Research On The Relationship Among Internal Control,Audit Quality And Earnings Management

Under the background of the separation of the ownership and the right of management of corporate governance, managers improve principal-agent relationship through earnings management, make earnings information toward the direction of the development of their own interests is the inevitable choice. Internal control and external audit supervision is inhibition of two mechanisms of earnings management, exploring the mechanism of internal control and external auditing in the inhibition earnings management has guiding significance for making policies to solve the problem of earnings management.Based on the agency theory and asymmetric information theory, by reading a large number of relevant literatures, using the theoretical analysis method and combining with the research results of scholars proposed the research hypothesis. In order to test the hypothesis, choosing 1418 listed companies of China's capital market from 2009 to 2013 as samples, using the panel data fixed effect model, with the help of STATA12.0 data processing software to conduct empirical test, so as to explore the relationship among the internal control, external auditing and earnings management. Empirical study results show that: the better the quality of internal control is, and the smaller the degree of enterprise earnings management is, and internal control for inhibition of accrued earning management are more obvious; the higher audit quality is, the smaller the enterprise earnings management is, and auditor industry specialization can effectively inhibit the accrual earnings management and real activities earnings management; internal control and external auditing in the inhibition of earnings management has substitution effect. Further, through descriptive statistical analysis of the results we find: our country enterprise internal control practice quality still needs to be improved, auditor industry specialization is generally low, take necessary measures to improve the quality of enterprise internal control, and improve the auditor industry expertise, so as to make the internal control and external audit have greater advantages in restraining the earnings management is imperative.