The Research On The Impact Of External Audit Characteristics On The Internal Control Weakness Disclosure

Since "Enterprise Internal Control Basic Standard" and”Enterprise Internal Control Guidelines" was issued in 2008 and 2010,all Public-Listed Companies in Shanghai Stock Exchange and Shenzhen Stock Exchange Starts gradually to carry out the new internal control information disclosure rules since January 1,2012.Listed companies arerequired to disclosure internal control self-appraisal report along with financial report.At the same time,outsider auditors need to carry out audit work for company' s internal control effectiveness,and make corresponding audit opinion.As a independent third party facilitating agency,accounting firm plays an important role in internal control information' s authenticity and reliability.Since companies have come into a compulsion stage of internal control audit,the internal control weakness disclosure becomes more and more popular in the academic circles.But the proportion of reported internal control deficiencies in China is small,especially of material internal control deficiencies.External auditor is an important supervisor from capital market who urge listed companies to report internal control defects as rules.But present scholars do not pay enough attention to how deep the external audit influence the disclosure of control weakness.So we choose the aspect of "external audit" for our research' s topic,and study whether external audit characters affects the disclosure of internal control weakness and the degree of these weakness' s severity.We select companies where internal control weakness does exist between 2012-2015 as samples for this empirical study.We measure externa]audit by six specific characters,scale of auditor,auditor change,audit fee,audit tenure,non-clear financial report audit opinion and internal control audit opinion.According to a series of empirical test,we find that the companies who disclose internal control deficiencies tend to appoint a large-scaled accounting office,dismiss auditor and receive non-clear audit opinion of internal control.As for the reporting of severe deficiencies,audit fee,non-clear audit opinion both of financial report and internal control effectiveness has a significant positive effect,increasing the likelihood of disclosing those material weakness.Also we have done a robust test after empirical analysis,the result demonstrates our study conclusion is prudent and has significance for theory research and policy reference.