Isomorphic Determinants of Financial Statement Integrity in Local Governments: Does Audit Committee Effectiveness Amplify Compliance?
DOI:
https://doi.org/10.47672/ajacc.2922Keywords:
Isomorphic Forces; Audit Committee Effectiveness (H83); Financial Reporting Quality (H83); Local Governments (H75)Abstract
Purpose: This study investigates the relationship between institutional isomorphic forces and financial reporting quality (FRQ) in district local governments within Uganda's Rwenzori Region. It specifically evaluates the empirical capacity of audit committee effectiveness to moderate and amplify this compliance nexus.
Materials and Methods: The study executed a cross-sectional correlational research design. Quantitative data were collected via electronic questionnaires from nine district local government headquarters. The study utilized a census of eight districts and purposive sampling of 72 key district financial officers, yielding a 95% response rate. Hypotheses were tested using Pearson zero-order correlations and hierarchical multiple regression modeling.
Findings: Pearson Correlation results confirm that isomorphic forces and audit committee effectiveness are moderately and positively associated with FRQ. Hierarchical regression modeling indicates that both independent constructs explain 28% of the variance in financial reporting. Introducing the interaction term significantly improves predictive capacity by 17%, elevating the total explained variance to 45%. This statistically establishes that robust audit committees systematically amplify the positive effect of institutional pressures on FRQ.
Implications to Theory, Practice and Policy: The Government of Uganda must prioritize structural, qualitative reforms within Local Government Public Accounts Committees (LGPACs). Merely enforcing standard regulatory compliance is insufficient without appointing independent, professional auditors with requisite accounting expertise and holding frequent operational meetings.
Originality/Value: The paper provides unique emerging-market insights by validating institutional theory in public-sector entities rather than in private financial systems. It bridges a gap in historical literature by demonstrating that macro-level isomorphic forces require strong local governance micro-structures to optimize the reliability, accuracy, and comparability of financial disclosures.
Downloads
References
Abdulrahman, N., Raweh, M., Intan, T. P., Kamardin, H., Malik, M., & Malek, @. (2019). Audit committee characteristics and audit report lag: Evidence from Oman. Academia.Edu, 9(1). https://doi.org/10.5296/ijafr.v9i1.14170
Aboud, A., & Robinson, B. (2022). Fraudulent financial reporting and data analytics: an explanatory study from Ireland. Accounting Research Journal, 35(1), 21–36. https://doi.org/10.1108/ARJ-04-2020-0079
Baatwah, S. R., Salleh, Z., & Stewart, J. (2019). Audit committee chair accounting expertise and audit report timeliness: The moderating effect of chair characteristics. Asian Review of Accounting, 27(2), 273–306. https://doi.org/10.1108/ARA-12-2017-0190/FULL/HTML
Bainomugisha Wilson Winstons Muhwezi Walter Akena Jonas Mbabazi Rebecca Nalwoga Mukwaya Eugene Gerald Ssemakula Oscord Mark Otile Phoebe Atukunda Kirungyi Richard Ayesigwa, A. (2023).: A Performance Assessment of Statutory Boards and Commissions in Uganda’s Local Governments FY2021/2022, Kampala, ACODE Policy Research Paper …. https://acode-u.org/uploadedFiles/PRS112.pdf
Bananuka, J., Kadaali, A. W., Mukyala, V., Muramuzi, B., & Namusobya, Z. (2019). Audit committee effectiveness, isomorphic forces, managerial attitude and adoption of international financial reporting standards. Journal of Accounting in Emerging Economies, 9(4), 502–526. https://doi.org/10.1108/JAEE-08-2018-0084
Bananuka, J., & Nkundabanyanga, S. K. (2023). Audit committee effectiveness, internal audit function, firm-specific attributes and internet financial reporting: managerial perception-based evidence. Journal of Financial Reporting and Accounting, 21(5), 1100–1123. https://doi.org/10.1108/JFRA-07-2021-0198
Capalbo, F., Galati, L., Lupi, C., & Smarra, M. (2024). Proportional appropriation systems and financial statement quality in municipally owned entities: empirical evidence from Italy. Journal of Public Budgeting, Accounting & Financial Management, 36(3), 343–362. https://doi.org/10.1108/JPBAFM-01-2023-0015
Cosa, M. (2024). How Institutional Pressures Drive Learning and Memory in Organizations (pp. 231–262). https://doi.org/10.4018/979-8-3693-5777-4.ch010
Dewi, K., Journal, I. A.-A. A., & 2021, undefined. (2021). Analysis of the effect of fraud pentagon factors on fraudulent financial statement with audit committee as moderating variable. Journal.Unnes.Ac.Id, 10(1), 39–46. https://doi.org/10.15294/aaj.v10i1.44520
