1、中文 3650 字 本科毕业论文（设计） 外 文 翻 译 外文题目 Internal Control Failures and Corporate Governance StructuresA Post Sarbanes-Oxley Act (SOX) Analysis 外文出处 Georgia Institute of Technology 外文作者 Beng Wee Goh 原文： Internal Control Failures and Corporate Governance Structures A Post Sarbanes-Oxley Act (SOX) Analysis 3.
2、1 Relation between Internal Control Quality and Corporate Governance Structure 3.1.1 Monitoring of Internal Controls by the Board of Directors The findings that weak internal controls result in lower accruals quality and negative stock market reaction lend support to the regulators emphasis on inter
3、nal controls to improve financial reporting quality. Weak internal controls, especially if disclosed and allowed to persist, can undermine users perception of the credibility of the firms financial reporting and harm the firm in the long run. Despite the importance of internal controls, research on
4、what corporate governance mechanisms can ensure effective internal controls is scant. Fama and Jensen (1983) contend that boards assume an important role in corporate governance. The modern large corporation is characterized by the absence of the classical entrepreneurial decision maker. Instead, in
5、 order to reap the benefits of risk sharing, the companys residual claims are diffused among many investors, who generally vest their decision rights in individuals with specialized knowledge. Agency theory predicts that such delegation of decision to management creates conflicts of interests betwee
6、n managers and residual claimants. Agency costs are created because the managers who initiate and implement important decisions are not the major residual claimants and therefore do not bear a major share of the wealth effects of their decisions.Without effective control procedures, such managers ar
7、e likely to take actions that deviate from the interests of residual claimants. For instance, managers can manipulate financial reports or commit fraud to maximize their own self-interests, and to the detriment of shareholders. Fama and Jensen (1983) argue that agency costs can be reduced by institu
8、tional arrangements that separate decision management from decision control. Separate decision control is required to monitor the actions of the top managers, i.e. CEO or president, approving the corporations strategy, and monitoring the control systems of the firms. Within the large corporations, d
9、ecision control rights are delegated to the board, which represents the highest level of decision control. The board helps to reduce conflicts of interests between managers and residual claimants and ensure that management decisions are congruent with shareholders interest. Effective internal contro
10、ls are part of the firms overall control system that can be used to mitigate agency conflicts and curb managers opportunistic behavior (Jensen and Payne 2003). A sound financial reporting system prevents managers from using aggressive accounting to inflate earnings and/or stock price, and effective
11、internal controls are essential in ensuring the integrity of financial reporting system. For instance, the maintenance of proper accounting policies and procedures and adequate controls over non-routine transactions reduce ambiguities in the interpretation of accounting procedures. In turn, this can
12、 prevent managers from manipulating accounting rules to maximize their self-interests. Proper internal controls over financial statement closing procedures, timely preparation of account reconciliations, and account analysis all seek to reduce errors in financial accounting, thus ensuring accurate f
13、inancial reporting. Effective internal controls such as the hiring of accounting personnel with high levels of accounting expertise and technical competence with financial accounting standards or SEC filing requirements can enhance the quality of accounting information (Jensen and Payne 2003). For i
14、nstance, accounting personnel with high levels of accounting expertise are more likely to capture and report relevant financial information useful for decision making and prepare financial statements in conformance with generally accepted accounting principles (GAAP) for external parties. Highly com
15、petent and/or experienced accounting personnel are also better able to understand complex accounting issues and deal with non-routine accounting transactions. Another important internal control that curbs managers opportunistic behavior is the internal audit function. Many of the responsibilities of
16、 internal auditors are linked directly to the production and monitoring of accounting information. One of them is to test, evaluate, and make recommendations regarding an organizations accounting system and internal controls over financial reporting. By doing so, internal auditors reduce the risk of
17、 fraud and protect assets from theft or loss, thus ensuring that accounting information generated by the firm is less susceptible to errors. The above discussions highlight the importance of internal controls as a monitoring mechanism that the board uses to reduce agency conflicts and managers oppor
18、tunistic behavior. Reputational concerns provide additional incentives for the board of directors to play a vigilant role in the monitoring of internal controls. Fama (1980) and Fama and Jensen (1983) contend that outside directors are generally highreputation members of the business community who v
19、iew the directorate as a means of further developing their reputations as experts in decision control. Directors who demonstrate their superior ability in decision control are rewarded through additional directorships and prestige. Hence, directors have incentives either to protect or enhance their
20、reputational capital. Because weak internal controls are likely to result in lower financial reporting quality (Ashbaugh et al. 2006a, Doyle et al. 2007b) and harm the directors reputation, the board is likely to play a vigilant role in the monitoring of internal controls and financial reporting. 3.1.2 Monitoring of Internal Controls by the Audit Committee It is common for the board to delegate duties to a subset of the board. The extant
