Abstract
This article examines the relationship of earnings quality and internal control disclosure information in the sample of 1273 nonfinancial firms in shanghai and Shenzhen Stock Exchange in 2010. Using multiple regression model, we launch an empirical analysis on the relationship between earnings quality and internal control disclosure information. We find a positive relation between earnings quality and internal control disclosure information. The better the earnings quality is, the higher level of the internal control disclosure information will be. This provides a theoretical support to perfect our system of internal control disclosure of information, and to reduce the occurrence of financial fraud.
Highlights
The cases of financial fraud lead to incalculable losses in these years, which are related to firm’s weak system of internal control
With the analysis of multiple regressions, we examine the relationship of earnings quality and internal control disclosure of information in the sample of 1273 nonfinancial firms in shanghai and Shenzhen Stock Exchange in 2010
The results showed that the companies with a better operating performance and higher reliability of financial report are more inclined to disclose its internal control information, and vice versa
Summary
The cases of financial fraud lead to incalculable losses in these years, which are related to firm’s weak system of internal control. Both domestic and foreign have issued a series of legal norms. We formulate two important files: “Shanghai Stock Exchange listed companies internal control guidelines” and “Shenzhen Stock Exchange listed companies internal control guidelines”. These files require companies to disclose internal control self-assessment report and comments of external auditor’s audit, which greatly improve company’s effectiveness of internal control and quality of financial information. With the analysis of multiple regressions, we examine the relationship of earnings quality and internal control disclosure of information in the sample of 1273 nonfinancial firms in shanghai and Shenzhen Stock Exchange in 2010
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