The Effect Of Internal Control Weakness On Earning Quality

Because of the occurrence of the Enron, internal control activities are built all over the world. The United States began to return to an independent audit program with a series of steps, like the famous Sarbanes-Oxley. Especially the section302and section404are the key guidance to the construction of internal control. The SOX require public companies disclose the internal control regularly with the internal control audit reports issued by firms. In addition, SOX is also treated as guidance to internal control construction in our country regarding to the emergence of a large number of internal control theories and practice of research results. People start to pay increasingly close attention to how to establish an effective internal control system and the practical significance of internal control.The development of internal control system in our country is still in the beginning stage. Most companies have not set up developed internal control system although they strive to establish a set of internal control system highly integration with its develop. Therefore, the research on the possible weaknesses of internal control system helps to build the internal control system. Establishment of an effective internal control system can control company operating environment and operation process. Such these business process can monitor the company in all aspects. This paper does research analysis on the internal control weaknesses on the earning quality, because the high earning quality is one of good operating indicators of the company.This paper lock in the real estate industry, in recent years the effect of real estate industry on the economic as any one industry, with the strengthening of government regulation and control policy, the real estate agent has slowed investment steps, wait, then the real estate industry has become a huge funds, under the state council issued after five ""2013new countries, real estate is pushed to the forefront, internal control problems of this kind of industry will highlight of the show in front of us, at the same time of external control, do a good job in their own internal control construction, is advantageous to the real estate industry gain a foothold in instability of the housing market, so we discuss the defects of internal control problems of this kind of industry and the relationship between the and earnings quality. Help to strengthen the internal control consciousness of real estate and at the same time provide guidance for the real estate enterprise internal control construction.A case study, this article uses the research form, summarizes a large number of scholars about the internal control and earnings quality and internal control defects on the quality of the surplus of literature, review phase and the research results, combing the relevant basic theory, and under the background of the research, combining with the real estate development present situation and the research present situation, puts forward the viewpoint of this article. In subsequent cases analysis, summarized the defects of internal control of real estate industry standards, analysis of the case enterprise internal control present situation, including the internal control, internal control disclosure of information distribution quantification and defects of internal control. And the net profit, operating activities net cash flow and assets for a surplus of quality index calculation. And analyze the case of enterprise surplus quality, research on internal control defects on the quality of the surplus.This paper has made a contribution in the following aspects, first of all, our predecessors on the basis of the detailed study of the classification of the internal control, combining with the characteristics of real estate industry and to explore a criteria for recognition of the real estate industry internal control defects a detailed analysis of enterprise internal control defects such as deep vibration industry situation, it is concluded that the existence of the internal control defects will lower earnings quality, for the economic consequences of internal control defects research provides evidence of earnings quality case. Previous studies showed that most of the companies in the business process exists the defect of company level and account level problem, this paper, based on defect type case and on the quality of the surplus. Situation, this article describes the real estate industry internal control defects and typical cases as the research object, the analysis enterprise’s specific situation, thus further study on the quality of the surplus, laid a theoretical foundation for the real estate enterprise internal control construction.