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Evaluating the credibility of voluntary internal controls certification

journal contribution
posted on 2017-07-01, 00:00 authored by M Garg, Ferdinand Gul, J Wickramanayake
This study finds that CEOs’ and CFOs’ voluntary certification of internal controls over financial reports (ICFR) in Australia are associated with higher quality earnings, suggesting that disclosures are credible. The results are robust to two-stage regression analysis, propensity score matching, and alternative measures of earnings quality. We use three-stage regression modeling to address the issue of the joint effects of ICFR and audit fees on accruals quality and the demand effect of corporate governance on audit fees. Using audit fees as a determinant of credible ICFR certification, we find that auditors charge lower fees for firms with good ICFR. Such firms are also associated with better corporate governance. The findings of our study have implications for policymakers, regulators, and capital market participants.

History

Journal

Journal of international accounting research

Volume

16

Issue

3

Season

Fall

Pagination

91 - 117

Publisher

American Accounting Association

Location

Lakewood Ranch, Fla.

ISSN

1542-6297

eISSN

1558-8025

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

[2017, American Accounting Association]