Research On Disclosing Of Internal Control

Lots of financial scandals happened at home and abroad during the last ten years, which badly compromised the confidence of investors and the development of the financial market. In 2002, the congress of unite states of America passed the Sarbanes-Oxley Act, which mandated that all the public company in America should disclose information about internal control in financial report. Chinese companies that is listed in America strictly followed Sarbanes-Oxley Act, and many Chinese companies that listed in America disclosed that there were one more internal control material weaknesses or significant deficiencies in annual financial report. In 2006, Shanghai stock exchange and Shenzhen stock exchange issued internal control guidelines respectively, which mandated Shanghai and Shenzhen listed companies to disclose information about internal control. In 2008, the Chinese finance ministry promulgated the Basic Standards for Enterprise Internal Control, which, again, mandated all listed companies in China should disclose internal control information in annual financial report. Under this circumstance, it is hardly to find Shanghai and Shenzhen listed company disclosing any forms of internal control material weaknesses or significant deficiencies.Issues related with internal control and disclosing of internal control are hot subjects for both theoretical and practical circles at home and abroad. In China, even though rules related to internal control and disclosing of internal control have been improved rapidly, for some unclear reasons, there are plenty of problems in practice. Choosing Chinese company listed in America as samples, this article researches the potential factors that may related with Chinese companies that listed in America disclosing internal control weakness, and the result indicates that Chinese companies listed in America disclosing internal control weakness is significant negative related to corporate size and earning ability, while significant positive related to auditor switch. The research conducted in this article is a beneficial exploration about the factors related to Chinese listed company disclosing internal control weakness, and advances the empirical research related to disclosing of internal control of Chinese listed company.