Jurnal Informasi dan Teknologi

https://jidt.org/jidt
2024 Vol. 6 No. 1 Page: 266-271 e-ISSN: 2714-9730

Analysis of The Influence of Financial Information Systems, Internal

Control Systems, and Information Technology on Quality of Financial
Reports
Yoesoep Edhie Rachmad1, Asri Ady Bakri2, Sukma Irdiana3, Juliana Waromi4, Alfry Aristo Jansen Sinlae5
1Universal Institute of Professional Management
2Universitas Muslim Indonesia
3Institut Teknologi dan Bisnis Widya Gama Lumajang
4Universitas Cenderawasih
5Universitas Katolik Widya Mandira

[email protected]
Abstract
The present study investigates the effects of information technology utilization, regional financial management information
system implementation, and internal control system implementation on the integrity of financial reports generated by regional
governments. A causal connection distinguishes the present investigation. Surveys were utilized to collect data, and
questionnaires were distributed to respondents as part of the methodology. Respondents to the study were government
employees. The samples used in this study were selected through convenience sampling. The research approach employed in
this investigation was multiple regression analysis. According to this research, no observable correlation between local
governments' degree of information technology implementation and the caliber of financial reports they generate can be
identified. Nevertheless, the integrity of financial reporting can be improved through the implementation of financial
management information systems and internal controls. An effective financial management information system can facilitate
the production of financial reports of superior quality that adhere to specific regulations. The above system should address
data security issues, timely information retrieval, report precision, report variety, and compliance with governmental financial
report standards. Similarly, the enhancement of financial report quality generated by local governments can be achieved by
implementing a resilient internal control system comprising communication, monitoring, the control environment, risk
assessment, and control measures. The concurrent implementation of internal control systems, information technology
implementation, and financial management information system establishment all contribute to improving the quality of
financial reports produced by local governments.
Keywords: Information Technology, Information Systems, Control Systems, Financial Reports.
JIDT is licensed under a Creative Commons 4.0 International License.

1. Introduction
The public's growing need for open and ethical governance pushes national and local governments to strengthen
public accountability. Accountability is the duty to explain the accomplishment or lack thereof of the
organization's mission to accomplish predetermined goals and objectives through periodic accountability media.
In Indonesia, accountability is not new; practically all organizations and government agencies strongly
emphasize it when performing their administrative duties [1]. Increasing public accountability in this situation
can be accomplished through creating an efficient monitoring system, guaranteeing openness in the
administration of public funds, and facilitating greater public access to information. Every government action
will be able to be adequately supervised and accounted for with the help of an efficient monitoring system. The
public can clearly understand how and for what purposes public monies are spent if public financial management
is transparent [2].
Additionally, expanding public access to information will boost citizen involvement in the oversight and
management of government operations. Aside from that, enhancing the standard of organizational performance
reports and financial reports is a crucial component of initiatives to raise public accountability [3]. High-quality
financial reports will provide a detailed picture of the government's economic situation and usage of public
resources. Effective reporting on organizational performance will demonstrate the degree to which the
government has met its objectives and aims [4]. By doing this, the government can win over the public's trust
and guarantee the economical and effective use of tax dollars. It is hoped that by increasing public
accountability, the government will be more responsive to the needs and aspirations of the community, allowing
it to produce better policies [5].

