Determinants of the Quality of Government Financial Reports with the Internal Control System as a Moderator

Abstract

This study examined the effects of the Local Government Financial Accounting System and Human Resource Competence on the quality of Regional Government Financial Reports and assessed whether the Internal Control System moderated these relationships. The population comprised 26 Regional Apparatus Organisations within the Surabaya City government, including one Secretariat of the Regional People’s Representative Council, one Inspectorate, 18 Departments, and six Agencies. Using purposive sampling, the study obtained 73 usable responses from officials involved in regional financial preparation and reporting. Primary data were collected through questionnaires distributed in hard-copy form and electronically via Google Forms. The data were analysed using multiple regression and moderated regression analyses in SPSS. The results showed that the Local Government Financial Accounting System had a positive effect on the quality of Regional Government Financial Reports. Human Resource Competence also had a positive effect on report quality. However, the Internal Control System did not moderate the relationship between the Local Government Financial Accounting System and report quality, nor did it moderate the relationship between Human Resource Competence and report quality. In both models, the Internal Control System functioned as a predictor rather than as a significant moderator. These findings indicate that the accounting system and personnel competence were directly associated with financial reporting quality in the surveyed organisations, while the tested interaction effects were not statistically significant.