Board Independence and Internal Control Weakness: Evidence from SOX 404 Disclosures

Chen, Yangyang and Knechel, Robert W and Marisetty, Vijaya B. and Truong, Cameron and Veeraraghavan, Madhu (2017) Board Independence and Internal Control Weakness: Evidence from SOX 404 Disclosures. Auditing: A Journal of Practice & Theory, 36 (2). pp. 45-62.

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Abstract

In this paper, we investigate whether board independence has an impact on the likelihood that a company reports weaknesses in internal controls. Using a sample of 11,226 firm-year observations spanning the period 2004–2012, we establish several findings. First, we document a negative relation between board independence and the disclosure of internal control weaknesses. We also document that the negative relation is stronger for firms with unitary leadership (combined positions of CEO and chairman) than for firms with dual leadership. Next, we show that board independence is associated with both fewer account-specific and company-level weaknesses. Finally, we show that board independence is associated with timely remediation of internal control weaknesses and that the implementation of Auditing Standard No. 5 in 2007 weakens the effect of board independence on the disclosure of ICW

Item Type:	Article
Uncontrolled Keywords:	Internal Control Weakness; Board Independence; Unitary Versus Dual Leadership; SOX 404
Subjects:	?? Finance ??
Divisions:	Finance and Strategy
Depositing User:	Mr. Muralidhara D
Date Deposited:	15 Sep 2018 11:19
Last Modified:	20 Feb 2019 10:56
URI:	http://tapmi.informaticsglobal.com/id/eprint/94

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