Internal Audit Function, Audit Committee Characteristics And Disclosure Of Internal Control Deficiencies

In June 2003, The Securities and Exchange Commission(SEC) formal implementation of SOX act,The act section 404 requires the management to evaluate company`s internal control.In July 2007, the Public Company Accounting Oversight Board(PCAOB) used Auditing Standards NO. 5 to instead of NO. 2, the Auditing Standards of NO. 5 classify the degree of internal control weaknesses, require auditors evaluate the seriousness of the weaknesses in the audit process, before using internal auditor work they should consider the internal auditor objectivity and professional competence. In 2011,The Enterprise Internal Control Evaluation and Guidelines has beginning implement in company that listing domestic and overseas at the same time(The following abbreviations The Guidelines), The Guidelines requires enterprises must disclose internal control weaknesses in their internal control evaluation report,encourages companies to hire accounting firm to evaluate the effectiveness of internal control.The NO.1201 of Internal Audit Specific Standards has made a clearly instructions to internal auditor`s objectivity, integrity and the professional competence,At the same time,setting up of the audit committee has transform to enforcing period from voluntary period.Form those Systems we can know that the supervision department of enterprises has already aware the significance of internal control and internal audit service department.Because of disclosing the internal control weaknesses can protect the external stakeholders and alleviate the problems of information asymmetry between the external stakeholders and managers,however,carrying out the Enterprise Internal Control Evaluation and Guidelines may generate a significant impact to internal control information disclose.Inspection the relationship between the internal audit function,audit committee characteristics and internal control weaknesses disclose,can clearly the internal audit and audit committee play a role in company`s internal control construction and improvement,for policy formulation department and company managers understand company’s internal control system implement effective and the supervise effective provides empirical evidence and policy support,help them to better management enterprise.In this paper, the study of the guide implementing in initial period,the internal audit function and audit committee characteristics make a influence for disclose internal control weaknesses,it will has some theoretical significance and practical significance to complete company`s internal audit and audit committee system.In this paper, we use companies that in the Shen Zhen Stock Exchange in 2011 to 2013 as for sample study the role of the internal audit function in the disclosing internal control weaknesses, use companies that in the Shang Hai Stock Exchange in 2013 as for sample study the role of the audit committee characteristics in the disclosing internal control weaknesses.The results indicate that :(1)The formulating and implementation of internal audit system can improve the effectiveness of internal control.;(2)The experience of internal audit department has the function of promoting the disclosure of internal control weaknesses;(3)The different professional types of the audit committee promoted the validity of the internal control of the company.;(4) Observed the annual the audit committee members have changed companies are more likely to disclose internal control weaknesses;(5) The longer the audit committee was established, the lower possibility to disclose internal control weaknesses. In addition,The Independence and the size of internal audit are Positively related to disclose internal control weaknesses,the education level of the audit committee members have a certain influence on internal control effective,however did not through the test of significance.