Earnings quality and voluntary disclosure of internal control audit reports

Following SOX, Japanese and Chinese regulators began to require domestic listed companies to disclose their self-evaluation and audit reports on internal control, however, in other countries non-mandatory requirements are adopted and companies are encouraged to disclose internal control reports. The effect of voluntary internal control reports becomes a problem that needs to be verified empirically. Based on the voluntary disclosure of listed companies in Chinese capital market prior to the implementation of mandatory internal control audit, we find that voluntary internal control audits did not improve the quality of accounting information, listed companies chose to disclose the reports in order to send signals to investors to show that they have higher earnings quality . This paper provides reference to the choice of voluntary or mandatory internal control systems in other countries.