Abstract
This study provides evidence concerning the significance of assessing operational control risks as part of an integrative evaluation of internal controls. We examine whether operational control weaknesses can be used as cues to potential unreported financial reporting control weaknesses, and in turn, relate to subsequent financial reporting deficiencies. We find positive relations between operational control weaknesses and future financial reporting control weaknesses, restatements, SEC comment letters, and audit fees, even after controlling for contemporaneous financial reporting control weaknesses. These findings question the completeness and accuracy of regulated assessments of financial reporting control weaknesses, and suggest that operational control risk is informative of potential financial reporting deficiencies.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
