| In recent years, bankruptcy or project huge losses frequently appear in domestic and foreign companies, investigate the reason, it' s all related to the company's own internal control weakness. Subsequently, many countries around the world has issued a series of laws and regulations on internal control, the company's internal control is strictly standardized. Once the internal control weakness occur, in order to eliminate its negative impact, restore the user's confidence in the financial statements, companies will take measures as soon as possible to remedate internal control material weakness. At the same time, it is also an objective requirement to improve corporate governance and achieve company objectives. With the promulgation of the SOX Act, the issue of internal control has also been concerned by academic, the integration of internal control and corporate governance has become a new research trend, the lack of scientific and consistent standards for the identification of internal control weaknesses. The previous research is from the prevention perspective and focused on the impact of defect disclosure, there are few people do research from the afterword perspective. Therefore, discuss the definition and measurement of the remediation of internal control weakness, it is an innovation to study how to remediate the internal control weakness from the afterword perspective.The theoretical significance of this study is to enrich the theoretical and empirical research on the remediation of internal control material weakness and improve the empirical research methods of internal control weaknesses. In this paper, the concept of the remediation of internal control material weakness is put forward, and the weaknesses of internal control and the remediation of material weakness in internal control are confirmed and measured. In the course of exploring the influence mechanism of the board of directors and the audit committee on the remediation of enterprise's internal control material weakness, it is the first time to consider the impact of government laws and regulations and media supervision on the material weakness of internal control, and to improve the theory and empirical research of internal control. In addition, based on the measurement of legal regulation, legal regulation and media supervision are incorporated into the model for the first time. Verifying its regulatory role contribute to the improvement of the empirical research methods of internal control weaknesses.The practical significance of this study is to:(1) It can guide the listed companies to concern about the remediation of internal control weakness from the perspective of strengthening the board of directors. Since the board of directors is the core institution of internal control performance, the board of directors will take some measures to remediate weakness,such as,optimize the size and structure of the board of directors, encourage the directors, set the audit committee. Therefore, this study is conducive to guide listed companies to concern about the remediation of internal control weakness and diagnosis influencing factors of the remediation of internal control weakness and conducive to the main body to take action against the disease.(2) So as to provide reference for evaluating the effectiveness of internal control. In this paper, repair effect of the internal control material weakness was used to measure the extent of internal control weakness in governance, it is one of the evaluation criteria to determine the effectiveness of internal control.(3) It strengthened the role of media supervision and legal regulation in the remediation of internal control material weakness. Media has the function of supervision, so it can play a role in regulating the governance of the main governance behavior through the exposure considering the regulatory role of media supervision for the first time. Empirical study shows that China's laws and regulations in the restoration process of internal control of material weakness has a regulatory function, this paper verify the mandatory effect of the series of internal control laws and regulations, provide policy recommendations to the relevant departments.This paper defined and measured the concept of "the remediation of the internal control material weakness " and the measure of the government regulations, has selected the sample which having internal control material weakness in 2010, give a research the influence of board of directors governance on internal control material weakness during 2010-2014.This paper expounds the influence mechanism, constructs the theoretical model, the descriptive statistics and analysis of variance was carried out on the variables, there is an empirical test to the impact about the board governance to the remediation of the internal control material weakness, law regulation and the media supervision is verified for internal regulation in the process of the influence of the board governance to the remediation of the internal control material weakness. This paper is mainly based on the principal-agent theory, signal theory, the theory of reputation theory, on the basis of analyzing the influence mechanism of board governance to the defects of internal control, using the method of combining normative and empirical research, for example, the specific mltching test, multiple regression, weighted regression method. We obtain the following important conclusion through empirical tests of sample:(1) The repair of material weakness in the sample company has a positive effect, there were significant differences between the two groups of defective companies and non-defective companies. The governance of board of directors can promote the remediation of internal control material weakness, media supervision and legal regulation play an important role in the process of internal control weakness rectification.(2) The professional of Audit committee has no significant relationship with the remediation of internal control material weakness,on the one hand, it may mean the reason of the low proportion of the independent directors of the audit committee of Listed Companies, the poor independence, and the governance capability is low due to the cross appointment of the Specialized Committee;on the other hand, it may mean that the non-financial expertise is more effective than the financial expertise to remediate the weakness of internal control, and non-financial expertise is an important management expertise of audit committee members., non-financial expertise is an important management expertise of audit committee members.