Internal Control Audit And Accounting Information Quality

Supporting Guidelines for Enterprise Internal Control was jointly issued by theChina’s Ministry of Finance, China Securities Regulatory Commission (CSRC), AuditingAdministration, China Banking Regulatory Commission (CBRC) and China InsuranceRegulatory Commission (CIRC) on April26th,2010. The promulgation of this supportingguidelines which is known as the "Sarbanes-Oxley Act" in China, marks the internalcontrol audit of China has been transformed from voluntary behaviors into compulsorybehaviors within partial scope. How the implementation of internal control audit or not willaffect the accounting information quality? Whether the companies forced to carry outinternal control audit and the companies carrying out the audits and the disclosure ofreports voluntarily can produce the accounting information quality at different levels?Whose accounting information quality is better? Therefore, the paper verifies theimplementation effect of internal control audit, reviews the advantages and disadvantagesof compulsory and voluntary internal control audit, and it is expected that the conclusion ofthis paper can provide some useful experience and data for decision-making sections tofurther promote the work of internal control audit in future.In view of the purposes mentioned above, the paper based on the System Theory,carries out the research by the research method of System Accounting. The paper collectscurrent related literature and reviews relative system background by the literature researchmethod; Starting from the Principal-Agent Theory, Asymmetric Information Theory,Signalling Theory and System Theory, the paper carries out the recursive process graduallyto propose two assumptions which are related to the paper. The non-financial listedcompanies in Shenzhen Stock Exchange are selected to be the sample, and then theresearch programme is designed and the empirical study is carried out, and finally thefollowing points are found:(1) A certain degree of earnings management really exists inChina, and the implementation of internal control audit can improve that situation, so theaccounting information quality can be improved significantly;(2) After further dividing the companies carrying out the internal control audit into compulsory companies and voluntarycompanies, it is found that the accounting information quality of the companies carryingout the internal control audit and disclosure of audit report voluntarily is better than the oneof those compulsory companies.Finally, based on the conclusion of the research in this paper, combining it with thecurrent situation in China’s capital market and realistic system background, the authorconcludes that it is necessary to enforce internal control audit gradually at the present stage.Once the rule of laws is developed into the corporate philosophy, the internal controlaudit’s compulsory driving pattern of government will be completely replaced by theconscious behavior of enterprises.