Research On The Influence Of Internal Control Quality On Earnings Management Of Textile Listed Companies

Modern businesses follow the pattern of contract management in which the shareholders are the principal as the investors and the managers as the agent of the enterprise make operation decisions, liable to the principal. When the shareholders cannot satisfy the requirements of the management levels, the management levels will take advantage of their information superiority and free decision-making power to hide the important transactions, adjust the financial statements or construct false transactions with the quality of corporate financial information and the long-term interests of investors deteriorated. In order to reverse the situation of bad quality of financial information in securities market, lack of confidence in investors, and damage to the interests of various parties, The internal control system came into being. China is the world’s largest textile production and export country, the sustained and stable growth of textile export is essential to the country’s foreign exchange reserves, the balance of international payments, to solve the employment. At present, some new changes in China’s textile industry have raised higher requirements on the standard operation and improving the quality of internal control.Therefore, this paper studies the influence of internal control quality on earnings management in the textile industry.Through combing domestic and international literatures, internal control and earnings management theory, this paper puts forward the research hypothesis. Secondly, the paper introduces the status quo of internal control and earnings management of listed Corporation, and selects 2008-2014 as the research objects. By designing internal control index based on the internal control objective and measuring the earnings management level with the choice of accounting earnings management and the real activity of earnings management. The data were processed by SPSS19.0 in the research process, and the descriptive statistical analysis and multiple linear regression analysis were used in the study.This paper constructs a multiple linear regression model to research empirically and comes to the conclusion: the level of internal control quality has no difference to companies with different choice of accounting earnings management; however, the higher the quality of the internal control is, the more effectively it inhibits the real activities of real earnings management, especially significantly restrains the behavior of manipulating production activity and cash flow, but effect on discretionary expenses manipulation is not obvious. Thus this paper puts forward to suggestion including perfecting corporate governance, improving internal control environment and internal control system,consummating internal and external supervision mechanism and so on so as to improve thequality of internal control, improve the earnings management behavior, and improve the quality of earnings information.