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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 WickramanayakeThis 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 researchVolume
16Issue
3Season
FallPagination
91 - 117Publisher
American Accounting AssociationLocation
Lakewood Ranch, Fla.Publisher DOI
ISSN
1542-6297eISSN
1558-8025Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleCopyright notice
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