Internal Quality Control Research Articles

Internal control and stock liquidity

This paper examines the correlation between corporate internal control and stock liquidity by utilizing data from China's A-share listed companies spanning the period from 2012 to 2022. It is observed that a higher quality of internal control positively signals to the capital market, thereby enhancing the stock liquidity of the enterprise. Furthermore, compared to state-owned enterprises, earnings quality serves as a partial intermediary in the process where internal control influences stock liquidity. However, for non-state-owned enterprises, the improvement in the quality of internal control is more notably effective in augmenting stock liquidity.

Does social media attention influence audit reporting conservatism? Evidence from China

ABSTRACT Based on stock forum data of companies listed on the Shanghai and Shenzhen Stock Exchanges from 2009 to 2021, we examine whether and how companies’ social media attention affects audit reporting conservatism. We find that companies’ social media attention is positively related to audit reporting conservatism, and this positive association is more pronounced when auditors are geographically distant from their clients. Furthermore, we observe that the effect of social media attention on audit reporting conservatism is stronger for clients with lower information transparency, lower internal control quality, and higher client importance.

Does the Digital Transformation of an Organization Improve the Quality of Internal Controls?

Does the Digital Transformation of an Organization Improve the Quality of Internal Controls?

Does digital transformation drive enterprise green investment? Evidence from Chinese listed firms

This study aims to investigate the effect of enterprise digital transformation on green investment based on data from Chinese A-share listed enterprises from 2008 to 2021. The result suggests that enterprise digital transformation has a significant contribution to green investment, and this finding still holds after a series of robustness tests. Digital transformation promotes green investment by improving internal control quality, increasing information transparency and ESG performance. We further find that the differences in firm characteristics and external environment also make the impact of digital transformation on enterprise green investment varied. Specifically, the promotion effect of digital transformation on green investment is greater in enterprises with low financing constraints, low risk enterprises and enterprises in the growth stage, and also greater in regions with developed digital financial inclusion and high government support and strong environmental regulation. Our findings provide empirical insights for understanding how enterprises engage in environmental governance in the context of rapidly growing digital economy.

Foreign ownership, subjective willing, and internal control level

Foreign shareholders are essential in the capital market. The study on A-share listed firms from 2012 to 2021 examines the impact of foreign ownership on internal control and its transmission effect. Using text analysis and machine learning methods, we construct a variable named “internal control willingness” to explore the impact of subjective willingness. The findings indicate that foreign shareholding significantly enhances internal control quality, with a more pronounced effect observed in samples demonstrating a more positive internal control willingness. Moreover, foreign shareholders contribute to the invested firm's sustainable development by enhancing internal control quality. Further research demonstrates that the positive impact of foreign shareholding is more significant in firms with legal foreign shareholders, highly competitive industries, and sound legal environments. These findings can aid host country firms in more efficiently leveraging foreign resources and provide empirical evidence for opening up China's capital market and formulating foreign investment regulations.

The diagnostic accuracy of quality control rules

Internal quality control in clinical chemistry laboratories are based on analyzing samples of stable control materials among the patient samples. The control results are interpreted by using quality control rules that usually are designed to detect systematic errors. The best rules have a high probability of error detection (Ped), i.e. to detect the maximal allowable (critical) systematic error and a low probability of false rejection (Pfr, false alarm). In this work we show that quality control rules can be represented by points on a ROC curve which appears when Ped is plotted against Pfr and only the control limit is varied. Further, we introduce a new method for choosing the optimal control limit, analogous to choosing the optimal operating point on the ROC curve of a diagnostic test. This decision needs knowledge of the pretest probability of a critical systematic error, the benefit of detecting it when it occurs and the cost of false alarm. The ROC curve analysis showed that if rules based on N = 2 are used, mean rules outperform Westgard rules because the ROC curve of the mean rules was lying above the ROC curves of the Westgard rules. A mean rule also had a lower maximum expected increase in the number of unacceptable patient results reported during the presence of an out-of-control error condition (Max E(NUF)) than comparable Westgard rules.