(3) The size of the board and the number of audit committee meetings are inverted "U" shaped relationship with the remediation of internal control material weakness. After adding the adjustment item still significant and should be reasonable the size of the Board and the Audit Committee meeting number, too much too little is not conducive to the internal control of material weakness in the remediation.(4) The media supervision is inverted "U" shape relationship with the remediation of internal control material weakness, the media supervision plays a significant positive role in the process of the impact of the audit committee setting on internal control material weakness; in the course of the audit committee meeting on the impact of internal control material weakness in the company, the media supervision played a significant negative regulatory role in the 1% level.(5) Legal regulation is significantly related with the remediation of internal control material weakness. After added legal regulation, the media supervision is no longer significantly related with the remediation of internal control material weakness, under the mandatory effect of laws regulations, media supervision weakened, if the law enforcement agencies intervening, media will no longer focus, which is in line with the actual. After the adjustment, the proportion of the independent director the highest amount of the remuneration of the top three directors?the size of the Audit Committee on the company's internal control material weakness has a negative regulatory role in the process of remediation. After added legal regulation or adjustment item, the setting of the audit committee is no longer significantly related with the remediation of internal control material weakness, it shows that the setting of listed company's audit committee is the result of external institutional constraints, which is consistent with the yong-zhen xie (2006) research conclusion.(6) The proportion of independent directors is negatively related to the remediation of internal control material weakness because of the paradox of independent directors' independence of China's listed companies and the poor governance of the independent directors. Increasing the proportion of independent directors in the board of directors is closely related to the remediation of internal control material weakness. Both the two level-one of chairman and general manager and remediation of the internal control material weakness are positively related, for maintaining the chairman and general manager of Listed Companies in our country as the board of directors of a strong governance capacity, it needs to properly increase the proportion for the phenomenon of low proportion of the two level-one of chairman and general manager.(7) After joining the media supervision and comprehensive regulation of legal regulation, comprehensive adjustment item has a significant negative effect on the process of the proportion of non-remunerated directors' effect on the remediation of internal control material weakness, and has a significant negative regulatory role in the process of the audit committee' rule on the repair of internal control defects.The innovation of this paper:(1) Definition and measurement of the concept of "remediation of Internal control material weakness ". Because of the lack of uniform criteria for the judgment and recognition of the major defects of internal control in the past studies, this paper is based on the twenty-second columns of the audit guidelines in 2010:Four signs of significant defects within the internal controls to determine the criteria for the identification of major defects within the internal control, to score the material weakness types, and calculate the total score. Then use the difference of next year's total score minus one year before the total score to measure the remediation effect. This approach is innovative and extends the study of internal control deficiencies.(2) Measurement of legal regulation. This article has carried on the reasonable measurement to the 60 internal control laws and regulations which the different organization issued, according to the authority of the promulgation authority to score points, calculate the total score of each year, and cumulate total. In the past, the study of laws and regulations has been using the method of normative research, in this paper, the quantification of laws and regulations overcome the limitations of previous studies, and laid the foundation for empirical research.(3) Consider the impact of media oversight and legal regulation on the remediation of internal control material weakness, the media supervision and regulation of legal regulation variables applied to the board of directors of governance and internal control deficiencies in the study. This paper overcomes the limitations of previous researches which focus on internal governance, for the first time, the media supervision and regulatory variables are used in the study of board governance and internal control deficiencies, break through the "input-output" model of the mainstream research paradigm, the theoretical model of the regulation variable is constructed, the regulatory role of the media supervision and legal regulation in the management of the board on the internal control material weakness in the repair process is verified, at the same time, it's the innovation of research methods.The disclosure of the internal control weakness is the result of the game between internal and external stakeholders. Without the disclosure of internal control weakness of the company does not mean there have no internal control weakness, we can only reseach the disclosure of internal control weakness of the company, which is a common problem faced by researchers at home and abroad. In the process of screening, due to the limited knowledge and ability, there are some errors in the judgment of some weakness. In the future, we should consider the improvement measures to reduce the error caused by subjectivity. We can get the data of governance subject behavior, study the mediating effect, and use the method of " mediation with adjustment" to deepen the research of this paper. In addition, the market effect of internal control material weakness is our further research direction. |
PDF Full Text Request