AAA Spark Meeting of the Regions

Cybersecurity Data Breaches and Internal Control

• In Event: Cybersecurity and Accounting Systems

Abstract

This study provides novel evidence on the effects of data breaches on firms’ subsequent internal control. We find that data breaches are negatively associated with the subsequent disclosure of internal control material weakness (i.e., improved internal control). CEO dismissal is an effective mechanism to improve internal control. Furthermore, data breaches can magnify the accounting expertise effect and attenuate the complexity effect on subsequent internal control. It is also found that with an improvement in the internal control, firms are less likely to file a “Big R” restatement and less likely to face litigation.

Authors

• Fuzhao Zhou, Bowling Green State University

• Jianning Huang, University of Manitoba