Reducing asymmetric cost behaviors: Evidence from digital innovation

This study quantifies the impact of digital innovation on corporate performance, offering insights into the sustainability of digital innovation’s impact and providing guidance for firms embarking on their digital innovation journey. We examine the effect of digital innovation on cost stickiness using patent reports spanning from 2007 to 2022. The baseline analysis results reveal that digital innovation significantly mitigates cost stickiness in companies. This finding remains robust after addressing endogeneity concerns and conducting various robustness tests. We probe potential mechanisms and discover that digital innovation reduces cost stickiness by enhancing the quality of internal controls, improving resource-adjustment efficiency, and addressing managerial over-optimism. Heterogeneity analysis indicates a more pronounced impact of digital innovation on reducing asymmetric cost behaviors in larger firms, those beyond the growth stage, and in regions with active digital procurement, well-developed digital taxation governance, and sound judiciary infrastructures. Additionally, our expanded analysis confirms the financial benefits of digital innovation in reducing cost stickiness. A notable discovery is the negative correlation between digital transformation and cost stickiness within digitally innovative firms, underscoring the greater significance of digital innovation over mere digitization. Overall, this study significantly advances our understanding of how digital innovation influences cost management strategies.

Salmonella Typhimurium caused an unprecedentedly large foodborne outbreak in Finland in 2021.

Salmonella infections are significant causes of foodborne outbreaks in the European Union. This study investigates a sudden increase in gastroenteritis patients in the hospital district of Central Finland in June 2021. The primary aim was to study the outbreak's magnitude and source of the outbreak. Epidemiological, microbiological, environmental and traceback investigations were conducted. Over 700 persons fell ill during the outbreak caused by Salmonella Typhimurium associated with a daycare lunch. Similar S. Typhimurium was found in the patients and a vegetable mix containing iceberg lettuce, cucumber and peas served during lunch. The traceback investigation revealed that the batch information of vegetables from the wholesaler was not complete. The wholesaler had received quality complaints about the iceberg lettuce from the central kitchen. The manufacturer did not test the suspected batch for Salmonella since the production plant had given a certificate declaring it Salmonella negative. The most suspect ingredient was one batch of iceberg lettuce due to quality complaints. The lettuce had not been served in two daycare centres without cases. We recommend that in order to enable thorough microbiological investigation, institutional kitchens store the food samples separately as part of the internal quality control and that food items should always be tested when Salmonella contamination in an outbreak is suspected.

CEO power, internal control quality, and entrepreneurial innovation spirit in family enterprises

Using listed manufacturing enterprises in China from 2013 to 2020 as a sample, we find that CEO formal power, CEO integrated power, and internal control quality are positively and significantly related to the entrepreneurial innovation spirit of family businesses. CEO informal power, although not directly correlated, can enhance entrepreneurial innovation spirit by strengthening CEO formal power. In addition, internal control quality negatively regulates the relationship between CEO formal power and integrated power, and entrepreneurial innovation spirit. These findings highlight the incentive effects of CEO power and internal control on entrepreneurial innovation spirit in family enterprises, as well as the supervisory and inhibitory role of internal control over CEO power. This study contributes to the understanding of factors influencing entrepreneurial innovation spirit in family enterprises, focusing on CEO power and internal governance.

Does internal control improve enterprise environmental, social, and governance information disclosure? Evidence from China

AbstractEnvironmental, social, and governance (ESG) is a relatively new concept that emphasizes how to contribute to creating sustainable businesses. However, research on factors that influence ESG development is insufficient. This study explores how internal control influence enterprise ESG information disclosure, using 2009–2021 data from China's A‐share listed companies. The findings show a substantial positive correlation between internal control quality and corporate ESG information disclosure. Particularly, the internal control quality significantly affects corporate governance information disclosure. Moreover, the connection between internal control quality and enterprise ESG information disclosure is significantly and positively moderated by media attention. Specifically, negative media evaluations have significant impacts on enterprises. The main findings remain valid even after conducting multiple robustness tests, such as the lag test, propensity score matching, instrumental variable method, and alternative measurements for the key variables. This study widens the theoretical research frontier of internal and external supervision mechanisms.

Customer concentration and management earnings forecast

This paper examines the impact of customer concentration on the surplus forecasts of listed companies by using the data of China's A-share listed companies from 2012 to 2022. It is found that the higher the customer concentration, the lower the voluntariness of management's disclosure of surplus forecasts; when firms' customers are highly concentrated, management tends to disclose optimistic earnings forecasts; the economic policy uncertainty and the quality of firms' internal control moderated the relationship.

