Human resource investment in internal control and operating efficiency

Bosun Shin, Seungju Choi, Jongsoo Han

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


In this paper, we examine whether human resource investment in internal control affects firm operating efficiency at both the firm and individual department level. We find that operational efficiency, derived from frontier analysis, is positively associated with the level of human resource investment in internal control. We also find that the increase in investment in internal control personnel leads to an improvement in operational efficiency. Our cross-sectional analysis indicates that the positive association between the human resource investment in internal control and firm's operational efficiency is more pronounced for smaller firms. Unlike prior studies mainly focusing on the effect of internal control on firm's financial reporting quality, this paper focuses on the positive effect of internal control on corporate operation. Thereby, our study documents that effective internal control system not only enhance the decision making of the external information users as documented in prior studies, but also help internal users, such as management, make better decision. Our findings also informs the debate over the costs and benefits of the internal control reporting requirements, which is relevant and timely given that recent amendment of the External Audit Act, effective November 2018, raised the level of assurance auditors provide on firm's internal control.

Original languageEnglish
Pages (from-to)1-34
Number of pages34
JournalKorean Accounting Review
Issue number4
StatePublished - 2021

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  • Human resource investment
  • Internal control
  • Internal control over financial reporting
  • Operating efficiency


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