Strengthening Financial Reporting Quality: The Role of Rule of Law, Public Transparency, and Cultural Change as a Moderator
DOI:
https://doi.org/10.47654/v29y2025i2p138-167Keywords:
Rule of Law, Public Transparency, Cultural Change, Financial Reporting QualityAbstract
Purpose - The purpose of this study is to investigate how the Indonesian General Election Commission's financial reports are affected by the rule of law, transparency, and cultural shift. From a decision sciences perspective, this study provides a quantitative framework for policymakers to allocate resources effectively by identifying critical determinants of financial reporting quality. Unlike previous studies that focus solely on accounting standards, this research uniquely integrates cultural change as a moderating variable within the public sector context, offering a novel behavioral perspective on financial accountability. From a decision sciences perspective, this study provides a quantitative framework for policymakers to allocate resources effectively by identifying critical determinants of financial reporting quality
Design/methodology/approach - This quantitative study employs PLS-SEM. Key members of the Election Commission's finance and administration staff were surveyed to gather primary data, while the Supreme Audit Agency's financial audit report provided secondary data.
Findings - The findings demonstrate that transparency (β = 0.419, p < 0.05) and the rule of law (β = 0.312, p < 0.05) have a positive and significant effect on financial reporting quality. Conversely, cultural change was found to weaken this relationship, highlighting that in the presence of strong cultural shifts, reliance on legal compliance and transparency becomes even more critical.
Practical implications - This study provides valuable insights for government agencies seeking to improve financial reporting quality. It highlights the importance of the rule of law, transparency, and fostering positive cultural change for accurate financial reporting. Policymakers and auditors can utilize these findings to enhance governance practices and address deficiencies in government financial control systems. This study is closely linked to decision sciences, as it provides empirical evidence on how governance principles and cultural factors influence financial reporting quality, which is critical for informed decision-making in public-sector resource allocation and policy formulation.
Originality - By incorporating cultural change as a moderating factor in the relationship among the rule of law, transparency, and financial reporting quality, this study makes a significant contribution to the existing literature. Addressing the specific challenges faced by the Indonesian General Election Commission offers a fresh perspective on how governance practices influence financial reporting in developing countries.
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