Determinants of Weaknesses in Internal Control Over Financial Reporting

Posted: 1 Nov 2006

See all articles by Jeffrey T. Doyle

Jeffrey T. Doyle

Utah State University

Weili Ge

University of Washington - Michael G. Foster School of Business

Sarah E. McVay

University of Washington

Multiple version iconThere are 2 versions of this paper

Abstract

We examine determinants of weaknesses in internal control for 779 firms disclosing material weaknesses from August 2002 to August 2005. We find that these firms tend to be smaller, younger, financially weaker, more complex, growing rapidly, or undergoing restructuring. Firms with more serious entity-wide control problems are smaller, younger and weaker financially, while firms with less severe, account-specific problems are healthy financially but have complex, diversified, and rapidly changing operations. Finally, we find that the determinants also vary based on the specific reason for the material weakness, consistent with each firm facing their own unique set of internal control challenges.

Keywords: Internal Control, Material Weakness, Sarbanes-Oxley

JEL Classification: G34, G38, M41, M46, M49

Suggested Citation

Doyle, Jeffrey T. and Ge, Weili and McVay, Sarah E., Determinants of Weaknesses in Internal Control Over Financial Reporting. Journal of Accounting & Economics (JAE), September 2007. Available at SSRN: https://ssrn.com/abstract=941467

Jeffrey T. Doyle

Utah State University ( email )

College of Business
Logan, UT 84322-3540
United States

Weili Ge

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Sarah E. McVay (Contact Author)

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States

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