Internal Control Disclosure and Earnings Management of Companies Listed on the Stock Exchange of Thailand
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Abstract
The purpose of the research was to study the relationship between internal control disclosure and the earnings management practice employed by companies listed on the Stock Exchange of Thailand. Data of 288 companies were acquired in 2018 to assess the internal control system of firms according to the framework provided by the Securities and Exchange Commission of Thailand. Basing on the model of Yoon, Miller, and Jiraporn (2006), the gross accrual earnings management variable was measured based on the discretion of executives. The multiple regression analysis was utilized. The result from hypothesis testing found that internal control disclosure level of firms is not associated with earnings management. The findings revealed that the earnings management practice of a company cannot be fully prevented by its internal control system as it is affected by the discretion of the company’s executives. This empirical study provides companies with important information to consider when planning the company’s internal control system and corporate governance process in developing the earnings quality. In addition, the study creates awareness in investors and stakeholders when making investment decisions in various companies.
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