Internal Controls, Corporate Governance And Financial Restatements Research

Although there are many factors that affect the information quality of the financialstatement, generally speaking, the main reasons are the defects or the failure of theinternal control. In the meantime, as a mechanism for supervision and balance as well asthe environment factor of the internal control, corporate governance and internal controlhave an interactive relationship, so it can affect the effectiveness of internal control andthen the information quality of the financial statement. As restatements of the previousfinancial statement, the financial statement restatements indicate the low quality ofprevious financial statement information，therefore, there exsit some relationship in theinternal control, corporate governance and financial statement restatements.Based on all of the A share listed companies releasing annual report in2010-2011as the research object, this paper finally acquire2966valid samples after eliminating thefinance companies, the companies that has been delisted or into the SanBan tradingmarket and the companies that lack of complete material or available data, and screenout194companies of financial statement restatement to discuss the relationship ofinternal control, corporate governance and the financial statement restatement. Researchfinds that the higher the quality of the internal control, the lower occurrence rate offinancial statement restatement; through importing relevant corporate governancevariables and interactive variables of corporate governance and internal control in themodel respectively, the result shows that good corporate governance structure can notonly directly inhibits the occurrence of financial statement restatements, but alsoindirectly inhibits the occurrence of financial statement restatements by improving theoverall quality of internal control, that is, the utility of internal control inhibitingfinancial statement restatement gets strengthened in its’ function. Therefore, this paperputs forward some corresponding policy recommendations from the company internallevel, external supervision level, laws and regulations level, in order to provide certainreference for the improvement of the enterprise internal control and corporategovernance structure in our country, strengthenment of the external supervision andsoundness of relevant laws and regulations about information disclosure.This study mostly contains six chapters as follows:Chapter One introduces the research background, research significance, researchcontents and framework, research method, the main innovation points and so on; Chapter Two concludes and reviews some related literature, leading to the researchcontents; Chapter Three contains theoretical basis and the relevant system evolution,which elaborates on theoretical basis, the institutional change of financial statementrestatements、internal control and corporate governance to lay the theoretical basis andinstitutional foundation for this paper; Chapter Four is the empirical research design,which presents the research hypothesis in accordance with the existing literature andtheory analysis, introduces the research sample, data sources, statistical analysis tools,and designs relevant variables and empirical models; Chapter Five is the empiricalresearch results and analysis, which makes descriptive statistical analysis, singlevariable correlation analysis,Logistic multivariate regression inspection result andanalysis, to test and analyze the influence direction and degree of research variables onthe financial statement restatements; Chapter Six contains the conclusion and policysuggestion, which summarizes the research conclusion according to the empiricalresults, puts forward the corresponding policy recommendations, and illustrates theresearch limitations.