Internal Control Weaknesses and Financial Reporting Fraud
研究了内部控制缺陷如何增加高管财务报告舞弊的风险，发现整体层面控制缺陷比流程层面缺陷更显著地预示未来舞弊，支持了机会解释而非管理特征解释。
SUMMARY This study examines whether and how weak internal controls increase the risk of financial reporting fraud by top managers. There is a longstanding debate on whether control strength significantly affects fraud risk, yet little evidence on this issue. Further, there is no evidence on the mechanism linking control strength to fraud risk. We find a strong association between material weaknesses and future fraud revelation. We theorize that this link could be attributable to weak controls (1) giving managers greater opportunity to commit fraud, or (2) signaling a management characteristic that does not emphasize reporting quality and integrity. We find support for the opportunity explanation, but not through specific accounts linked to control weaknesses. Instead, consistent with the PCAOB's assertion, weaknesses in entity-wide controls, not process-level controls, are associated with a higher risk of reporting fraud. JEL Classifications: M41.