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The Effects of Internal Control Reporting Regulation on Control Quality, Compensation and Audit Effort

出版	SSRN, 2018
URL	http://books.google.com.hk/books?id=Ubz-zgEACAAJ&hl=&source=gbs_api

註釋New internal control reporting (ICR) requirements under the Sarbanes-Oxley Act of 2002 (SOX) imposed affirmative duties on managers and auditors to evaluate and attest to the effectiveness of internal controls. This paper studies the role of ICR regulation in alleviating accounting manipulation. My basic model with one firm emphasizes the strategic interaction between internal control and external audit in its detection, as well as the stewardship and valuation roles of accounting information in financial reporting. I investigate whether and why ICR requirements under SOX can enhance incentives for internal control quality and audit effort, and make predictions regarding their effects on audit failure rate, manager's expected compensation, audit fee and current owner's expected payoff. An extension to a multi-firm setting suggests that ICR regulation can improve social welfare in the presence of an endogenous norm of internal control quality.