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http://ssrn.com/abstract=930690
 
 

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How Does Internal Control Regulation Affect Financial Reporting?


Jennifer Lynne M. Altamuro


Ohio State University (OSU) - Fisher College of Business; Villanova University - Accountancy

Anne Beatty


Ohio State University (OSU) - Department of Accounting & Management Information Systems

June 24, 2009

AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper

Abstract:     
Internal control regulation effectiveness remains controversial given the recent financial crisis. To address this issue we examine the financial reporting effects of the Federal Depository Insurance Corporation Improvement Act (FDICIA) internal control provisions. Exemptions from these provisions for banks with assets under $500 million and for non-U.S. banks provides two unaffected control samples. Our difference-in- differences method suggests that FDICIA-mandated internal control requirements increased loan-loss provision validity, earnings persistence and cash-flow predictability, and reduced benchmark-beating and accounting conservatism for affected versus unaffected banks. More pronounced effects in interim versus fourth quarters suggests that greater auditor presence substitutes for internal control regulation.

Number of Pages in PDF File: 45

Keywords: Internal Control, Earnings Quality, Banking

JEL Classification: G1, G21

working papers series


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Date posted: September 15, 2006 ; Last revised: September 15, 2009

Suggested Citation

Altamuro, Jennifer Lynne M. and Beatty, Anne, How Does Internal Control Regulation Affect Financial Reporting? (June 24, 2009). AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper. Available at SSRN: http://ssrn.com/abstract=930690 or http://dx.doi.org/10.2139/ssrn.930690

Contact Information

Jennifer Lynne M. Altamuro (Contact Author)
Ohio State University (OSU) - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-688-8679 (Phone)

Villanova University - Accountancy ( email )
United States
Anne L. Beatty
Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )
2100 Neil Avenue
Columbus, OH 43210
United States

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