Strategy Deviance and Internal Control Quality : Based on big data samples empirical evidence of listed companies

A TOPSIS evaluation index system of entropy weight of enterprise internal control quality based on fuzzy matter-element model was established to master the enterprise internal control quality comprehensively and analyze its influences on enterprise innovation performance accurately. Firstly, a composite fuzzy matter-element model was established based on the fuzzy matter-element theory. Secondly, weights of evaluation indexes were determined by the entropy weight method. Thirdly, the concept of relative closeness was developed by comparison with positive and negative ideal indexes. Finally, the internal control quality levels of 781 listed companies in Chin were measured by TOPSIS method. Results show that: weights of five level-1 indexes for enterprise internal control quality evaluation are different. Specifically, weights of Law & Regulation, Operation and Strategy are higher than those of Financial Statements and Assets Safety. In the level-2 index system, weights of “major litigation and arbitration cases”, “turnover of total assets” and “Tobin’s Q” occupy 66% of total weights. Listed companies which occupy the top10 position in term of internal control quality mainly belong to industries requiring strict monitoring and control over safety production. Enterprise internal control quality differs significantly among different industries. Research conclusions can provide methods and practical references to evaluate internal control quality of Chinese enterprises.

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The Severity of Internal Controls over Financial Reporting Deficiencies: Differences among Types and Industries

FINANCIAL REPORTING ◽

10.3280/fr2014-001003 ◽

2014 ◽

pp. 55-77

Author(s):

Tatiana Mazza ◽

Stefano Azzali

Keyword(s):

Information Technology ◽

Financial Reporting ◽

Internal Control ◽

Service Industry ◽

Listed Companies ◽

Internal Controls ◽

Service Companies ◽

Finance Industry ◽

Material Weaknesses ◽

Fixed Assets

This study analyzes the severity of Internal Control over Financial Reporting deficiencies (Deficiencies, Significant Deficiencies and Material Weaknesses) in a sample of Italian listed companies, in the period 2007- 2012. Using proprietary data the severity of the deficiencies is tested for account-specific, entity level and information technology controls and for industries (manufacturing and services vs finance industries). The results on ICD severity is compared with one of the most frequent ICD (Acc_Period End/Accounting Policies): for account-specific, ICD in revenues, purchase, fixed assets and intangible, loans and insurance are more severe while ICD in Inventory are less severe. Differences in ICD severity have been found in the characteristic account: ICD in loan and insurance for finance industry and ICD in revenue, purchase for manufacturing and service industry are more severe. Finally, we found that ICD in entity level and information technology controls are less severe than account specific ICD in all industries. However, the results on entity level and information technology deficiencies could also mean that the importance of these types of control are under-evaluated by the manufacturing and service companies.

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