Misstatements and Internal Control over Operations and Compliance

What is it about?

Internal control is a process designed to assist management in achieving three organizational objectives: effectiveness and efficiency of operations, reliability of reporting, and compliance with applicable laws and regulations. While many studies examine internal control over financial reporting, little is known about internal control over operations and compliance. Using a unique dataset from Taiwan, we examine whether the effectiveness of internal control over operations and compliance is associated with the likelihood of financial misstatements. The result suggests that the more deficiencies in internal control over compliance for a company, the greater the likelihood that the company’s financial statements will be restated in the future.

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