Internal control and real earnings management in the French context

2020 ◽  
Vol 18 (2) ◽  
pp. 363-387 ◽  
Author(s):  
Sonda Wali ◽  
Sana Mardessi Masmoudi
Keyword(s):  
Control System ◽  
Earnings Management ◽  
Internal Control ◽  
Information Quality ◽  
Real Earnings Management ◽  
System Quality ◽  
Entire Study ◽  
Content Type ◽  
Control Quality ◽  
Internal Control System

Purpose This study aims to examine whether the internal control system quality in the French context improve the information quality having been reflected by the level of real earnings management (REM) measured by inventory overproduction, discretionary expenses reduction and sales manipulation. Design/methodology/approach The research uses a multiple regression analysis to examine the association between internal control and REM. The years 2010-2015 are used as analysis period by focusing on the French context. Three panel data are applied to the companies belonging to the Cotation Assistée en Continu (CAC) 40 index for the entire study period. Findings The results show that high internal control index has a negative impact on the REM and that better internal control indeed makes financial reporting more credible to investors. Further, the results demonstrate that control environment, risk assessment, control activities and monitor are the components that mainly affect REM. Originality/value The results contribute to the literature dealing with the relationship between internal control quality and REM by shedding light on the importance of internal control quality in improving information quality in the French context. Moreover, this study is using a quantitative measure of the internal control quality while much of the prior literature uses material weaknesses to estimate the effectiveness of internal control system.

The relationship between managerial ability, earnings management and internal control quality on audit fees in Iran

2019 ◽  
Vol 69 (4) ◽  
pp. 685-703 ◽  
Author(s):  
Mahdi Salehi ◽  
Mahmoud Mousavi Shiri ◽  
Seyedeh Zahra Hossini
Keyword(s):  
Earnings Management ◽  
Internal Control ◽  
Significant Relationship ◽  
Stock Exchange ◽  
Audit Fees ◽  
Real Earnings Management ◽  
Managerial Ability ◽  
Content Type ◽  
Control Quality ◽  
The Relationship

Purpose The purpose of this paper is to emphasize the relationship between managerial ability, earnings management, internal control quality and audit fees to establish whether or not there is a significant relationship between the variables of managerial ability, earnings management, internal control quality and the audit fees. Design/methodology/approach The study sample includes 190 listed companies on the Tehran Stock Exchange during 2009–2016. Research hypotheses were tested using the statistical methods of multivariable linear regression and data envelopment analysis pattern. Findings The obtained results indicate that there is a significant and direct relationship between managerial ability and internal control quality as well as real earnings management and internal control quality. Based on the results obtained from the second hypothesis, the authors could claim that there is an inverse and significant relationship managerial ability and audit fees. The third hypothesis also revealed that in companies with lower audit fees, there is a stronger relationship between managerial ability and internal control quality. The results of related tests show no significant relationship between accrual-based earnings management and internal control quality. Originality/value This paper is the first study in Iran whose main focus is on the relationship between managerial ability, earnings management, internal control quality and audit fees.

scholarly journals The Empirical Research on the Correlation Between the Internal Control and Earning Management in Private Listed Companies

2021 ◽  
Vol 292 ◽  
pp. 02035
Author(s):  
Sheng-Nan Yan
Keyword(s):  
Control System ◽  
Earnings Management ◽  
Negative Correlation ◽  
Internal Control ◽  
Significant Negative Correlation ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Earning Management ◽  
Internal Control System ◽  
Accrued Earnings

Under the background of industrial innovation, this paper takes the data of private listed companies from 2011 to 2016 as the sample for empirical analysis, and finds that internal control is an important factor in earnings management. There is a significant negative correlation between internal control and accrued earnings management and real earnings management. That is to say, having a good and rigorous internal control system can effectively reduce earnings management. Moreover, compared with earnings management of accounting selective activities, internal control has more restrictive effect on earnings management of real activities.

scholarly journals Internal Control System Quality and Decision-Making Success: The Role of the Financial Information Quality

2021 ◽  
Vol 9 (3) ◽  
pp. 285-294
Author(s):  
Albertina Paula Moreira Monteiro ◽  
Joana Andreia Machado Vale ◽  
Catarina Libório Morais Cepêda ◽  
Eduardo Manuel de Almeida Leite
Keyword(s):  
Decision Making ◽  
Control System ◽  
Internal Control ◽  
Information Quality ◽  
Financial Information ◽  
System Quality ◽  
Internal Control System

Do SOX 404 Control Audits and Management Assessments Improve Overall Internal Control System Quality?

