1. Does Ineffective Internal Control over
Financial Reporting affect a Firm’s
Operations? Evidence from Firms’ Inventory
Management
财务报告内控失效是否影响公司的运营？
证据：公司的存货管理
作者： Mei Feng
Chan Li
Sarah E. McVay
Hollis Skaife
汇报人：韩俊凤

2. ABSTRACT: We investigate whether ineffective internal control over financial reporting has implications for firm operations by examining the association between inventoryrelated material weaknesses in internal control over financial reporting and firms’ inventory management. We find that firms with inventory-related material weaknesses have systematically lower inventory turnover ratios and are more likely to report inventory impairments relative to firms with effective internal control over financial reporting. We also find that inventory turnover rates increase for firms that remediate material weaknesses related to inventory tracking. Remediating firms also experience increases in sales, gross profit, and operating cash flows. Finally, we assess the generalizability of our findings by examining all material weaknesses in internal control over financial reporting, regardless of type, and provide evidence that firms’ returns on assets are associated with both their existence and remediation. Collectively, our findings support the general hypothesis that internal control over financial reporting has an economically significant effect on firm operations
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3. 3.样本与描述性统计
(一)样本与数据

4. 4.测试设计与结果
(一)存货周转率

5. 4.测试设计与结果
(二)补救措施分析

6. 4.测试设计与结果
(三)存货减值

7. 4.测试设计与结果
(三)存货减值

8. 4.测试设计与结果
(四)经营业绩额外措施的变化

9. 4.测试设计与结果
(五)结果的可推广性

10. conclusion
We examine the association between inventory-related material weaknesses in internal control (MWIC) and accounting-based measures of inventory management to draw inferences on whether internal control over financial reporting (ICFR) has spillover effects on firm operations. We hypothesize that firms with inventory-related MWIC are more likely to experience the real effects of stock shortages, excess inventory, and greater inventory obsolescence as a consequence of maintaining ineffective inventory-related ICFR, leading to lower inventory turnover and more inventory impairments. Consistent with these expectations, we document that firms with inventory-related MWIC, as identified in firms’ required internal control reports, have systematically slower inventory turnover and have a higher likelihood and magnitude of inventory impairments. We also find evidence that inventory turnover ratios, sales, gross margin, and cash flows from operations improve when the weaknesses are remediated. Because firms with higher inventory turnover ratios and fewer inventory impairments are viewed to be operating more effectively, our findings suggest that an unintended benefit of maintaining effective ICFR is better operating performance.

11. Thank you!