Empirical Research On Internal Audit Quality To Corporate Performance Of Private Listed Companies In China

At the beginning of the century, the exposure of series of financial scandals, made the scholars focus on internal audit. As an important part of corporate governance structure, internal audit is a fundamental section of internal control. Internal audit is one of the four cornerstones of corporate governance. Internal audit and corporate governance are supplement with each other. Corporate governance is the institutional environment of internal audit playing role, and internal audit is the effective guarantee of corporate governance. How to make internal audit work efficiently and add value for organizations to the greatest level became a hot topic in theoretical circles. This paper examines whether higher internal audit quality could add value, and helps to strengthen corporate performance.This paper selects347private listed companies in China, which listed before2009, from2009to2012as the primary sample. It explores the internal audit quality playing a role in improving the performance of the company by multiple regression models from four aspects that are whether to establish an internal audit department, the independence of the internal audit department, restatement of financial reports and receive SFC penalty. Corporate performances are measure by ROE, Tobin’s q and ROA. The empirical test has the following conclusions. Most of the private listed companies in China have established highly independence internal audit departments which belong to the board of directors or board of auditors. The higher internal audit quality, the more effective of the internal control, the less restatement of financial reports or receive SFC penalty, and also has a better corporate performance.