Material Weaknesses in Internal Control in Relation to Derivatives and Hedge Accounting

Sang Mook Lee, Keun Jae Park, Hakjoon Song, Li Wang

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


We examined 173 internal control reports containing material weaknesses (MW) in internal control over financial reporting related to derivatives and hedge accounting issues (FASB codification ASC 815). We found that a majority of the companies (122) did not properly implement the ASC 815 accounting rules, followed by inadequate monitoring and review (72), insufficient resources (61), incomplete documentation for hedge effectiveness (49), and inaccurate valuation (32). We also found that companies with MW mostly fixed their problems by process and procedure improvement (205), training expansion (60), engaging external specialists (53), and increasing staffing (52). Our review and discussion of the MW in internal control related to ASC 815 should benefit external auditors, management, and regulators.

Original languageEnglish (US)
Pages (from-to)24-31
Number of pages8
JournalJournal of Corporate Accounting and Finance
Issue number3
StatePublished - Jul 2018

All Science Journal Classification (ASJC) codes

  • Accounting
  • Economics, Econometrics and Finance(all)


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