The Impact of Disclosures of Internal Control Weaknesses and Remediations on Investor-Perceived Earnings Quality

2010 ◽  
Author(s):  
Luo He ◽  
Daniel B. Thornton
Keyword(s):  
Internal Control ◽  
Earnings Quality ◽  
Internal Control Weaknesses ◽  
The Impact

Organizational identity, professional identity salience and internal auditors’ assessments of the severity of internal control concerns

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ian Burt ◽  
Theresa Libby
Keyword(s):  
Professional Identity ◽  
Internal Control ◽  
Organizational Identity ◽  
Internal Audit ◽  
Identity Salience ◽  
Content Type ◽  
Internal Auditors ◽  
Internal Control Weaknesses ◽  
The Impact ◽  
Benefits And Costs

Purpose This paper aims to examine whether increasing the salience of the internal auditor’s professional identity, defined by the expectations of their professional group, increases internal auditors’ judgments of the severity of internal control concerns when their organizational identity is high. Design/methodology/approach This paper tests the hypothesis using a laboratory experiment with internal auditors as participants. Findings The results support the hypothesis that professional identity salience moderates the relation between organizational identity and the assessed severity of identified internal control weaknesses. Increasing the salience of professional identity results in a more severe assessment of identified internal control weaknesses when organizational identity is high than when it is low. Originality/value Prior research in the lab and in the field provides mixed results about the impact of organizational identity on internal auditors’ judgments of the severity of identified internal control concerns. This paper contributes to the discussion on this issue. In addition, the results have implications for the debate about the benefits and costs of in-house versus out-sourced internal audit functions.

Does Mandatory Disclosure of Internal Control Weaknesses Affect Corporate Financing Decisions?

2018 ◽  
Vol 35 (3) ◽  
pp. 581-606 ◽  
Author(s):  
Xinghua Gao ◽  
Yonghong Jia ◽  
Siyi Li
Keyword(s):  
Internal Control ◽  
Information Environment ◽  
External Financing ◽  
Equity Financing ◽  
Corporate Financing ◽  
Financing Decisions ◽  
Financing Choices ◽  
Internal Control Weaknesses ◽  
Financing Behavior ◽  
The Impact

We examine the impact of internal control weaknesses (ICWs) on firms’ financing choices and how firms alter their financing behavior after the mandated disclosure of ICWs. We find that, before disclosure, ICW firms tend to seek external financing more than non-ICW firms do and are more likely to use equity financing as opposed to debt. After the disclosure, however, ICW and non-ICW firms exhibit similar financing preferences. In exploring the motivations for equity financing, we find that ICW firms are more prone than non-ICW firms to use the equity proceeds to fund investments and that this penchant disappears post-disclosure. The overall evidence indicates that ICW disclosure alters the information environment and managerial incentives, which has significant impact on firms’ financing decisions.

The Impact of Information Technology Internal Controls on Firm Performance

2012 ◽  
Vol 24 (2) ◽  
pp. 39-49 ◽  
Author(s):  
Lemuria D. Carter ◽  
Brandis Phillips ◽  
Porche Millington
Keyword(s):  
Information Technology ◽  
Firm Performance ◽  
Internal Control ◽  
Ordinary Least Squares ◽  
Internal Controls ◽  
Publicly Traded ◽  
Sarbanes Oxley ◽  
Internal Control Weaknesses ◽  
Performance Results ◽  
The Impact

Since the introduction of the Sarbanes-Oxley (SOX) Act in 2002, companies have begun to place more emphasis on information technology (IT) internal controls. IT internal controls are policies that provide assurance that technical systems operate as intended, provide reliable data, and comply with regulations. Research suggests that firms with strong internal controls perform better than those with internal control weaknesses. In this study, the authors evaluate the impact of IT internal controls on firm performance. The sample includes 72 publicly traded firms, 36 that reported IT internal control weaknesses and 36 that did not. The results of ordinary least squares (OLS) regression indicate that substantive IT internal control weaknesses negatively impact firm performance. Results and implications for research and practice are discussed.

scholarly journals Exploration Disclosures of Internal Control as the Impact of Earnings Quality and Audit Committee

2019 ◽  
Vol 3 (1) ◽  
pp. 4-22
Author(s):  
Hisar Pangaribuan ◽  
Raynald Wilbert P. Donni ◽  
Oluwatoyin Muse Johnson Popoola ◽  
Jenny Sihombing
Keyword(s):  
Internal Control ◽  
Information Disclosure ◽  
Audit Committee ◽  
Industrial Revolution ◽  
Annual Report ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Secondary Data ◽  
Internal Controls ◽  
The Impact

Information disclosure carried out by management as an appointed agent is increasing in importance and hence, a source of concerns to users.  It is widely believed that information received by the stakeholders should be appropriate and sufficient for useful decision making, especially in the era of the Fourth industrial revolution. An appropriate and sufficient disclosure in the Annual report indicates a reflection of the effective implementation of the company's operational, strategic, financial and compliance objectives that have been carried out by the management. This study employed secondary data obtained from the annual report for the banks listed in the Indonesia Stock Exchange (IDX). The data for internal control disclosure was observed through a content analysis approach by calculating the internal control system index obtained in the annual report. This study has shown that companies with high earnings quality report more openly convey the application of internal controls system disclosure. This study demonstrated that company with the high characteristics of the audit committee would significantly increase disclosure of internal controls system than a company without audit committee.  Supervision, as one of the internal controls established by the management, enhances the performances of the audit committee in ensuring compliance through full disclosure of the financial statements. Thus, restoring users’ trust and confidence in making informed and useful decisions on information emanating from the management.  

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