Internal Conteol, External Audit And Financial Restatement Research

In recent years, domestic and foreign listed company has released the annual and interimfinancial report restatement common occurrences. Restatement of financial statements oflisted companies is the preliminary financial report has been released in the presence of falseor misleading information to correct the error and disclosed, thereby ensuring the authenticityof the behavior of the early release of the financial report. Conduct detrimental to the financialstatements restated financial statements for the authenticity, reliability and fairness letter isone of the high quality of financial reporting is not obvious manifestation, seriously affectingthe interests of investors, harm the reputation of the enterprise, disorderly China’s capitalmarket. The internal control and external audit as an important part of modern management,reasonable assurance that the financial statements give a true reliability is one of the twogoals.Aiming at the phenomenon of financial statement restatements occur frequently in ourcountry current listing Corporation annual report, this article attempts from two aspects ofinternal control and external audit to study how to govern the financial restatementsphenomenon. The article makes a lot of analysis research of correlation around the externalaudit and financial restatement and internal control and financial reporting restatement.Inorder to clarify the relationship between the three, this paper made the following analysis:first carries on to the related literature at home and abroad were reviewed, and then on China’sfinancial restatement system background and actuality, again is the analysis of internal control,external audit of the financial restatement of empirical, is the core section of the article. Onthe basis of relevant research to learn from previous, established the internal controlcomprehensive evaluation system, according to the relevant theoretical analysis put forwardthe basic assumption, and carries on the empirical analysis with the help of related software.The conclusion is restatement of the internal quality control, through the external audit qualityare significantly lower than those without the occurrence of financial restatements company;the lower quality of internal control, less occurrence of financial restatements; external auditquality is higher, less occurrence of financial restatements; whether it has a loss, whether ithas two duty syncretic are significantly related to financial restatement. The last part is theconclusion, mainly is the research summary, from the internal control and external audit twoangle gives recommendations to prevent the financial restatement, and points out the prospectof the limitations and future research.The main academic contribution of this paper is both from internal and externalperspective on how to govern the financial restatements phenomenon. Also use the mediating effect model to test the relationship between internal control, external audit and financialrestatements, to clarify the mechanism of action between the three, namely, external auditgovernance financial restatement in part is to pass through the internal control. The results ofthis study show that, enterprises must enhance the effectiveness of internal control, from thesource to control the financial restatement. At the same time, the quality of the external auditto improve and give full play to the supervisory role, to audit the internal control of theenterprise, and puts forward related suggestions to help enterprises to improve internal controlweaknesses and flaws, gradually improve the effectiveness of internal control, to achieve aninternal and external effect.