The Association between Auditor Industry Specialization, Corporate Governance and the Disclosure of Internal Control Weakness

• Main Authors: Jui-Yen Lee, 李瑞妍
• Other Authors: Ti-Hsing Liao
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/47774209371557461029

碩士 === 中原大學 === 會計研究所 === 97 === This research collects data of Taiwan listed and OTC companies from 1998 to 2008 as samples to explore the relationship between auditor industry specialization, corporate governance and the disclosure of internal control weaknesses. In order to further realize the internal control system, and encourage companies to perform self-assessment and to reveal the effectiveness of internal control system, Taiwan Stock Exchange Corporation (TWSE) and Taiwan Gre Tai Securities Market (GTSM) required in 1997 that those listed and OTC companies should perform self-assessment for the internal control system and prepare internal control report to general public, after audited by CPA. And they further required that internal control system statement should be submitted every year and be offered in the annual report and the prospectus. Consequently, CPA plays an important role in the assessment of internal control effectiveness. Thus, this research aims to explore whether the employment of industry specialist auditor can be more effective in the assessment of companies’ internal control system, and make companies disclose internal control weaknesses in their internal control report. In the meantime, this research also further explores the environmental factors of internal control and their connection with corporate governance. This research uses Taiwan listed and OTC companies with internal control weakness in the disclosure as test samples, and adopts one-to-one method by the same year, same industry and same performance to collect companies with non-internal control weakness in the disclosure as the controlled samples. As the empirical results show, auditor industry specialization is significantly positive correlated with the disclosure of internal control weakness. Namely, industry specialist auditor will be more active in urging firms who are with internal control weakness to disclose their weaknesses. In term of corporate governance, the mechanism of corporate governance is also positive correlated with the disclosure of internal control weakness. Namely, when a company with better corporate governance faces weaknesses in the internal control, the company is more possible to report the weaknesses.