外文翻译稿和原稿.docx

外文翻译稿和原稿.docx

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外文翻译稿和原稿

外文翻译稿和原稿

[1]Hermanson,DanaR,Smith,JasonL,Stephens,NathanielM,HowEffectiveareOrganizations’InternalControls?

InsightsintoSpecificInternalControlElements[J],CurrentIssuesinAuditing,2012,Vol.6Issue1,pA31-A50.20p.

[2]Ya-FangWang.INTERNALCONTROLANDFINANCIALQUALITY:

EVIDENCEFROMPOST-SOXRESTATEMENT[J].Accounting&Taxation,2013,Vol.5Issue1,p19-28.10p.5Charts.

HowEffectiveAreOrganizations’InternalControl?

InsightsIntoSpecificInternalControlElements

DanaR.Hermanson,JasonL.Smith,andNathanielM.Stephens

SUMMARY:

Basedonsurveyresponsesfromapproximately500ChiefAuditExecutives（CAEs）andotherinternalauditors,thisarticleprovidesaninsider’sviewoftheperceivedstrengthoforganizations’internalcontrols（i.e.,internalcontroloverfinancialreporting）intheControlEnvironment,RiskAssessment,andMonitoringcomponentsoftheCommitteeofSponsoringOrganizations’（COSO1992a）InternalControl—IntegratedFramework.Althoughtherespondentslargelyratecontrolstrengthasrelativelyhigh,weidentifyseveralareasforpotentialimprovementofinternalcontrols,especiallyrelatedtoassessingthe‘‘toneatthetop,’’aswellasfollowingupondeviationsfrompolicyandmanagementoverrideofcontrols.Inanalyzingindividualcontrolelements,wefindthatpubliccompanies’controlsareconsistentlyratedasmoreeffectivethanthoseofotherorganizations.Wealsofindanumberofinterestingdifferencesacrosskeyindustries,especiallyintheMonitoringcomponent,wherebanksandotherfinancialservicesfirmsappeartohavemorerobustMonitoringcontrolsthandohealthcareandotherservicesfirms.Thecomponent-levelanalysisrevealsthatinternalcontrolcomponentstrengthispositivelyrelatedtotheCAEreportingprimarilytotheauditcommittee,publiccompanystatus,andtheaveragetenureoftheinternalauditfunctionstaff,amongotherfindings.Basedonthesurveyfindings,wedescribekeyimplicationsrelevanttointernalandexternalauditors,accountingresearchersandeducators,andmanagement.

Keywords:

internalcontrol;controlenvironment;riskassessment;monitoring.

Introduction

WerecentlydevelopedasurveythatwasadministeredbytheInstituteofInternalAuditorsResearchFoundation（IIARF）toChiefAuditExecutives（CAEs）andInternalAuditManagers.ThepurposeofthesurveywastoaskCAEsandInternalAuditManagerstoassessthestrengthsandweaknessesoftheirorganizations’internalcontrols.Suchspecificinformationaboutindividualcontrolelementstypicallyisnotpubliclyavailable,andwebelievethatauditorsandmanagementwouldbenefitfromcurrent,detailedassessmentsofinternalcontrolstrengthacrossabroadrangeoforganizations.Theseassessmentsbyinternalauditinsiderscouldbequitebeneficialforidentifyinginternalcontrolareasthatmayrequireadditionalattention.

Inthisarticle,wereportandprovideinsightsintoapproximately500internalauditors’perceptionsofthestrengthoftheirorganizations’controls,withparticularfocusoninternalcontroloverfinancialreporting.

First,weexaminecontrolelementsperceivedtoberelativelyweakorrelativelystrong.2Althoughtherespondentslargelyratecontrolstrengthasrelativelyhigh,weidentifysomecommonareasforpotentialimprovement,especiallyinassessingthe‘‘toneatthetop,’’aswellasfollowingupondeviationsfrompolicyandmanagementoverrideofcontrols.

Second,weexplorevariationsinperceivedcontrolstrengthattheindividualcontrolelementlevelbycomparingpubliccompanieswithotherorganizationsandprovidinginformationaboutfourkeyindustries.Wefindthatpubliccompanies’controlsareconsistentlyratedasmoreeffectivethanthoseofotherorganizations.Wealsofindanumberofinterestingdifferencesacrosskeyindustries,especiallyintheMonitoringcomponent,wherebanksandotherfinancialservicesfirmsappeartohavemorerobustMonitoringcontrolsthandohealthcareandotherservicesfirms（likelybecauseoftheregulatednatureoftheindustryandthesignificantcompliancerisksthesefirmsface）.

Finally,weexaminevariationsincontrolstrengthatthecomponentlevel,exploringhowControlEnvironment,RiskAssessment,andMonitoringstrengthvarywithkeycharacteristicsoftheinternalauditfunctionandorganization.Thecomponent-levelanalysisrevealsthatinternalcontrolcomponentstrengthispositivelyrelatedtotheCAEreportingprimarilytotheauditcommittee,publiccompanystatus,andtheaveragetenureoftheinternalauditfunctionstaff,amongotherfindings.

