An Empirical Research Of Relationship Between Internal Control Quality And Earnings Management

Along with the prosperity of the security market, some problems within themanagement for the surplus of the listed companies begin to loom large and havealready become a hot issue in the field of accounting theory and in practice.Due to the situation that the focus of the management of surplus mainly falls onthe account information and there is a intimate connection between the information ofaccount and the Internal Control, let alone that in2008, documents such as the basicregulations of Internal Control, guide for the application of Internal Control, guide forrecommendation of Internal Control and the guide of the audit of Internal Control,through practice to prove and test the deep relationship between Internal Control andmanagement of surplus, will promote the inner control of a company and restrain theirmanagement of surplus, with important theoretical and realistic significance.This paper firstly introduced the meaning and related theories of surplusmanagement and Internal Control and analyzing the relationships between the twoform the factors of Internal Control l from the theoretical point of view.Secondly, this paper collected the information of companies that the index ofInternal Control were exposed and at the same time, getting rid of taking financialcompanies as research object, using descriptive statistics, mean differences inspectionand multi-linear and regression， talking about the correlation between InternalControl and surplus management. The core of my paper is research with proof and itis talked through two aspects.The first one is the research of measurement of surplus management.Based on the evaluation of all kinds of measurement models and combining themarket of our country with the reality of this paper, respectively chose the Lu JianQiao (1999) extended Jones model and Roychowdhury(2006) the true earningsmanagement evaluation model and conduct regression analysis of the model company,measuring degree of the surplus management from the index of earnings managementand accounting choice real earnings management activity indexThe second part of my paper is the research of the correlation of the InternalControl within a company and surplus management.The index of measuring Internal Control is set by the index number of theInternal Control. In order to control the influence other factor may put to the surplus management, the paper mainly set the company management, company performance,management feature and the complicity of running a company and analyze thatthrough linear regression.Through the result of empirical, high quality Internal Control will restrain the Alisted company’s accounting choice behavior and earnings management real earningsmanagement activities and also, the inner feature of a company and factors ofmanagement will affect the A listed company’s Internal Control and earningsmanagement behavior. Considering the quality of Internal Control will be influencedby the structure of a company, the paper subsequently analyze impact that the qualityof Internal Control in different company structure will exert to the surplusmanagement.The paper adopts the variable that represent the property of equity, equitystructure, features of the board of directors, features of the board of supervisors todescribe the structure of company management. According to the variable ofcompany management structure, different groups of models are set and find that thedegree of inner management will be affected by the property of equity, structure ofequity, features of the board of directors, features of the board of supervisors, etc.At last, this paper gives proposal according to the problems remaining in theInternal Control of our company.