The Influence of Internal Control Weaknesses on Firm Performance

Abstract

This study investigates the effect of internal control (IC) weaknesses on firm performance. Our findings confirm that IC weaknesses, in general, have a negative impact on firm performance and that this impact varies with each of the major IC components. Our findings confirm that IC material weaknesses in a firm’s control environment, information technology, accounting documentation, accounting policies and procedures, or control design have a significantly negative impact on firm performance. We also confirm that delaying remedial actions addressing IC weaknesses will continue to hamper firm financial performance.