Webelievethattheresultsofthisstudywillbeusefultointernalandexternalauditors,accountingresearchersandeducators,andmanagement.Weofferimplicationsofeachofthemajorfindings.Inparticular,weencourageincreasedappreciationofthetoneatthetop,managementoverride,industrydifferencesinMonitoringstrength,andthepotentialvalueoftheCAEreportingprimarilytotheauditcommittee,aswellashavingexperiencedinternalauditstaff.

Background

SincethepassageoftheSarbanes-OxleyActof2002（SOX,U.S.HouseofRepresentatives2002）,theliteratureoninternalcontrolweaknessesandtheirdisclosurebypubliccompanieshasgrownrapidly.Schneideretal.（2009）reviewthisliterature,whichisprimarilybasedoninternalcontrolreportsunderSections404and302ofSOX.Suchreportsdisclosedetailsofcompanies’materialweaknesses（andsometimessignificantdeficiencies）ininternalcontrol.Thus,thefocusofresearchonadverseSection404reportsisontheminorityofcompanieswithpublicdisclosurescitingmateriallydeficientinternalcontrols.AsdescribedbySchneideretal.（2009）,thisliteratureprovidesinsightsintothetypesofcompanieswithinternalcontroldeficiencies,thenatureofspecificinternalcontroldeficienciescited,theconsequencesofinternalcontroldeficiencies,andauditingissuesrelatedtointernalcontroldeficiencies.

Muchlesscommonarestudiesthatprovidemorespecificinsightsintointernalcontrolstrengthacrossabroadrangeofcompanies,includingthemajorityofpubliccompanieswithoutreportedmateriallydeficientcontrolsunderSOX.Forexample,Hansenetal.（2009）surveyinternalauditorstoexploreassessmentsofthetoneatthetop.Theyreportfindingsrelatedtocurrentpracticesandfutureplansforassessingthetoneatthetop（e.g.,howoften,whoisinvolved,whichpositionsareincludedintheassessment）,aswellascurrentassessmentsofthetoneatthetop.Theyfindthat47percentofrespondentsassesstheirtoneatthetopas‘‘VeryGood,’’33percentreportthetoneas‘‘Good,’’and15percentreportthetoneatthetopas”Adequate.’’Only2.5percentofrespondentsreportthetoneaseither‘‘Poor’’or‘‘VeryPoor.’’Likewise,Huntonetal.（2011）surveyfinancialmanagersregardingthetoneatthetop,subsequentlyrelatingtheseassessmentstocompanies’earningsquality.Theyfindthatperceivedtoneatthetopispositivelyrelatedtoearningsqualityasmeasuredbytheresearchers.

Weextendthislineofresearchbyexaminingabroadrangeofcontrolelements—37elementsacrosstheControlEnvironment,RiskAssessment,andMonitoringcomponents—toprovideacurrentviewofinternalcontrolstrengthacrossarangeoforganizations.3Weincludebothpubliccompaniesandnon-publicentitiesinouranalysis.

Method

In2010,theIIARFcontactedover3,000NorthAmericanCAEsatourrequestwithaninitialemailinvitation,andlatersentafollow-upemailinvitationtoparticipateinthesurvey,whichwashostedonanonlinesurveyplatform.TosupplementtheCAEsample,theIIARFsubsequentlycontactedover3,000InternalAuditManagerswithanemailinvitationtoparticipate（nosecondrequestwassenttotheManagers）.Afterthesethreesolicitations（twotoCAEsandonetotheInternalAuditManagers）,wereceived501responses,foranoverallresponserateofapproximately8percent.Thisrateisconsistentwithpriorstudiestargetinginternalauditors.

Thesurveyrequestedthattherespondentsratethestrengthoftheirorganizations’controlsonascalefrom1¼‘‘Notverydescriptiveofmycompany’’to7¼‘‘Verydescriptiveofmycompany,’’whereeachinternalcontrolelementwasdescribedinpositiveterms（e.g.,‘‘Managementiscommittedtohighquality,accuratefinancialreporting.’’）usinglanguagequotedoradaptedfromCOSO’sinternalcontrolimplementationguidance（COSO1992a,1992b）.Thesurveyincluded19ControlEnvironmentelements,sevenRiskAssessmentelements,and11Monitoringelements.The37individualinternalcontrolelementsincludedinthesurveyarethosethatexperiencedexternalauditors（inapriorsurveyconductedbytheauthors）hadratedasmostimportantinpromotingfinancialreportingquality.

Results

Theapproximately500respondentsareprimarilyCAEsormanagerswithsignificantexperienceininternalauditing.Organizationsizevarieswidely,withnearlyhalfoftheorganizationsreportingunder$500millioninannualrevenues,andoverone-thirdhavingrevenuesover$1billion.Theindustrydistributionofthesamplealsoisbroad.Themostrepresentedindustriesincludefinancialservices,banking,healthcare,andotherservices,whichcollectivelyaccountforapproximatelyhalfofthesample.ThevastmajorityoftheorganizationsareU.S.-based,andnearlyhalfareU.S.publiccompanies.Intermsofdeviationsfrompolicyandmanagementoverride,inadditiontoworkingwithmanagementtoensurethatsuchdeviationsarealwayspursued,weencourageinternalandexternalauditorstoworktosharpentheauditcommittee’sfocusonmanagementoverrideofcontrols.AveryhelpfulpublicationinthisregardisManagem