| Summary: | 碩士 === 中原大學 === 會計研究所 === 96 === This paper, based on 3664 observations with internal control deficiencies reported from 1988 to 2006, investigates the relation between financial reporting quality and internal control over financial reporting. My research employs quality of accrual to measure reliability of financial reporting and find that, firstly, firms with internal control deficiencies reported get lower quality of accrual in terms of discretionary accruals and accruals noise than those without internal control deficiencies reported. Secondly, firms with internal control deficiencies reported are usually with higher persistence of transitory loss components in earnings as well, and, therefore, has lower earnings conservatism; however, my research doesn’t show that firms with internal control reported deficiencies have lower earnings value relevance. Thirdly, the effect of internal control deficiencies on financial reporting quality is mainly from that of transaction cycles. Finally, governance mechanism of internal control either from board of director or accounting firm can’t change the impact of internal control deficiencies on all financial reporting quality while accounting firm can improve the relation between earnings value relevance and internal control over financial reporting. Collectively, the results are supported by cross- sectional regression of Fama MacBeth.
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