search query: @indexterm INTERNAL CONTROL / total: 207
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| Author: | Feng, M. Li, C. McVay, S. |
| Title: | Internal control and management guidance |
| Journal: | Journal of Accounting & Economics
2009 : DEC, VOL. 48:2-3, p. 190-209 |
| Index terms: | management forecasting internal control financial reporting decision making |
| Language: | eng |
| Abstract: | This study investigates the relation between internal control quality and the accuracy of management guidance, and documents less accurate guidance among firms reporting ineffective financial controls. This is consistent with managers in firms with ineffective internal controls relying on erroneous internal managhement reports when forming guidance. The documented relation extends to a change analysis, and the impact of ineffective internal controls on forecast accuracy is three times larger when the weakness relates to revenues or cost of good sold, which are particularly relevant inputs to forecasting earnings. To conclude, internal control quality has an economically significant effect on internal management reports and thus decisions based on these figures. |
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