2015 ◽  
Vol 91 (5) ◽  
pp. 1513-1541 ◽  
Author(s):  
Joseph H. Schroeder ◽  
Marcy L. Shepardson
Keyword(s):  
Control System ◽  
Internal Control ◽  
Current Control ◽  
Data Availability ◽  
System Quality ◽  
Financial Reports ◽  
Indirect Measure ◽  
Control Quality ◽  
Internal Control System ◽  
Auditing Standards

ABSTRACT We address whether SOX 404(b) internal control audits under two auditing standards regimes and SOX 404(a) management assessments are associated with improved internal control system quality, an important and largely unstudied potential benefit. In 2013, the PCAOB disclosed that 15 percent of inspected control audits were ineffective, suggesting that the current control auditing standard may not be sufficient to induce implementation of high-quality control systems. We use an indirect measure of internal control system quality—future unaudited accruals quality—to proxy for internal control quality because sustained internal control improvements should be exhibited in future quarterly financial reports unaltered by contemporaneous financial statement audits. We find that internal control audits initially provided internal control quality benefits. After the 2007 auditing standards change, internal control quality deteriorated for ICFR audited versus unaudited firms. Finally, we find limited evidence that management assessments affect internal control quality. Results indicate that recent PCAOB concerns may have merit. Data Availability: Data are publicly available from the sources identified in the text.

Real Earnings Management before and after Reporting SOX 404 Material Weaknesses

2015 ◽  
Vol 30 (1) ◽  
pp. 119-141 ◽  
Author(s):  
Tuukka Järvinen ◽  
Emma-Riikka Myllymäki
Keyword(s):  
Earnings Management ◽  
Internal Control ◽  
Internal Controls ◽  
Real Earnings Management ◽  
Public Disclosure ◽  
High Quality ◽  
The Public ◽  
Material Weaknesses ◽  
Internal Control System ◽  
Before And After

SYNOPSIS The purpose of this study is to investigate whether SOX Section 404 material weaknesses manifest in real earnings management behavior. The empirical findings indicate that, compared to companies with effective internal controls, companies with existing material weaknesses in their internal controls engage in more manipulation of real activities (particularly inventory overproduction). This implies that the weak commitment by management to provide effective internal control system and high-quality financial information relates to a tendency to use real earnings management methods. Moreover, we find evidence suggesting that companies employ real earnings management (overproduction and reduction of discretionary expenses) after disclosing previous year's material weaknesses. We conjecture that the public disclosure of material weaknesses induces management to strive to mitigate the expected negative reactions of stakeholders to the disclosure by engaging in real earnings management, which is not easily detected or constrained by outsiders. Overall, this study suggests that material weaknesses in internal controls signal an environment where management is more inclined to employ real earnings management.

scholarly journals PENGARUH SISTEM PENGENDALIAN INTERN DAN SISTEM AKUNTANSI KEUANGAN DAERAH TERHADAP KUALITAS LAPORAN KEUANGAN PEMERINTAH

2017 ◽  
Vol 12 (2) ◽  
Author(s):  
Novtania Mokoginta ◽  
Linda Lambey ◽  
Winston Pontoh
Keyword(s):  
Control System ◽  
Local Government ◽  
Internal Control ◽  
Local Governments ◽  
Financial Statements ◽  
Financial Accounting ◽  
Accounting System ◽  
System Quality ◽  
Internal Control System

Application of Internal Control System and Regional Financial Accounting System in management of local government financial statements is a very important thing. This financial statements of local governments must meet the following characteristics : relevant, reliable, comparable, and understandable.  The purpose this study to examine the influence of the Internal Control System,Regional Financial Accounting System on the quality of goverment financial statements. The population in this study are all working in BPKAD Bolaang Mongondow Utara.  The sample in this study is the staff / employees of the financial part of the respondents were 30 respondents. The samples were selected by using a purposive samplingmethod. Data was collected by distributing questionnaires to the respondents directly concerned. Technical analysis of the data used is multiple regression with SPSS 22. The result showed that : the Internal Control System has a significant effect on the quality of government financial statements and the Regional Financial Accounting System has a positive significant effect on the quality of goverment financial statements.Keywords : Internal Control system, Regional finsncisl accaounting system, quality of goverment financial statements.

