中小企业内部控制的完善与发展 外文原文.doc

Internal Control Reporting and Accounting Conservatism Mary Brooke Billings New York University Leslie Davis Hodder Indiana University Abstract?: One objective of the internal control reporting requirements of the Sarbanes-Oxley Act of 2002 (SOX) is to improve the quality of financial reporting. This study examines whether a relation exists between internal control quality and accounting conservatism, which is an important feature of high financial reporting quality. Using a sample of firms which disclose material weaknesses (MWs) in internal control under SOX, we find that firms with MWs exhibit less accounting conservatism than firms with no such weaknesses. However, firms that disclose MWs andwhose auditors subsequently confirm the remediation of these weaknesses exhibit more conservative accounting earnings than firms that continue to have MWs. We also find that the internal control reporting requirements have a disciplining effect on firms’ financial reporting. Specifically, firms with MWs exhibit more conservative earnings after the disclosure of such weaknesses, regardless of whether or not these weaknesses are remediated. Overall, our results show that the quality of internal control affects accounting conservatism and underscore the importance of the internal control reporting requirements in enhancing the quality of financial reporting. Key words: internal control conservatism disclosure; 1. Introduction “This law (Sarbanes-Oxley Act) says to shareholders that the financial information you receive from a company will be true and reliable.This law says to workers: we will not tolerate reckless practices that artificially drive up stock prices and eventually destroy the companies, and the pensions, and your jobs.”1 In 2002, following a series of high-profile cases of corporate improprieties, the U.S. Congress passed the Sarbanes-Oxley Act (SOX), which is widely considered to contain the most important and sweeping corporate r