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ABSTRACTSegregation of tasks is an important factor in the determination of internal control system reliability. In assigning tasks within an organization, the impact on internal control system reliability must be considered. This paper uses reliability modeling as the basis of a method for formulating the design problem. Formulation of the problem in this manner facilitates development of a knowledge base for auditors' judgments and the use of such knowledge in the design problem. It is demonstrated that under certain conditions the problem can be solved easily. This is useful not only in task assignment but also in manpower decisions. New concepts such as reliability degradation and a task combination matrix are introduced in developing the formulation.

Using an international sample of firms from 28 countries, we document that there exists a negative relationship between political connections and the informativeness of stock price, as measured by idiosyncratic volatility (IV). This finding is robust to alternative regression specifications, sub-samples analyses, and concerns related to endogeneity. A more detailed analysis shows that out of the different types of possible connections, the connectedness of the owners is the primary driver of this result. Further, the negative association is only significant for firms in countries characterized by low institutional quality (corrupted countries, countries with low access to external equity markets, and countries with low media penetration). There is no evidence of any relation between political connections and stock price informativeness for firms in countries characterized by high institutional quality. Overall, our results show that although political connections exacerbate rent-seeking that weaken the firms' information environment on average, the negative information consequences are compensated by the countries' institutional quality.

Using aninternational sample of firms from 28 countries, we document that there existsa negative relationship between political connections and the informativenessof stock price, as measured by idiosyncratic volatility (IV). This finding isrobust to alternative regression specifications, sub-samples analyses, andconcerns related to endogeneity. A more detailed analysis shows that out of thedifferent types of possible connections, the connectedness of the owners is theprimary driver of this result. Further, the negative association is onlysignificant for firms in countries characterized by low institutional quality(i.e. corrupted countries, countries with low access to external equitymarkets, and countries with low media penetration). There is no evidence of anyrelation between political connections and stock price informativeness forfirms in countries characterized by high institutional quality. Overall, our results show that although politicalconnections exacerbate rent-seeking that weaken the firms' informationenvironments on average, the negative information consequences are compensatedby the countries' institutional quality.

Using a sample of firms from 28 countries, we investigate the cross-country differences in the effect of political connections on the information environment. We find that politically connected firms in the emerging markets exhibit lower stock price informativeness than similar unconnected firms but we do not find this result in the developed markets. This finding is robust to controlling for earnings quality, analyst coverage, share-turnover, and insider ownership. Examination of specific differences between countries reveals that the weakening of the information environment for connected firms is prevalent in countries that have high levels of corruption, no electoral democracy, and low media penetration. Further analysis shows that this degradation is significant only if the firm is connected to the highest echelons of the country's leadership and the connected party in the firm is the controlling shareholder. In conjunction with earlier literature, our findings suggest that political rent-seeking weakens both the public and the private information environments for connected firms in emerging economies with weak political processes and low media penetration.