Research on the Relationship Between Internal Control Defects and the Accuracy of Corporate Financial Reports

Dongmei Wang ()
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Dongmei Wang: Geely University of China

A chapter in Proceedings of the 2024 6th Management Science Informatization and Economic Innovation Development Conference (MSIEID 2024), 2025, pp 565-571 from Springer

Abstract: Abstract In the context of global economic integration and increasingly fierce market competition, the completeness of internal control systems in enterprises has become a key benchmark for measuring the accuracy of financial reporting and overall financial management level. This article delves into the intrinsic relationship between internal control deficiencies and the accuracy of corporate financial reporting, aiming to provide solid theoretical support and practical guidance for improving financial transparency and enhancing the quality of accounting information in enterprises. We conducted empirical tests on the relationship between internal control deficiencies and financial reporting accuracy by using advanced statistical techniques such as multiple regression analysis. The research results show that there is a significant negative correlation between internal control deficiencies and the accuracy of a company’s financial reports, which means that the more and more serious the loopholes in the internal control system, the more likely the accuracy of the company’s financial reports will be weakened. Further analysis reveals the key role played by the five core elements of internal control - control environment, risk assessment, control activities, information and communication, and supervision - in ensuring the accuracy of financial reporting. Specifically, a healthy and positive control environment can create a good internal control atmosphere for enterprises and lay a solid foundation for the accuracy of financial reports. An effective risk assessment mechanism can help companies identify and respond to potential risk factors in a timely manner, reducing the likelihood of errors or fraud in financial reporting.

Keywords: Internal Control Defects; Financial Reporting Accuracy; Multiple Regression Analysis; Enterprise Governance; Accounting Information Quality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-676-5_55

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DOI: 10.2991/978-94-6463-676-5_55

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