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Effects of internal control information disclosure, corporate governance

Author: XiaoJun From: www.yourpaper.net Posted: 2010-04-04 05:04:58 Read:
[Abstract] Internal Control Information Disclosure System directly related to the success or failure of corporate governance. Complete and transparent internal control disclosure of information is the key to improve the level of corporate governance. Based on this, the paper on the internal control information disclosure, corporate governance effect study.
[Keywords] listed companies; internal control information disclosure; corporate governance effect

Internal control information disclosure of listed companies manage the internal control evaluation standard for the integrity of the company's internal control, rationality and effectiveness evaluation, in the form of a report issued by the assessment and to provide to the external information users. Therefore, the enterprise internal control disclosure of information, not just management authorities lifted a way of fiduciary duties, and will play an important role in corporate governance. This paper argues that the internal control information disclosure, corporate governance effect is manifested in the following aspects:

Enhanced corporate governance, decision-making is based on reliability and comprehensiveness

Corporate governance, investors are the main source of information is the administering authority financial data provided in the form of financial statements. Financial information is a high-level overview of the information, it is subject to a variety of factors, such as accrual accounting policy choice, the strength of internal control. Due to the limited rationality of the people, as the agent manager will continue using aggressive accounting methods, increasingly deviate from the substance of the economic business of the financial information, false information on flooding in the capital markets, a serious impediment to the normal function of the capital market play. Attention to the authenticity of financial information in the world has been generally recognized, because the true and reliable financial information is the protection of investors in their decisions, while confidence in the reliability of financial information from the strict laws, a certified public accountant audit oversight and effective internal control. If the report produced by the process is also seen as the business activities, a result of the financial data is the internal control activities. If the enterprise internal control, the reliability of the financial data itself is also higher. Vice versa. If the internal control is not perfect or has not been effectively implemented, then the quality of financial information on the likelihood of problems is very large. Thus. Internal control disclosure of information on the people to evaluate the reliability of financial reporting is an important alternative variable. Chen Guan-Ting, Zhang Shaohua (2003) study of the disclosure of information relating to the audit of internal control of listed companies has a positive role to promote the enterprises to optimize their internal controls and financial reporting, internal control report.
With economic development, the need for corporate governance information is comprehensive and integrated. Both financial information including non-financial information; both quantitative information and qualitative information. More concerned about people in the past quantitative financial information in the financial reporting, internal control information like disclosure of qualitative information is more important to the information users. Because this qualitative non-financial information more objectively reflect the level of corporate governance and scientific decision-making. It also makes more and more investors realize that, with respect to false financial reporting purposes, the value creation of the poor performance are more likely to lead to business failure (Li Xin Hopewell, 2007). Greater investment risk faced than the decline in operating results in part internal control failure. This is because the internal control of financial information is a basic, is the impact of a process is directly related to the reliability of accounting earnings. So rational investors will not only focus on financial data, will also focus on the process of the data. Therefore, the internal control disclosure of information, it provides incremental information outside of the financial report in addition to the parties concerned can increase confidence in financial reporting, to enhance the credibility of financial reporting. As Hermanson (2000) study shows that the internal control report not only prompted the company to improve internal controls, and provide additional decisions.

Second, for the rational allocation of corporate control to provide a reliable basis for

Miller (1996), corporate governance lies in the configuration and implementation of the control of the Company. Control of the company is a "bundle of rights of a group of exclusive use and disposal of scarce resources (including financial and human resources). Corporate control over the nature, in fact, is the contention of the the enterprise contracting parties of corporate power and interests. Corporate control of corporate behavior to seek benefits. Assuming economic theory, corporate behavior artificially maximize their own interests on corporate control over the game. Control of the company's arrangements are not static, but a dynamic adjustment process, but in a certain range, but also to maintain relatively stable. The Accounting Information provides control over the configuration of the District asked boundary, stakeholder negotiations. Shareholders, managers and other stakeholders on the actual control over the ultimate expression of the extent of the impact of their interests, and the results of the company's accounting activities with the direct regulation of the role of the various stakeholders main. In the modern market economy, environment, money has become a course scale of measurement of the relationship between wealth and equity, the realization of all economic interests first performance on the realization of the financial interests. The reason why the company's accounting system as both a part of the development of a source of information for decision-making, but also organizational control mechanisms, is built on the basis of this understanding of the economic consequences of accounting activities.
Therefore, in the basic system of corporate enterprises, accounting control system plays a basic role. To ensure that the decision-usefulness of accounting information on the company control over the configuration, it is necessary to have a sound and effective internal control, the improvement of the company's internal control and effective depends on the objective evaluation and high-quality disclosure of internal control. Internal control report, generally containing a statement of management's internal control over financial reporting and financial reporting. But we should clearly realize that an impact on the financial report is not just internal accounting controls, even if it is mainly focus on operating efficiency and effectiveness, and control of legal compliance activities will have a significant impact on the financial statements. So, the internal control disclosure of information as to reflect the results of the internal control implementation process, the role of the key issues of corporate governance - the configuration of the control of the Company is self-evident. In turn, the internal control disclosure of information missing, not only allows the company control over not reasonable configuration, but also will result in managers spent their power to obtain improper benefits not be held accountable and will suffer in the end it is the company's stakeholders, so a direct consequence of corporate governance failure caused by the company in trouble or bankruptcy, modern company based market economy run and cause chaos. Third, is conducive to further improve the level of corporate governance and the governance efficiency

For investors in the financial capital is delivered to the company before the decision, need the help of reliable, relevant and comparable information to evaluate the ability of the company's managers, performance, moral standards, in order to correctly select the object of intervention, timing and methods, so know the performance of listed companies is good and true, to a large extent determine the level of disclosure of information in the effectiveness of internal control and internal control. The owners of financial capital through internal control chips, and thus to improve the corporate governance structure of information to evaluate the personal ability of the company performance, management and managers, in order to increase the next negotiations. The foreign scholars Fekrat (1999) found, the company disclosed internal control information to enable investors to understand the company now or potential competitive advantage, strengthen investors' understanding of the company's competitive advantage, thus making investment decisions.
For corporate management authorities, the internal control information disclosure is a way to relieve the fiduciary duties. To establish a comprehensive and effective implementation of the internal control system, the responsibilities of the Authority. Assess and report on the results of the system of internal control to investors, in fact, prove to investors that they have to make the responsibility of management. True and excellent performance of listed companies, to a large extent depends on the presence or absence of the strength of the company's internal control. Enterprises the foreign issued by the internal control report, certified public accountants audit opinion, makes the enterprise management authorities for consideration of the long-term interests of the enterprise as well as mitigate their own responsibility, had the assistance of certified public accountants really concerned about the lack of internal control, and continuously improve and improve enterprise internal controls and reduce operational risk, improve operational efficiency and effectiveness, and ultimately achieve the purpose of business growth. Meanwhile, the internal control
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