Abstract
This study uses data on Japanese listed companies for the period 2009 to 2012 to examine the incentive factors for the (non-)disclosure of material weakness (MW) in internal control over financial reporting. The propensity score-matching results of matched and potential MW companies from the research sample reveal that companies that do not disclose MW have longer management tenure, Big 3 auditors, lower audit fees, larger boards of directors, fewer outside directors, and greater main bank involvement than those companies that disclose MW. In addition, the non-disclosure of MW at the company level is associated with longer management tenure, larger management shareholdings, and greater main bank involvement, whereas the non-disclosure of MW at the account-specific level is associated with longer management tenure, Big 3 auditors, lower audit fees, significant non-audit services, and greater main bank involvement. These results suggest that the assessment and audit process of internal control systems in Japan is sensitive to management- and audit-related (non-)disclosure incentives. The findings could provide useful academic insights as well as practical guidance for companies in Japan, the United States, and other countries.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: 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.