内部控制信息的弱点和不确定性外文翻译文献.docx

内部控制信息的弱点和不确定性外文翻译文献.docx

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内部控制信息的弱点和不确定性外文翻译文献

文献信息：

文献标题：

InternalControlWeaknessesandInformationUncertainty（内部控制信息的弱点和不确定性）

国外作者：

MessodDanielBeneish,MaryBrookeBillings，LeslieD.Hodder

文献出处：

《AccountingReview》,2007,83（3）:

665-703

字数统计：

英文2183单词，12880字符；中文4096汉字

外文文献：

InternalControlWeaknessesandInformationUncertainty

AbstractUsingasampleof336firmsmakingreportsrequiredbytheSarbanes-OxleyAct,weexaminetheeffectofmandatedinternalcontrolweaknessesdisclosuresoninformationuncertaintyfordisclosingfirmsandforsize-andperformance-matchednon-disclosingfirms.Wefindasignificantlynegative（weaklypositive）priceresponsefordisclosing（non-disclosing）firmsconsistentwithresolutionofinformationuncertaintyinbothgroups.Fordisclosingfirmswefindthatthenegativemarketresponsetodisclosureisexacerbatedbyconditionsassociatedwithhigherinherentreportingrisk,includingauditorturnoverandhigh-riskindustrymembership.However,wefindthatthenegativemarketresponsetodisclosureismitigatedwhenthefirmhasengagedahighqualityauditor.Inaddition,wefindthatthenegativemarketreactionfordisclosingfirmsisdampenedwhenthefirm’spreviouslyreportedearningshaveanabnormallyhighaccrualscomponent.Thisresultisconsistentwiththedisclosurehavinglowerinformationcontentwhenpoorearningsqualityhasalreadybeenconveyedbyhighabnormalaccruals.

Keywords:

earningsquality;informationuncertainty;reportingcredibility;Sarbanes-Oxley;regulation

1.Introduction

Recentaccountingscandalshaveledtoincreasedinterestintothedeterminantsandconsequencesoflowfinancialreportingquality.AseriesofcongressionalinquiriesintotheintegrityoffinancialreportingsystemsintheUnitedStatesculminatedwiththepassageoftheSarbanes-OxleyAct（SOX）in2002.Amongotherprovisions,SOXrequiresfirmstoidentifyanddisclosematerialweaknessesininternalcontrolsoverfinancialreporting.Onepotentialeffectofthesedisclosuresisareductionoftheaveragelevelofinformationuncertaintyinthemarket.EasleyandO’Hara（2004）showsthatinformationuncertaintymaybeanon-diversifiableriskfactorpricedbyinvestors.Therefore,regulationthatreducessystematicinformationriskmayreducetheaveragecostofequityandpromoteeconomicgrowth.

Inthispaper,wefocusonthemarketresponsetomandateddisclosuresthatprovideinformationaboutthecredibilityoffirms’financialreportingsystems.First,wemeasureabnormalreturnsoverthethree-daywindowsurroundingthedisclosureeventtodeterminewhetherthemarketresponsetodisclosing（non-disclosing）firmsisconsistentwithanincrease（decrease）inperceivedinformationuncertainty.Second,weexaminefactorsexpectedtoexacerbateormitigatethemarketresponsetothedisclosures,includingauditquality,industrymembership,auditorturnover,prior

restatementsandprevioussignalsoflowearningsquality.Third,weperformtwoteststodeterminewhetherthenegativemarketresponseisconsistentwithhigherperceivedinformationrisk.Specifically,weevaluatewhetherthemarket’sresponsetoearningsannouncementsdeclineswhenweaknessesaredisclosed,consistentwithlowerperceivedinformativenessofearnings.Wealsoevaluatewhetherabnormaltradingvolumeincreaseswithdisclosure,consistentwithgreaterinformationuncertaintyfordisclosingfirms.

Ourstudycontributestothreeimportantstreamsofresearch.Thefirstishowthequalityoffinancialdisclosuresaffectsthecapitalmarkets.Priorresearchhasbeensubjecttolimitedavailabilityofmeaningfulproxiesforfinancialreportingquality.Forexample,Botosan（1997）andBotosanandPlumlee（2002）providesomeevidencethatthequantityofdisclosuresisnegativelyassociatedwiththecostofequityforfirmswithlowanalystfollowing.However,inferencesarelimitedtotheextentthatdisclosurequantitydoesnotcapturedisclosurequality.Similarly,the

documentationofdisproportionatelynegativereactionstofinancialreportrestatementsisconsistentwiththepricingofincreasedinformationuncertainty（HribarandJenkins,2004,Palmroseetal.,2004）.However,restatementannouncementsconfoundinformationaboutfuturefinancialperformancewithinformationaboutthecredibilityofthefirm’sfinancialreportingsystem.In

contrast,oursettingallowsustoevaluatethecapitalmarketeffectsofdisclosuresdirectlytargetedatthequalityofindividualfirm’sfinancialreportingsystemseparatelyfromdisclosuresaboutfinancialperformance.

