Research On The Relationship Between Financial Restatement And Internal Control Index

Financial restatement is a kind of remedial activity after the event,it is the correction and supplement to the report before the financial report of the enterprise is found to be wrong.This type of behavior indicates that the financial statements previously released by company failed to deliver the company's information to the user in a complete and true manner.Of course,this kind of activity can be either a deliberate act of the administration or an unintentional act.From a global point of view,the financial restatement of listed companies,both in terms of scale or quantity,presents an increasing trend.The misstatements and omissions of financial reporting have seriously affected the quality of accounting information,and the increased information asymmetry,stock price decline,capital cost increase and loss of investor confidence and a series of serious economic consequences.The phenomenon of financial restatements has been paid more and more attention by scholars.For the prevention and control of financial restatements,the supervisory authorities have implemented a series of measures,but still did not achieve the desired results.Getting to the root of the matter,it is found that we have not pay more attention to the influencing factor,which leads to the lack of pertinence of governance measures,is the main reason for the increasing number of restatements.Many domestic and foreign research results show that the failure of internal control is an important source of financial restatements.With the promulgation of the COSO internal control framework and the U.S.Sarbanes Oxley Act,the regulatory authorities around the world have also issued a series of policies and regulations on internal control.Combined with the specific situation of China's listed companies,the five ministries jointly issued the basic norms of internal control and its supporting guidelines,which means that the internal control system is gradually maturing.IV This paper introduces the internal control index,which is non-financial indicator,broaden the scope of quantitative research on the relationship between financial restatement and internal control index.First of all,this paper systematically reviews and summarizes the domestic and foreign academic works related to internal control index,financial restatement and internal control and financial restatements,which shows the literature on the relationship between internal control and financial restatements is more focused on the relationship between internal control deficiencies and financial restatements.Secondly,based on the internal control theory and the principal-agent theory,this paper makes an in-depth discussion on the relationship between the five elements of internal control and financial restatements,and puts forward the following six hypotheses.Again,the use of SPSS software for empirical analysis.The sample comes from the 2012-2014 of our country of financial restatements of all A shares of listed companies that emerge financial restatements in the past three years.Combined with Debo internal control information disclosure index database for exclusion,according to the principle of 1:1,we choose the non financial restatements as the paired samples.The regression model used in empirical test is Logistic model,select financial restatements as dependent variable,internal control combined index and five subindex internal control index as independent variable,audit opinion,asset liability ratio and return on net assets as control variables,use SPSS to empirical analysis.The analysis results show that the enterprise internal control index Debo scores is higher,the probability of financial restatements is lower,and it is consistent with the assumptions of this article.At the same time,this paper uses the target index of Debo and financial restatement for binary regression.The results show that the empirical analysis of the relationship between the internal control index and financial restatements is robust.Finally,combined with the empirical regression results,the paper puts forward some relevant policies and suggestions for preventing and controlling financial restatements,that is,consolidating the construction of internal control,improving the information and communication mechanism of enterprises,and reducing the rate of assets and liabilities of the company,and point out the deficiencies in the research process and the direction of improvement.