Sustaining Competitive Advantage Through Good Governance and Fiscal Controls: Risk Determinants in Internal Controls

Corporate Ownership & Control, 2020

13 Pages Posted: 6 Nov 2020

See all articles by Jahidur Md Rahman

Jahidur Md Rahman

Wenzhou-Kean University

Rob Kim Marjerison

Wenzhou-Kean University

Date Written: September 12, 2020

Abstract

This study conducts a comprehensive review of the literature published during 1989-2020 to identify the factors that can cause internal control weakness. This review is organized around five main groups, namely: 1) rapid growth and restructuring, 2) financial reporting complexity, 3) auditor tenure, 4) cultural differences, and 5) corporate governance. We perform an integrated literature review approach. Among the several factors found, some factors (the proportion of managerial ownership, Individualism, power distance, financial reporting complexity, rapid growth, and auditor-customer geographic distance) have a positive relationship with internal control weakness while others (the quality of the board of directors and auditing committees, directors’ compensation, and uncertainty avoidance) have a negative relationship. The findings contribute to future research by examining the factors that can cause internal control weakness from different perspectives, which will prove to be useful for investors, auditors, audit committee members, managers, and other stakeholders regarding the prevention of internal controls weaknesses through the application of solid internal controls as well as a path towards the improvement of existing problems of internal control weakness.

Keywords: Corporate Governance, Cultural Differences, Financial Reporting Complexity, Growth and Restructuring, Internal Control Weakness, Auditor Tenure

JEL Classification: G34, M42, D53

Suggested Citation

Rahman, Jahidur Md and Marjerison, Rob Kim, Sustaining Competitive Advantage Through Good Governance and Fiscal Controls: Risk Determinants in Internal Controls (September 12, 2020). Corporate Ownership & Control, 2020, Available at SSRN: https://ssrn.com/abstract=3693963

Jahidur Md Rahman (Contact Author)

Wenzhou-Kean University ( email )

88 Daxue Road, Ouhai
Kowloon
Wenzhou, Zhejiang CHINA 3250
China
13857714151 (Phone)

Rob Kim Marjerison

Wenzhou-Kean University ( email )

88 Daxue Rd
Ouhai
Wenzhou, Zhejiang
China

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