Impact of goal congruence on higher education institutions’ performance quality

PurposeIn India, national accreditation agencies stipulate that internal quality control in higher education institutions (HEIs) is to be institutionalized through internal quality assurance cells that are responsible for implementing and controlling quality systems. As the concept of goal congruence is central to a control process, this study aims to examine whether goal congruence is observed in such institutions. The impact of the absence of goal congruence on the quality of performance in higher education was also examined.Design/methodology/approachThis cross-sectional study measured the impact of goal congruence or the lack thereof on the performance quality of HEIs as defined in the evaluation criteria of the apex accreditation agency, the National Assessment and Accreditation Council. Two hypotheses were tested using t-tests and regression analysis. Focus group discussions were conducted to elicit participants’ suggestions.FindingsThe results showed a lack of goal congruence between HEIs’ quality goals and their faculty’s personal goals, which adversely impacts the quality of their performance, as indicated by an average disagreement of 81% on a ten-statement scale. Goal congruence as an independent variable explained 63% of the variability in HEIs’ performance quality, and the results were statistically significant, indicating that lack of goal congruence is an important contributor to poor performance among HEIs.Originality/valueAccreditation of HEIs is a global practice; hence, the findings of this study and the importance of goal congruence apply not only to India but also to HEIs globally.

Can multiple major shareholders reduce the probability of listed firms receiving inquiries from stock exchanges? Evidence from China

Taking the Chinese A-share listed firms (2015–2020) as the research object, this study examines the impact of the presence of multiple majority shareholders (MMS) on the probability of stock exchanges inquiries (PSEI) and its mechanism. We show that the MMS can increase probability of PSEI. The mediating test shows that MMS increases PSEI by reducing the quality of internal control. Besides, a favorable information and legal environment can reduce MMS's impact on PSEI, and independent directors fail to function as supervisors and consultants.

Party organization embedded and corporate internal control level

Embedding Party elements in corporate governance is not only a characteristic of Chinese corporate governance but also plays a positive role in improving the quality of internal control in Chinese enterprises. The results of this study show that the embedding of enterprise Party organizations can enhance the level of corporate internal control, and this impact is more pronounced in state-owned enterprises and in companies where the CEO has higher social capital. The findings of this study have theoretical significance and practical value in fully leveraging the leading role of enterprise Party organizations and promoting the high-quality development of Chinese enterprises.

Attention to STEMI patients in our region: what is the adherence to the quality indicators from a population perspective?

Abstract Funding Acknowledgements None. Introduction The use of quality indicators (QI) proposed by the Association for Acute Cardiovascular Care (ACVC) for processes carried out in cardiology services represents an excellent internal quality control of their operation. Purpose The aim is to assess adherence to the main QI in the care of acute ST-elevation myocardial infarction (STEMI) in our region, according to data from the population-based registry of myocardial infarction in that area. Methods Evaluation of adherence to the main QI proposed by the ESC Association for ACVC, by retrospective analysis (data from in-hospital and out-of-hospital care) of patients with STEMI from our regional Infarction Registry attended between 2017 and 2020, in both tertiary and secondary hospitals of the public and private care network, providing data with a population-based character. Results QI were analysed in 1355 patients categorised as STEMI in our regional Infarction Registry between 2017 and 2020. 71% of patients were male. The number of STEMI per year ranged from 358 in 2019 to 316 in 2020. Primary percutaneous coronary intervention (PCI) was performed in 87% of patients. In 53% the first medical contact occurs in out-of-hospital care, while 25% occur in emergency departments (ED) of PCI capable hospitals and 12% in emergency departments of non-PCI hospitals. Forty-two percent of patients firstly attended out-of-hospital or in non-PCI centres achieve revascularisation in less than 90 minutes, but less than 30% of patients seen in PCI centres achieve revascularisation in less than 60 minutes. Radial access was used in 92% of cases. LVEF was assessed during admission in 98% and LDL-cholesterol was determined in 87%. Ninety-one per cent of patients were discharged on dual antiplatelet therapy, 96% on statins and a large proportion of patients with left ventricular dysfunction received angiotensin-converting enzyme inhibitors (78%) and beta-blockers (88%). Conclusion There is good overall adherence to major QI related to care of patients with STEMI in our region. However, there are indicators that could be optimised, particularly those related to timely primary reperfusion. Networked care thanks to the local Infarction Code means a significant reduction in reperfusion times, avoiding unnecessary referrals to Emergency Departments.