Gender and internal control systems in Spanish local governments

2020 ◽  
Vol 35 (5) ◽  
pp. 463-480
Author(s):  
Ester Gras-Gil ◽  
María del Rocío Moreno-Enguix ◽  
Joaquín Henández-Fernández
Keyword(s):  
Control System ◽  
Public Administration ◽  
Control Systems ◽  
Internal Control ◽  
Local Governments ◽  
Empirical Relation ◽  
Positive Influence ◽  
Economic Management ◽  
Content Type ◽  
Internal Control System

Purpose The presence of women is lower than that of men in positions of responsibility in economic management in public administration, although there has been a more significant increase in local administration. The purpose of this study is to determine whether the application and development of the internal control system in local governments improves through the presence of women in positions of management and responsibility in these institutions. Design/methodology/approach The authors use a multivariate model that allows them to verify the predictive capability of their previously defined explanatory variable gender in 1,527 Spanish local governments. They analyze the empirical relation between the gender and internal control system by multivariate regression models. Findings The authors find that the presence of women in management positions in local governments affects internal control system influences as well as a series of financial and non-financial variables. They conclude that in local governments of more than 50,000 inhabitants, the presence of women in the management has a positive influence on internal control systems and also promotes transparency and a more effective fight against corruption, thus enhancing internal control systems. Research limitations/implications The presence of women in positions of management and responsibility in local government will favor a decrease of corruption in local governments and increase their efficiency and transparency. This study can facilitate women’s access to positions of more economic and financial responsibility in public administration, as well as improve the management and efficiency in these institutions. Originality/value This research is novel in that it determines whether the application and development of the internal control system in local governments improves through the presence of women in the position of management and responsibility in these institutions.

Firm borrowing capacity, government ownership and real earnings management

2019 ◽  
Vol 33 (2/3) ◽  
pp. 339-362
Author(s):  
Mouna Ben Rejeb Attia
Keyword(s):  
Public Sector ◽  
Earnings Management ◽  
Information Quality ◽  
Simultaneous Equation ◽  
Real Earnings Management ◽  
Government Ownership ◽  
Content Type ◽  
Financing Decisions ◽  
Research Stream ◽  
The Relationship

Purpose The purpose of this paper is to examine borrowing capacity (BC) of government-owned firms and whether real earnings management (REM) activities moderate the sensitivity of firm BC to government ownership. Design/methodology/approach A simultaneous equation analysis is applied to study 210 Tunisian non-financial firms over the 2001–2014 period. Findings The empirical results provide substantial evidence indicating that government-owned firms have higher BC and significant REM than other firms; the relationship between government ownership and firm BC is partially moderated by REM activities. Practical implications The findings imply that the implicit credit guarantee of government is not necessarily the unique determinant of firm BC and highlight the role of lenders in monitoring discretionary real transactions in government-owned and protected firms. These implications should be taken in to account by public sector policy makers. In particular, the findings predict that the current government accounting reform in Tunisia on the basis of IPSAS will, probably, improve information quality, but it is still insufficient to control real activities in public institutions. Originality/value This study extends a growing research stream on the relationship between BC and government ownership by focusing on the moderating effect of REM on this relationship and by considering the endogeneity issue. The findings provide evidence that government-owned firms use REM practices to improve their BC. Examining these practices in developing countries provides an opportunity to evaluate the efficiency of their public sector reforms and their effect on a firm’s performance and financing decisions.

scholarly journals PENGARUH KOMPETENSI, SISTEM PENGENDALIAN INTERNAL, DAN KUALITAS PENYAJIAN LAPORAN KEUANGAN TERHADAP AKUNTABILITAS PEMERINTAH DESA

2019 ◽  
Vol 17 (1) ◽  
pp. 44-56
Author(s):  
Amanda Mutiara Sweetenia ◽  
Eka Pinditya Ayu Caesari ◽  
Arum Frida Aprillia ◽  
Anissa Hakim Purwantini
Keyword(s):  
Control System ◽  
Internal Control ◽  
Sampling Technique ◽  
Financial Statements ◽  
System Quality ◽  
Internal Control System ◽  
Local Government Budget ◽  
Survey Responses ◽  
Quality Of Presentation

This study empirically investigates the factors that influences accountability of village governments in managing the Allocation of Village Funds in terms of Competency of the village apparatus, Internal Control System, Quality of presentation of financial statements. The sampling technique used in this research is purposive sampling, which is the official of the local government budget team in each sub-district within the scope of Magelang Regency. Based on survey responses from 150 respondents, the results show that Internal Control System and the quality of presentation of financial statements affect the accountability of management of ADD in Magelang regency. Meanwhile, competency has no effects on the accountability of managing the the Allocation of Village Funds.

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