An Empirical Research About The Influence Of The Listed Companies Internal Control On Earnings Management

Alone with the releasing of “The Basic Norms of Internal Control” and “The Guides of the Enterprise Internal Control”, the internal control system in China is gradually forming. The emphasis of the government on the internal control is increasing and starting forcing companies to implement internal control construction. Theoretically, effective internal control can improve financial earning quality, however, the fact of the theory will directly related to the government to carry out the internal control construction. This paper uses empirical research to verify whether effective internal control can inhabit the earnings management. And provide new empirical evidence for evaluation the scientific of using the related internal control activities.To better understand whether the internal control can inhibit the earnings management, the paper starts using contract theory, agency theory, information asymmetry theory to analysis the basic reason for the appearance of earnings management. Analysis how internal control can inhibit the earnings management from the company and business level. Based on the 2010-2013 listed board companies on the Shenzhen Stock Exchange and SSE as the research objectives, we proved that an effective internal control can effectively inhibit the listed companies’ earnings management. Furthermore, it finds the internal control in state companies is more effective to inhibit the earnings management. In the area with higher market-based degree, it can effectively inhibit the accrued earnings management, whereas in the area with lower market-based degree, it can effectively inhibit the real earnings management. And the size of the company has no relation with the influence which internal controls can inhibit the earning management. Finally, combined with conditions in China, this paper puts forward some concrete and feasible recommendations.