Managerial myopia and audit fees: Evidence from China

Following the upper echelons and time orientation theoretical frameworks, this study meticulously examines the effects of managerial myopia on audit fees utilizing data of Chinese A-share listed companies spanning from 2007 to 2022. Employing textual analysis and machine learning techniques on MD&A, we find that managerial myopia can significantly increase audit fees by intensifying financial constraints, diminishing accounting information comparability, and compromising internal control quality. However, this relationship is accentuated by analyst coverage but attenuated by digital transformation. Cross-sectionally, we document a particularly pronounced positive association between managerial myopia and audit fees within firms exhibiting higher corporate risk tolerance, diminished industrial competition and a lower degree of marketization. Collectively, this study further enriches corporate governance and audit fees literature, advancing valuable insights for regulators, accountants and auditors.

The effect of internal control quality and internal control disclosure regulation on executive perks: A quasi natural experiment from China

This paper investigates the effect of internal control quality and mandatory internal control disclosure regulation on executive perks in China. Based on a sample of Chinese firms between 2008 and 2019, this study finds that internal control quality and the mandatory disclosure regulation limit both under‐consumption and over‐consumption of executive perks. Furthermore, the mandatory regulation strengthens the relationship between internal control quality and the levels of executive perks. The results are consistent across alternative measures of key variables and are robust to endogeneity analyses. The findings of this study have important implications for policymakers, managers, and investors seeking to understand the determinants of the abnormal consumption of executive perks and the associated economic consequences of the internal control system.

Measurement uncertainty in clinical chemistry: ISO 20914 versus nordtest or intermediate precision versus bias

Aim Measuring uncertainty (MU) is crucial to ensure the accuracy and precision of laboratory results. This study compares the ISO 20914 and Nordtest guidelines to analyze the MU values for 20 clinical chemistry analytes over six months. Methods The researchers calculated MU components, including within-laboratory reproducibility (Rw), laboratory analytical performance bias (u(bias)), and combined standard uncertainty (u c), based on internal quality control and external quality assessment data. The final expanded uncertainty (U) values were determined by multiplying the combined uncertainty with a coverage factor (k = 2 for 95% Confidence Interval), following each guideline’s respective procedures. Clinical chemistry analytes were analyzed on Roche Cobas 6000 c501 auto analyzer (Roche Diagnostics, Mannheim, Germany) and manufacturer’s kits were used analysis. Results The results show that 11 out of 20 clinical chemistry analytes met the targeted maximum allowable measurement uncertainty (MAU) values when calculated according to ISO 20914 guideline. Also, 11 out of 20 clinical chemistry analytes’ MU values met the MAU values with the Nordtest guideline’s recommended calculations. However, some tests met the MAU in the ISO 20914 approach but not in the Nordtest guideline, and vice versa. Conclusions The study found that intermediate precision (u Rw) in the ISO 20914 approach and performance bias (u(bias)) in the Nordtest approach significantly impacted MU values. The research highlights the importance of standardization in MU calculation approaches across clinical laboratories. These findings have implications for patient care and clinical decision-making, emphasizing the importance of selecting appropriate laboratory guidelines for routine use.

Research on the Impact of Supply Chain Integration on the Quality of Internal Control of Manufacturing Enterprises and Its Improvement Path under Digital Intelligence

Internal control is an important mechanism for all kinds of units to regulate activities, prevent internal and external risks, improve management efficiency and effectiveness, and guarantee the realization of unit goals. As the digital age has given new connotations to supply chain integration, the impact of supply chain integration on the quality of internal controls in manufacturing companies is becoming increasingly significant. The influence of digital-intelligent supply chain integration on the internal control quality of manufacturing businesses is examined theoretically in this paper using the literature analysis approach, and a corresponding improvement route is proposed. The study finds that supply chain integration using digital intelligence technology affects the quality of internal control of manufacturing enterprises in three aspects: information integration, operation integration, and organizational integration. The study's conclusion offers manufacturing companies theoretical direction on how to strengthen internal control through supply chain integration, which is crucial for their ability to transform, upgrade, and become more competitive in the age of digital intelligence.

Risk-based quality control plan incorporating patient based real time quality control using moving average and internal quality control

Risk-based quality control plan incorporating patient based real time quality control using moving average and internal quality control