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The government can implement accountability by compiling and publishing accountability reports, especially
financial reports. Financial reports are essential for the public as users of public services and the highest income
generators in the state budget through taxes because they allow them to evaluate and analyze the allocation of
resources managed by the government [6]. Apart from that, parties collaborating with the government, such as
investors and vendors, also need government financial reports. They employ financial records to verify the
capability and efficacy of payments intended for acquiring products and services rendered to the government [7].
The outcomes of financial reports are necessary for auditors of financial reports to evaluate the integrity and
impartiality of the financial reports prepared by the government. Typically, this assessment presents four types of
opinions: those that are reasonable without exception, those that are reasonable with exception, those that are
unreasonable, and those that demonstrate hesitation to give an opinion [8]. Enhancing the level of confidence
that the public and other stakeholders have in the government's management of state finances can be achieved by
disseminating top-notch, transparent financial reports. Additionally, this will aid the government in cultivating
positive relationships with the community and guaranteeing the optimal and proficient utilization of public
resources [9].
Financial reports facilitate openness and enable the public and other stakeholders to evaluate the government's
degree of accountability [10]. Financial reports are the primary way corporations and external entities
communicate essential financial information. Stakeholders will employ financial information produced by local
governments to make informed decisions. Hence, the data contained inside these reports must have inherent
worth to be advantageous for consumers [11]. Local government financial reports of excellent quality contain
valuable data and comply with the normative criteria set by government accounting standards. Financial reports
should present relevant, reliable, comparable, and understandable information to enable its utilization by
financial report recipients, especially those in positions of power, to make decisions [12]. Therefore, it is
imperative for local governments to carefully and precisely generate financial reports, guaranteeing that the
information included provides a clear and accurate representation of the local government's financial condition
[13]. Providing high-quality financial reports is anticipated to bolster public trust and confidence in local
government while fostering the effective and efficient use of public resources [14].
The public and other stakeholders have high expectations for the extensive utilization of information technology
in government during this period of globalization since it is seen as a means to achieve state goals with greater
efficiency. The central government aims to optimize information technology's fair and efficient application in
regional governments by leveraging technological advancements [15]. This would enhance communication and
information dissemination. Government entities that have not yet adopted technology must implement it.
Technology transfer refers to sharing and acquiring the knowledge and skills necessary to effectively exploit and
control scientific and technological advancements [16]. This transfer can occur across various entities, including
institutions, organizations, and individuals domestically and internationally. Implementing technology in
regional work unit offices, such as computer equipment and applications that adhere to regulations, computerized
processing and reporting of information results, scheduling computer maintenance, and utilizing internet
networks, can enhance the efficiency of the preparation process, reduce errors, and facilitate efficient storage of
financial data [17]. The primary objective of the central government is to optimize overall efficiency to support
personnel in accomplishing their jobs and generating financial reports of exceptional quality [18]. A high-quality
regional government financial report fulfills the prescribed standards: relevance, reliability, comparability, and
understandability. This ensures that the information provided in the report is of superior quality and can be
effectively utilized by users, particularly government officials, for decision-making purposes [19].
As government activities progress in managing all their resources, superiors and regional leaders exercise
internal control over employees in each organizational structure. This is done to ensure that the internal activities
of each division continue to carry out their respective tasks and achieve organizational goals. The internal control
system is an extensive and ongoing process implemented by management and staff to ensure that the
organization achieves its goals by ensuring dependable financial reporting, efficient and effective operations,
protection of state assets, and compliance with applicable laws and regulations. Submission of an application to
attend an event [19]. Internal supervision encompasses a variety of activities, including audit, review,
assessment, and monitoring, which ensure that an organization's responsibilities and functions are carried out
according to predetermined criteria. This ensures that actions are executed with efficacy and efficiency,
ultimately assisting leadership in attaining good governance [20]. Government offices can enhance their control
environment by implementing an internal control system encompassing responsibility allocation, ethics, and
authority [21]. Communication, monitoring, risk assessment, and control activities may all be enhanced. This
will improve the capacity of personnel to concentrate on their duties and produce financial statements that
comply with the necessary criteria. The financial report should adhere to normative standards, which include
being relevant, reliable, comparable, and intelligible. This ensures that the information provided in the report is
of high quality and can be effectively utilized by users, particularly office holders, as a reference for decision-
making purposes.

