,the system of internal control standards for enterprises in China has been improving.The content of internal control regulations of China has a significant feature: the construction of non-financial reporting internal control specifications is given special consideration on the basis of standardizing financial reporting internal control construction,which fully reflects the comprehensive characteristics of internal control regulatory construction of China.But as a feature of internal control construction of China,is it necessary to regulate the non-financial reporting internal control construction and its defect information disclosure,and can it have a positive impact on company value? Does it have any relationship with the internal control construction of financial reporting and its deficiencies information disclosure,and can it affect the quality of accounting information? Based on this,article aims to explore the rationality and necessity of comprehensive internal control requirements of China.By using the data of companies which listed in motherboard,small and medium-sized board and GEM stock markets of Shanghai and Shenzhen from 2008 to2018 as the research samples.Firstly,whether there is a significant difference in company value and quality of accounting information between companies that disclose non-financial reporting internal control deficiencies and those who do not disclose non-financial reporting internal control deficiencies using a propensity score matching method(PSM)horizontal comparison to test the institutional effects of disclosure of non-financial reporting internal control deficiencies in China.Secondly,the multi-period double difference method(DID)is used to vertically compare whether the company value and accounting information quality of the companies that disclosed non-financial report internal control deficiencies changed significantly before and after the disclosure period,so as to test the time effect of the disclosure of non-financial report internal control deficiencies.The study found that companies that disclosed non-financial reporting internal control deficiencies had higher company value than non-disclosed companies,and the company's company value also be significantly increased after disclosing non-financial reporting internal control deficiencies.Compared with undisclosed companies,there is no significant difference between the level of accrued earnings management and the true level of earnings management,and the company has not significantly reduced the two after disclosing non-financial reporting internal control deficiencies.The research conclusions show that the disclosure of non-financial reporting internal control deficiencies can enhance the value of the company,but it has no impact on the quality of accounting information,that is the unique institutional arrangements for the disclosure of non-financial reporting internal control deficiencies are useful and necessary in China,and companies should attach great importance to this work,and to further strengthen the construction of non-financial reporting internal control and the disclosure of deficiencies information.However,at the same time,the company cannot reduce or relax the construction,evaluation and deficiencies information disclosure of financial reporting internal control.The research in this article provides empirical evidence for demonstrating the rationality and necessity of comprehensive internal control standards in China.At the same time,the impact of the disclosure of non-financial reporting internal control deficiencies is evaluated based on company value and the quality of accounting information,the evaluation criteria are more comprehensive and comprehensive.Not only can it more accurately judge the role of the disclosure of non-financial reporting internal control deficiencies,but it can also reliably determine the impact of the disclosure of non-financial reporting internal control deficiencies on the effectiveness of financial reporting internal control,it can provide useful enlightenment to effectively handle the relationship between financial reporting internal control and non-financial reporting internal control,and then build these two types of internal control,comprehensively improve the effectiveness of internal control.