What is it about?
The purpose of this study is to investigate whether CEOs’ and CFOs’ voluntary certification and disclosure on internal controls over Australian financial reports is associated with higher quality accruals to assess whether the disclosures made in the Australian setting are credible.
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Why is it important?
Our primary motivation for this study arises from the existence of very little evidence on ICFR reporting regimes that are different from the U.S., as most prior studies in a mandatory environment has been conducted post-SOX. While the U.S. regime is a “one size fits all” approach, it may not be feasible in other countries that have many small and loss-making firms listed on the securities exchange, as in the case of Australia. For many of the smaller firms, bearing an additional cost of ICFR audit over and above the costly regulatory audit is not economically viable. The Australian setting is a different, less costly option than U.S. SOX with different trade-offs.
Perspectives
There are implications of our study for international accounting research as very few studies have examined internal control reporting outside of the U.S. These studies include Lu et al. (2011), Brown, Pott and Wömpener (2014) and Ji et al. (2015). The findings of our study have implications for investors, regulators, auditors and management of a firm as it informs them about the effectiveness of the Australian voluntary ICFR reporting regime.
Mukesh Garg
Monash University
Read the Original
This page is a summary of: Evaluating the Credibility of Voluntary Internal Controls Certification, Journal of International Accounting Research, September 2017, American Accounting Association,
DOI: 10.2308/jiar-51856.
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