Ourstudyalsocontributestoresearchthatinvestigateshowauditorattestationaffectstheperceivedcredibilityoffinancialreportingsystems.TeohandWong（1993）findsthatfirmsengaginghighqualityauditorshavehigherearningsresponsecoefficients.Beckeretal.（1998）findsthatfirmsengaginghighqualityauditorshavelowerdiscretionaryaccruals.However,theseresultsareconsistenteitherwiththeselectionofhighqualityauditorsbyhighqualityfirms,orwiththeengagementofhighqualityauditorsresultinginhigherperceivedearningsquality.Incontrast,our

settingallowsustoexaminethemarginaleffectofauditortypeonthemarketreactiontoanuncertainty-increasingevent.Findingapositiveeffectofauditqualityoninformationuncertaintyinthissettingisconsistentwiththeengagementofhigh-qualityauditorsresultinginhigheractualorperceivedfinancialreportingquality.

Finally,ourpapercontributestothestreamofresearchassessingtheeffectsofSarbanes-Oxleyprovisionsonthefinancialreportingenvironment,forwhichresultshavebeenmixed.Lietal.（2004）andJainandRezaee（2003）documentapositivemarketreactiontotheregulatoryproposalsculminatingwiththepassageofSOX,consistentwithSOXhavinganetbeneficialeffectonthequalityoffinancialreporting.Consistentwiththeseresults,Jainetal.（2004）findsthatinformationuncertaintyreflectedinbid-askspreadsdeclinedsubsequenttoSOX.Incontrast,Cohenetal.（2004）findsnochangeinearningsinformativenessfollowingthepassageofSOXandBhattacharyaetal.（2002）findsnosignificantmarketresponsetoCEOandCFOcertificationrequirement.EachofthesestudiesprimarilyaddressesperceivedchangesintheaverageinformationenvironmentandallbutBhattacharyaetal（2002）arebasedonanticipatedratherthanactualimplementationofSOX.Incontrast,ourstudyfocusesontheeffectonfirm-specificinformationuncertaintyofdisclosuresaboutreportingqualityresultingfromimplementationofSOX.Hence,ouranalysiscanrevealsignificantindividualeffectsthatmightcanceloutinaggregate,andthepowerofourtestsispotentiallystronger.

Ourpapercontainsthefollowingresults.First,wefindasignificantlynegative（weaklypositive）priceresponsefordisclosing（non-disclosing）firmsconsistentwithresolutionofinformationuncertaintyinbothgroups.Second,fordisclosingfirmswefindthatthenegativemarketresponsetodisclosureisexacerbatedbyconditionsassociatedwithhigherinherentreportingrisk,includingauditorturnoverandhigh-riskindustrymembership.However,wefindthatthenegativemarketresponsetodisclosureismitigatedwhenthefirmhasengagedahighqualityauditor.Finally,

wefindthatthenegativemarketreactionfordisclosingfirmsisdampenedwhenthefirm’spreviouslyreportedearningshaveanabnormallyhighaccrualscomponent.Thisresultisconsistentwiththedisclosurehavinglowerinformationcontentwhenpoorearningsqualityhasalreadybeenconveyedbyhighabnormalaccruals.

Therestofthepaperisorganizedasfollows.InthenextsectionweprovidebackgroundonSOXanddiscusspreviousliteratureexamininginformationrisk.InSection3wedescribeourhypothesesandresearchdesign.Insection4wedescribeoursampleandprovidedescriptivestatistics.WepresentresultsinSection5,andadditionalanalysesinSection6.Section7containsasummaryandourconclusions.

2.BackgroundandpriorresearchBackgroundandpriorresearch

2.1.Regulationofinternalaccountingcontrols

TheSecuritiesActsof1933and1934givetheSecuritiesandExchangeCommissionlittleauthorityoverfirms’operationalmattersortheirinternalaccountingcontrols.Hence,regulatoryoversightoverfirms’internalcontrolsresultsfromsubsequentlegislationenacted,generallyinresponsetoaccountingscandals.ThepassageoftheForeignCorruptPracticesAct（“FCPA”）in1979marksthefirstlegislativeefforttoinstillinvestorconfidenceinthequalityoffinancialreportingbyprovidingregulatorystandardsforinternalaccountingcontrols.TheFCPArequiresissuersto“makeandkeepbooks,records,andaccounts,which,inreasonabledetail,accuratelyandfairlyreflectthetransactionsanddispositionsoftheassetsoftheissuer.”Althoughtheseprovisionsareconsistentwiththeestablishmentandmaintenanceofaneffectivesystemofinternalcontrols,theFCPAoffersnomaterialitystandard,andthereislittleauthorityforenforcementoftheActintheabsenceofevidenceofotherwrong-doing.

RegulatoryauthorityoverinternalaccountingcontrolsisexpandedbythepassageoftheFederalDepositInsuranceCorporationImprovementAct（“FDICIA”）in1991inresponsetothelargenumberofbankfailuresinthe1980s.Inadditiontorequiringbankstoestablishandmaintainadocumentedsystemofinternalcontrols,pioneeringprovisionsofFDICIAcalledforbankstoassessandreportontheadequacyoftheirinternalcontrols,andforthesecontrolstobesubjectedtoindependentaudit.

Theconsequenceofwell-publicizedaccountingscandals,theSarbanes-OxleyActof2002（“SOX”）expandsthescopeofregulatoryo