The Relationship between Firm Characteristics and Internal Control Weaknesses in the Financial Reporting Environment of Companies Listed on the Tehran Stock Exchange

Internal control is not only policies, procedures or forms, but also a process, which licenses operating activities of the organization and is part of main tasks of management. Objectives of internal control include effectiveness and efficiency of operation, credibility of financial reporting, and observing laws and regulations. Achieving these objectives increases the confidence of corporate activities and management policies which is along the interests of shareholders, in particular, and those of all the stakeholders, in general. This study has investigated the relationship between internal control weaknesses and firm characteristics in the financial reporting environment of companies listed on Tehran Stock Exchange. In this study, 174 companies listed on Tehran Stock Exchangein 1389 (2010),were selected as our samples.Also, nine variables selected based on the developed model of internal control weaknesses which are related to some specific characteristics of the companies were tested by applying the Logistic Regression Model with cross-sectional.Results showed that there is a significant relationship between firm characteristics and the internal control weaknesses of companies listed on Tehran Stock Exchange.In other words we can saythat companies which are smaller, financially weaker, more complex, and fast-growing and also companies with high inventory levels probably have a higher number of serious internal control weaknesses.