Do Material Weaknesses in Information Technology Related Internal Controls Affect Firms’ 8-K Filing Behavior?

• In Event: External Reporting Quality and Technology Investments

Abstract

Using a unique, comprehensive sample of 107,141 firm-year 8-K filing event observations and separating internal control weaknesses into information technology (IT) and non-IT related we investigate: the connection between firms’ 8-K reporting behavior and internal control weaknesses and the connection between firms’ 8-K reporting and information technology (IT) related internal control weaknesses. Overall, we find strong and robust evidence of a negative relation between the likelihood of the firm reporting a material internal control weakness and the timeliness of the firms’ 8-K filing behavior. We also find distinguishing effects of weaknesses in IT-related controls. 8-K reporting represents a different environment than the annual 10-K filings. Given recent interest in IT related controls and far-reaching reforms aimed at improving disclosure timeliness, increasing the quality of internal controls and improving the quality of accounting information, our study is relevant to accounting information systems academics, regulators, accounting standard setters and other interested observers.

Authors

• Anthony Dewayne Holder, University of Toledo

• Khondkar E Karim, University of Massachusetts Lowell

• Karen Lin, University of Massachusetts Lowell

• Robert E Pinsker, Florida Atlantic University