Internal control and management guidance

• 成果类型: Article
• 署名作者: Feng, Mei; Li, Chan; McVay, Sarah
• 署名单位: Utah System of Higher Education; University of Utah; Pennsylvania Commonwealth System of Higher Education (PCSHE); University of Pittsburgh
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2009.09.004
• 发表日期: 2009
• 关键词: sarbanes-oxley act; EARNINGS FORECASTS; control deficiencies; voluntary disclosure; control weaknesses; control quality; audit fees; specification; RISK; association

摘要

We examine the relation between internal control quality and the accuracy of management guidance. Consistent with managers in firms with ineffective internal controls relying on erroneous internal management reports when forming guidance, we document less accurate guidance among firms reporting ineffective internal controls. This relation extends to a change analysis, and the impact of ineffective internal controls on forecast accuracy is three times larger when the weakness relates to revenues or cost of goods sold-inputs particularly relevant to forecasting earnings. We conclude that internal Control quality has an economically significant effect on internal management reports and thus decisions based on these figures. (C) 2009 Elsevier B.V. All rights reserved.