Variable type  Variable name  Variable Definition 

Dependent Variable  ICOP  Internal control audit opinion. 1 for modified opinion, 0 otherwise 

Explanatory Variables  ICAF  Internal control audit fees, expressed in natural logarithm 

ICAF_r  The proportion of internal control audit fees to total audit fees 
 
 Pre_ICOP  Internal control audit opinion of the previous year 

 ICQ  The natural logarithm of DIB internal control quality index 

 DA  Absolute value of discretionary accruals 

 AGE  Years of listing 

 SIZE  Natural logarithm of total assets 

 ROA  Profitability, measured by company’s return on total assets 

 LEV  Financial leverage, measured by assetliability ratio 

Control Variables  LOSS  Equals 1 when the net income is negative, 0 otherwise 

CFO  Operating net cash flow divided by total assets 
 
 GRTH  Operating income growth rate 

 INVTA  Inventory divided by total assets 

 RECTA  Account receivable divided by total assets 

 SOE  Equals 1 if the company is stateowned, 0 otherwise 

 ICBIG10  Equals 1 when the internal control audit firm is “big ten” 

 INDUS  Dummy variables of the industries 

 YEAR  Dummy variables of the years 
