Research On Quality Of Internal Control And Earnings Management

Since the financial crisis of2008, many listed companies in order inthis depressed economic background to get more preferential policies, betterfinancing conditions and to achieve their own interests, to begin intensified earningsmanipulation. Earnings management not only can not bring business benefits, butalso may mislead investors to make the wrong decision, especially real earningsmanagement activities relative accruals earnings management control methods interms of not only extremely subtle, and the consequences are more serious. So whattheorists have been exploring ways to suppress these two kind of earningsmanagement behavior. COSO Internal Control reports that one of the most importantgoals of internal control is reasonable to ensure the authenticity and reliability of thefinancial statements of the data, since the United States ’ Sarbanes-Oxley Act ",2008-2010also has introduced five ministries, including the " internal control basic norms", including internal control supporting documents, requiring listed companies todisclose internal control information, strengthen the supervision of internal control.Since then, the relationship between earnings management and internal controltheory has gradually become the focus of the study.In order to prove that indeed a correlation between the two, and the internalcontrol can indeed inhibit the earnings management, research and empiricalspecification I used a combination of research, starting with theory, through theprincipal-agent theory, the modern theory, asymmetric information theoreticalanalysis and derivation and signaling theory, both constructed graph theory provedcorrect internal control can suppress earnings management. On this basis, the paper first introduced the nature of property rights, combined with China’s actual situationanalysis of the relationship between changes in the quality of internal control underdifferent ownership and earnings management is theoretically proved that the natureof state-owned property can strengthen this inhibition. In order to support thisconclusion on the given data, collected and analyzed2010manual-2012ShanghaiA-share listed companies of all financial data, for the first time using the traditionalinternal information disclosure quality index with the latest Dibo combination ofinternal metrics quality control, the same time with Jones model and Roychowdhurymodel to measure separately accruals earnings management and real earningsmanagement activities, and build quality of internal control and the relationshipbetween these two types of earnings management model for including descriptiveanalysis, correlation test, regression empirical analysis, including analysis, toprove that the nature of the internal quality control under different ownership for theinhibition of earnings management from the data.Conclusion of the study show that both state-owned enterprises and non-state-owned enterprises, high-quality internal controls inhibited accruals earningsmanagement, and state-owned enterprises this inhibition is more significant; But nomatter what the nature of property rights, internal control activities are not realearnings management suppressed. In the final conclusion of this article wereexplained, and make relevant policy advice and hope to provide new empirical datafor this research.