Comparative Research On Internal Control Auditing Models

Internal control auditing can effectively restrain earnings management and improve the quality of accounting information.CPA can conduct internal control auditing independently in China capital market,which is unlike the United States and other western developed capital markets,which explicitly require listed companies to conduct integrated auditing.In other words,there are two different internal control auditing modes in China capital market,they are separated auditing and integrated auditing.As a result,how will the internal control separated auditing and integrated auditing mode affect the company?Specifically,will the integration of financial report auditing and internal control auditing improve audit efficiency and reduce audit costs?Does separated auditing of financial report and internal control ensure audit quality because of independence?How do the investors in the capital market view the two different auditing models,and will they demand different returns for different auditing models?To answer the above questions is of great significance to the interpretation of internal control auditing behavior and the improvement of internal control auditing system.This paper empirical research the difference between separated auditing and integrated auditing based on three perspectives,using the method of combining normative research and empirical research,based on China capital market allows certified public accountants to conduct internal control auditing independently.The basic research ideas of this paper are as follows:Firstly,to summarize the evolution of the internal control audit system and to put forward the inevitability of the internal control audit system.Secondly,to analyze the theoretical basis of internal control audit mode using principal-agent theory and signal transmission theory and so on.Then,to empirically compare the differences between separeted auditing and integrated auditing based on the cost-benefit principle and from the perspectives of audit cost,audit quality and capital cost.Finally,to draw the research conclusions and to put forward policy recommendations.This paper can be divided into four parts.The first part is to raise research questions,including chapter 1 and chapter 2 of this paper.The second part is the institutional background and theoretical basis of the internal control auditing mode,including chapter 3 of this paper.The third part is the empirical test of the comparative study of internal control auditing mode,including chapter 4,5 and 6 of this paper.The fourth part is the research summary,including chapter 7 of this paper.The conclusions of this paper are as follows:First,this paper empirically tests the differences between the separated auditing and the integrated auditing based on the perspective of audit cost.The study found that compared with the separated auditing,the integrated auditing significantly reduced the internal control auditing cost,but there was no significant difference between the financial report auditing cost and the total auditing cost between the two audit modes.The empirical results remained unchanged after the separated auditing samples were paired according to industry and year.The research shows that the integrated auditing improves the audit efficiency,reduces the audit cost,espacially the internal control audit cost,compared with the separated auditing.To some extent,the research conclusion of this paper supports the view that integrated auditing mode has cost advantage.Secondly,this paper empirically tests the differences between the separated auditing and the integrated auditing based on the perspective of audit quality.The research found that there was no significant difference between separated and integrated auditing in discretionary accruals and financial restatements.The empirical results remain unchanged after 1:1 matching of separated auditing samples according to industry,year and asset size.Research shows that there is no significant difference in audit quality between internal control separated auditing and integrated auditing.Thirdly,this paper empirically tests the difference between the separated auditing and the integrated auditiung based on the perspective of equity capital cost.The study found that the separated auditing was significantly negatively correlated with the cost of equity capital,and the empirical results remained unchanged after the endogeneity problem was controlled by the PSM method.Further research shows that the effect of internal control separated auditing on the cost of equity capital mainly exists in regions with poor legal environment and state-owned enterprises.This research show that internal control separated auditing significantly reduces the cost of equity capital of listed companies and improves the financing efficiency of capital market.To some extent,the research conclusion of this paper provides a scientific explanation for why listed companies choose separated auditing mode for higher audit costs,and a new research perspective for a more scientific and comprehensive understanding of the differences of different internal control audit modes.This paper has carried out an exploratory study on the differences between the two audit modes,expecting the following innovations:First,from the research perspective,the existing researches only to investigate the differences between the internal control auditing modes from the perspective of internal control auditing cost,this paper empirical investigate the differences between the internal control auditing modes based on the principle of cost-benefit,from the audit cost,audit quality and the cost of capital three different perspectives,which can more comprehensively integrating the difference between the separated auditing and the integrated auditiung.Secondly,from the theory,this paper built a theoretical analysis framework for comparative study of internal control audit mode based on the cost-benefit principle,which can lay a theoretical foundation for empirical investigation of the differences between the separated auditing and the integrated auditing.Thirdly,from the empirical evidence,this paper has provided the empirical evidences of the differences between separated auditing and integrated auditing respectively from the audit cost and audit quality and the cost of capital.This research can provide more empirical evidence for the selection decision of internal control audit mode and the improvement of relevant systems of internal control audit mode.What's more,this research can enrich research literature in the related field.