alexa The Effect of Internal Control Material Weaknesses on F
ISSN: 2472-114X

International Journal of Accounting Research
Open Access

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Research Article

The Effect of Internal Control Material Weaknesses on Future Stock Price Crash Risk: Evidence from Tehran Stock Exchange (TSE)

Seyed Mohammad Reza Razavi Araghi1* and Zahra Lashgari2

1Bank Supervision Department, Central Tehran Branch, Master’s in Accounting in Islamic Azad University, Iran

2Assistant Professor and Faculty Member, Islamic Azad University, Central Tehran Branch, Iran

*Corresponding Author:
Seyed Mohammad Reza Razavi Araghi
Master’s in Accounting in Islamic Azad University
Central Tehran Branch, Bank Examiner
Bank Supervision Department
Central Bank of the Islamic Republic of Iran
Tehran, Iran
Tel: +982122 565149
E-mail: [email protected]

Received Date: February 02, 2017; Accepted Date: April 10, 2017; Published Date: April 14, 2017

Citation: Araghi SMRR, Lashgari Z (2017) The Effect of Internal Control Material Weaknesses on Future Stock Price Crash Risk: Evidence from Tehran Stock Exchange (TSE). Int J Account Res 5: 150. doi:10.4172/2472-114X.1000150

Copyright: © 2017 Araghi SMRR, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

 

Abstract

Internal controls are methods put in place by a company to ensure the integrity of financial and accounting information, meet operational and profitability targets, and transmit management policies throughout the organization. Since 2012, attention to internal control in Iran became more serious; indicating its importance in entity’s activities. Given that investors tend to be concerned about returns and stock price crashes, the results of this study can be helpful for users of financial statements. Regarding the objective, this is an applied research using a correlational method. This study investigates the effect of internal control deficiencies on future stock price crash risk. A sample of 133 companies listed on Tehran Stock Exchange in the period 2011-2015 was selected and analyzed using a systematic elimination method. Logistic regression model was used for hypothesis testing. The research findings suggested that material weaknesses in internal control have positive and significant impacts on future stock price crash risk.

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