The Effect Research Of The Internal Control Audit

Under the current enterprise system,because of the separation between operation right and ownership,the information which the investors and managers obtained is inconsistent.In order to avoid the damage of the profit,the investors must acquire the operation situation of the enterprise.Based on this situation,the financial report becomes the major way to be aware of the enterprise for the investors.In addiction,to ensure the proper of the provision,the regulators also need to acquire the operation situation of the enterprise.For this meaning,the financial report of high quality becomes the key object for the enterprise stakeholders.And the effective internal control could ensure forming the financial report of high quality.Therefore,which evaluating the performance of the internal control audit has the necessity and urgency of the realty.On the basic of the initial implementation of the internal control audit,this study try to explore the provision’s influence on the information quality of the financial report,which is to evaluate the performance of this provision.First,after searching and sorting the related literatures,we comb with the research related to internal control and difference-in-differences,and lay a theoretical foundation for this paper’s research topic and method.Then, the study choose the companies from2010-2012which listed in Shanghai and Shenzhen exchange main board as the research samples,which is built as a3-years panel data,and then discuss the performance of this provision. Because the internal control audit takes effect in batches,which construct an analysis framework of "natural experiment ".As a consequence,this study uses the difference-in-differences,through the difference of the experimental group and control group,to separate the effect of internal control audit.The experimental group is affected by the provision,and the control group is not.Then we evaluate the internal control provision’s effect on the information quality of financial report by the fixed effect model.In the measure of the information quality of the financial report,this study considers the accrued earnings management and the real earnings management.The final result shows that the internal control audit has different effects on the different ways of earnings management. That’s to say,the effect of the first implementation of the internal control audit is not obvious,but the effect of the second implementation of the internal control audit is obvious. The internal control audit can restrain the accrued earnings management, but it has increased the real earnings management.It has a gradual effect. Finally, this paper also offers corresponding proposal of this provision,and point out the deficiency of this study and the future research prospects.