내부회계관리제도의 중요한 취약점과 이익의 질적 속성

The objective of this study is to investigate the relationship between Internal Control over Financial Reporting(ICFR) and fairness of the financial accounting information. Specifically, this study evaluates various earnings attributes of the companies who reported material weaknesses in their ICFR, which include accruals quality, persistence, predictability, income smoothing, value relevance, timeliness, and conservatism. A summary of the study results is as follow: First, the companies with a material weakness in ICFR attempt to smooth their reported incomes to reduce earning fluctuation. Second, the material weakness in ICFR negatively affects conservatism. Third, the companies that reported a material weakness in ICFR generally have lower accruals quality. Income smoothing may improve a projection of future earnings and cash flows based on the past and current earnings. However, the essential property of income smoothing is management’s attempts to use their reporting discretion. Non- conservative accounting is related to opportunistic earnings management. In general, accruals quality is an attribute relating to earnings reliability. Therefore, income smoothing, conservatism and accruals quality can be categorized as accounting information reliability, and the results of this study suggest that ineffective ICFR negatively affects the accounting information reliability. Less reliable earnings cannot be adequately valued in the market. Therefore, a more informative and detailed disclosure about a company’s operations of ICFR as index of accounting information reliability will improve market efficiency.