Choi, Jong-Hag and Choi, Sunhwa and Hogan, Chris and Lee, Joonil (2013) The effect of human resource investment in internal control on the disclosure of internal control weaknesses. Auditing: A Journal of Practice and Theory, 32 (4). pp. 169-199. ISSN 0278-0380
Full text not available from this repository.Abstract
This paper investigates the effect of human resource investment in internal control over financial reporting on the disclosure of internal control weaknesses at both the firm and the individual department level. Using a unique reporting requirement for Korean listed firms, this study uses the ratio of the number of employees involved with the implementation of internal controls (henceforth IC personnel) to the total number of employees of the firm as a proxy for a firm's human resource investment in internal control. We find that the proportion of IC personnel and the change of the proportion within the firm and several key departments are negatively associated with the disclosure of internal control weaknesses. We also find that a change in IC personnel is positively associated with the likelihood of remediation of the internal control weaknesses. These findings provide valuable insights into the role of human resource investment in determining the strength of a firm's internal controls over financial reporting.