The Effect of Internal Control Effectiveness on the Quality of Financial Information: A Survey Research of the Local Government

Lingga, Ita Salsalina (2015) The Effect of Internal Control Effectiveness on the Quality of Financial Information: A Survey Research of the Local Government. In: The 3rd IBEA International Conference on Business, Economics and Accounting, 15-17 April 2015, Ho Chi Minh City.

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Abstract

The objective of financial reporting by public sector entities as noted by IPSASB are to provide information about the entity that is useful to users for accountability and decision making purposes. The poor quality of performance accountability is still a major issue for the government of Indonesia. According to The Audit Board of The Republic of Indonesia (BPK-RI), the Government of Indonesia needs to improve the quality of financial reporting, the effectiveness and efficiency of operations, compliance with applicable laws and regulations, and the effectiveness of internal control system. This research attempts to examine the effect of internal control effectiveness measured by five interrelated elements: control environment, risk assessment, information and communication, control activities, as well as monitoring on the quality of financial information of the local government in Bandung. A survey research design was adopted and data were collected using questionnaires. The research findings revealed that an effective internal control system significantly affects the quality of financial information. Hence, an effective internal control system has a positive impact on the performance accountability of the local government.

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Conference or Workshop Item (Paper)

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