The Effect Of Audit Firm Tenure On Internal Control Weakness Disclosure

Based on the new regulations on the disclosure of internal control weakness under the notice of Enterprise Internal Control Standard System (2012), we examine the relationship between the audit tenure and internal control weakness disclosure by integration audit firms, as well as the determinants of internal control deficiencies disclosure. We find that the internal control weakness disclosure is significant relate to audit tenure in local-government-owned firms. However, in central-government-firms, the determinants of internal control deficiencies disclosure is their business strategy, such as foreign sales, business segments. Furthermore, our examine show that the organizational structure of audit firm have a different impact on internal control weakness disclosure. Additional, in local-government-owned firms, audit tenure have a significant relation to firms which located in a less developed areas of China.Next, we propose the following policy recommendations:Firstly, the audit firms must pay attention to internal control auditing rather than a part of financial report auditing; Secondly, regulators should set up to guide the disclosure of develop expenditure and standardize the information disclosure of listed companies; Thirdly, Auditing Standards authority shall update the Auditing Standards to make sure auditors whose have a rule in any future build-down.