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Internal Control And Financial Quality: Evidence From Post-Sox Restatement


  • Ya-Fang Wang


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.

Suggested Citation

  • Ya-Fang Wang, 2013. "Internal Control And Financial Quality: Evidence From Post-Sox Restatement," Accounting & Taxation, The Institute for Business and Finance Research, vol. 5(1), pages 19-28.
  • Handle: RePEc:ibf:acttax:v:5:y:2013:i:1:p:19-28

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    References listed on IDEAS

    1. Suraj Srinivasan, 2005. "Consequences of Financial Reporting Failure for Outside Directors: Evidence from Accounting Restatements and Audit Committee Members," Journal of Accounting Research, Wiley Blackwell, vol. 43(2), pages 291-334, May.
    2. Kinney, William Jr. & McDaniel, Linda S., 1989. "Characteristics of firms correcting previously reported quarterly earnings," Journal of Accounting and Economics, Elsevier, vol. 11(1), pages 71-93, February.
    3. repec:wly:coacre:v:13:y:1996:i:1:p:1-36 is not listed on IDEAS
    4. repec:wly:coacre:v:21:y:2004:i:1:p:139-180 is not listed on IDEAS
    5. Doyle, Jeffrey & Ge, Weili & McVay, Sarah, 2007. "Determinants of weaknesses in internal control over financial reporting," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 193-223, September.
    6. Ashbaugh-Skaife, Hollis & Collins, Daniel W. & Kinney Jr., William R., 2007. "The discovery and reporting of internal control deficiencies prior to SOX-mandated audits," Journal of Accounting and Economics, Elsevier, vol. 44(1-2), pages 166-192, September.
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    More about this item


    Internal control; Financial quality; Restatement;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • K20 - Law and Economics - - Regulation and Business Law - - - General


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