Business Strategy, Internal Control over Financial Reporting, and Audit Reporting Quality

被引:91
作者
Bentley-Goode, Kathleen A. [1 ]
Newton, Nathan J. [2 ]
Thompson, Anne M. [3 ]
机构
[1] UNSW Sydney, Sydney, NSW, Australia
[2] Univ Missouri, Columbia, MO 65211 USA
[3] Univ Illinois, Urbana, IL USA
来源
AUDITING-A JOURNAL OF PRACTICE & THEORY | 2017年 / 36卷 / 04期
关键词
business strategy; internal control; material weakness; audit quality; MANAGEMENT CONTROL-SYSTEMS; SARBANES-OXLEY ACT; CONTROL DEFICIENCIES; MATERIAL WEAKNESSES; FIRM PERFORMANCE; ACCOUNTING RESEARCH; DESIGN; RISK; REMEDIATION; IMPACT;
D O I
10.2308/ajpt-51693
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This study examines whether a company's business strategy is an underlying determinant of the strength of its internal control over financial reporting (ICFR) and auditors' internal control reporting quality. Organizational theory suggests that companies following an innovative "prospector'' strategy are likely to have weaker internal controls than companies following an efficient "defender'' strategy. Consistent with theory, we find that firms with greater prospector-like characteristics are more likely to report and less likely to remediate material weaknesses, incremental to known determinants of material weaknesses. We also find that auditors' internal control reporting quality is lower among clients with greater prospector-like characteristics when measured using the timeliness of reported material weaknesses. Our findings indicate that business strategy is a useful summary indicator for evaluating companies' internal control strength and suggest that internal control reporting is an important area for audit quality improvement among prospector-like clients.
引用
收藏
页码:49 / 69
页数:21
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