Research on the Determinants of the Quality of Internal Control: Evidence from China

In China, more and more companies are constructing internal control system as enterprise internal control basic standard (EICBS) was released last year. Based on the data obtained in a survey, we firstly examine the quality of internal control in China companies. Secondly we examine how and to what extent the firm-specific characteristics determine the quality of internal control. We find that size, financial position, management philosophy, culture and internal auditing are positively correlated to the quality of internal control. We also find that the control power of the largest shareholder and the degree of decentralization are negatively correlated to the quality of internal control.