Gita Saraswati, I. G. A., & Budiasih, I. G. A. N. (2019). Pengaruh Good Governance, Kompetensi SDM dan Sistem Pengendalian Intern pada Kualitas Laporan Keuangan. E-Jurnal Akuntansi, 2268. https://doi.org/10.24843/EJA.2019.v27.i03.p23
Hamdan, A. (2020). The role of the audit committee in improving earnings quality: The case of industrial companies in GCC. Journal of International Studies, 13(2), 127–138. https://doi.org/10.14254/2071-8330.2020/13-2/9
Hj. Mohaiyadin, N. M., Aman, A., Palil, M. R., & Muhamad Said, S. (2022). Addressing Accountability and Transparency Challenges in Waqf Management Using Blockchain Technology. Journal of Islamic Monetary Economics and Finance, 8, 53–80. https://doi.org/10.21098/jimf.v8i0.1413
Kabuye, F., Alinda, K., Bugambiro, N., & Kezaabu, S. (2021). Intellectual capital, isomorphic forces and internal controls over financial reporting in Ugandan microfinance institutions. Cogent Business & Management, 8(1). https://doi.org/10.1080/23311975.2021.1944960
Krah, R., & Mertens, G. (2023a). Financial transparency, trust and willingness to pay in local governments of sub-Saharan Africa. Journal of Public Budgeting, Accounting & Financial Management, 35(6), 100–120. https://doi.org/10.1108/JPBAFM-06-2022-0110
Krah, R., & Mertens, G. (2023b). Financial transparency, trust and willingness to pay in local governments of sub-Saharan Africa. Journal of Public Budgeting, Accounting & Financial Management, 35(6), 100–120. https://doi.org/10.1108/JPBAFM-06-2022-0110
Mawejje, J., & Odhiambo, N. M. (2021). Uganda’s fiscal policy reforms: What have we learned? Public Budgeting & Finance, 41(2), 89–107. https://doi.org/10.1111/pbaf.12283
Mnif Sellami, Y., & Gafsi, Y. (2019). Institutional and Economic Factors Affecting the Adoption of International Public Sector Accounting Standards. International Journal of Public Administration, 42(2), 119–131. https://doi.org/10.1080/01900692.2017.1405444
Musina, O. B., Manini, M. M., & Alala, B. O. (2021). Coercive Isomorphism and Financial Reporting Qualities of Listed Banks in Kenya: Moderating Role of Top Management. SEISENSE Business Review, 1(2), 1–14. https://doi.org/10.33215/sbr.v1i2.501
Ngo, D., Finance, A. L.-T. J. of A., and, E., & 2021, undefined. (2021). Relationship between the audit committee and earning management in listed companies in Vietnam. Koreascience.Kr, 8(2), 135–0142. https://doi.org/10.13106/jafeb.2021.vol8.no2.0135
Office of the Auditor General. (2023). Report of the Auditor General on the Financial Statements of Kabarole District Local Government for the Year Ended 30th June 2023.
Office of the Auditor General. (2024). Report of the auditor general on bundibugyo district local government for the audit year ended december 2024.
Office of the Auditor General Kenya. (2022). Auditor General’s Report on national Government Fund, 2021/2022.
Omona, D., Katono, I., Waiswa, J., Olobo, M., & Wonyaka, A. (2023). Analysis of the Implementation of Auditor General’s Recommendations in Local Governments to Enhance Accountability. https://acode-u.org/uploadedFiles/PRS115.pdf
Posadas, S. C., Ruiz-Blanco, S., Fernandez-Feijoo, B., & Tarquinio, L. (2023). Institutional isomorphism under the test of Non-financial Reporting Directive. Evidence from Italy and Spain. Meditari Accountancy Research, 31(7), 26–48. https://doi.org/10.1108/MEDAR-02-2022-1606
Rana, T., Ahmed, Z. U., Narayan, A., & Zheng, M. (2022). An institutional theory perspective on public sector reform and service performance reporting by New Zealand universities. Journal of Accounting & Organizational Change, 18(3), 461–484. https://doi.org/10.1108/JAOC-08-2020-0112
Safari Gerayli, M., Rezaei Pitenoei, Y., & Abdollahi, A. (2021). Do audit committee characteristics improve financial reporting quality in emerging markets? Evidence from Iran. Asian Review of Accounting, 29(2), 251–267. https://doi.org/10.1108/ARA-10-2020-0155
Tran, Y. T., Nguyen, N. P., & Hoang, T. C. (2021). Effects of leadership and accounting capacity on accountability through the quality of financial reporting by public organisations in Vietnam. Journal of Asia Business Studies, 15(3), 484–502. https://doi.org/10.1108/JABS-02-2020-0077
Uganda Investment Authority. (2020). Rwenzori Region Tourism Investment Profile Briefing Summary.
Wong, K. S., Amran, A., & Chu, E. Y. (2023). Institutional antecedents of integrated reporting quality: The moderating role of board independence. Corporate Social Responsibility and Environmental Management, 30(2), 621–640. https://doi.org/10.1002/csr.2378
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 John Rwakihembo, John Baguma Kule
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
