INTERNAL CONTROL AND FINANCIAL QUALITY: EVIDENCE FROM POST-SOX RESTATEMENT

Ya-Fang Wang

Accounting & Taxation, 2013, vol. 5, issue 1, 19-28

Abstract: Studies of post-SOX restatements have examined the cause of the increase and have documented the association with internal controls in a negative light. In general, restatements result from internal control problems because internal controls are the first line of defense for financial statement quality. However, prior research ignores internal controls have different quality levels and may make various impacts on restating companies. Thus, this study examines the association between restatements and internal controls by examining whether and how internal control quality affects degree of restatement severity. Empirical results show that restatement severity increases in degree of internal control deficiency under among three definitions of internal control quality.

Keywords: Internal control; Financial quality; Restatement (search for similar items in EconPapers)
JEL-codes: G24 G32 K20 M41 (search for similar items in EconPapers)
Date: 2013
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