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2. Research Methods
The internal control system is an extensive and ongoing process implemented by management and staff to ensure
that the organization achieves its goals by ensuring dependable financial reporting, efficient and effective
operations, protection of state assets, and compliance with applicable laws and regulations. Submission of an
application to attend an event. Internal supervision encompasses a variety of activities, including audit, review,
assessment, and monitoring, which ensure that an organization's responsibilities and functions are carried out
according to predetermined criteria. This ensures that actions are executed with efficacy and efficiency,
ultimately assisting leadership in attaining good governance. Government offices can enhance their control
environment by implementing an internal control system encompassing responsibility allocation, ethics, and
authority. Communication, monitoring, risk assessment, and control activities may all be enhanced. This will
improve the capacity of personnel to concentrate on their duties and produce financial statements that comply
with the necessary criteria.
3. Results and Discussion
The results of the F-test suggest that the regression model employed to forecast the quality of financial reports
from local governments is accurate. This is corroborated by an F value of 10.5 and a p-value of 0.000, which are
incredibly significant. The findings indicate that the utilization of information technology significantly impacts
the quality of financial reports produced by regional administrations, the establishment of internal control
systems, and the implementation of regional financial management information systems. The results validate that
implementing robust internal control systems, utilizing information technology, and developing regional
financial management information systems can enhance the precision and dependability of financial reports
produced by regional administrations. Hence, local governing bodies should persist in promoting the improved
utilization of information technology, bolstering internal control systems, and refining the integration of
information systems to guarantee the production of dependable and superior financial reports that inspire
confidence among the general public and other relevant parties. The research results indicate that the technology
utilization variable possesses a t statistic value of 2.5, which lends credence to the null hypothesis (H1). The
current findings support this conclusion, consistent with previous research indicating that implementing
information technology improves the quality of financial reports produced by local administrations.
Nevertheless, these results do not consistently align with other scientific investigations. Information technology
is critical in enhancing the efficiency and precision of financial report generation. By utilizing suitable computer
hardware and software, personnel can generate financial reports that comply with current regulations and
complete their duties more efficiently. In addition, implementing structured data processing systems, internet
networks, and regular computer maintenance schedules can significantly enhance the efficiency of managing
financial information. Therefore, local governments should persist in promoting improved and more streamlined
utilization of information technology in generating financial reports. Implementing this measure is expected to
promote transparency, responsibility, and precision in the financial reporting of regional administrations, in
addition to aiding in the formation of effective and capable governance.
Ha2 is considered acceptable for the variable implementation of the regional financial management information
system, as indicated by the t-statistic value 1.5. This suggests that the utilization of the regional financial
management information system substantially influences the caliber of financial reporting by regional
governments. Consistent with research from the past, it has been demonstrated that accounting information
systems enable local governments to enhance the dependability and precision of their financial reports.
Establishing a regional financial management information system to produce high-quality financial reports that
comply with government financial reporting standards is essential. This system encompasses data security,
accuracy and speed of access, thoroughness, a wide range of reports, and suitability. Hence, local authorities
should further enhance the adoption of organized and unified financial management information systems. This
measure would not only guarantee the integrity of financial reports that adhere to established criteria but also
promote the openness and responsibility of local government finances and enhance public confidence in the
management of public funds.
The t-statistical value of 5.5 for the variable implementing the internal control system indicates that hypothesis
Ha3 is supported. The impact of incorporating internal control measures on the quality of financial reports
produced by municipal administrations is significant. Consistent with earlier research confirming the positive
effect of internal control system implementation on the integrity of financial reporting by local governments,
these results support this notion. Compliance with government financial reporting standards necessitates
establishing an internal control system comprising the control environment, risk assessment, control actions,
communication, and monitoring to ensure accurate financial reporting. Hence, local authorities should further
enforce a well-organized and efficient internal control mechanism. This measure would guarantee that the
financial reports generated adhere to set criteria while improving the openness and responsibility of local
government finances, hence bolstering public and stakeholder confidence in local government.

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The t-statistical value of 5.5 for the variable implementing the internal control system indicates that hypothesis
Ha3 is supported. The implementation of internal control systems substantially impacts local government
financial report quality. These results are consistent with those of other studies that have confirmed the positive
effect of internal control system implementation on the integrity of financial reporting by local governments. An
internal control system comprising the control environment, risk assessment, control activities, communication,
and monitoring is essential for ensuring compliance with government financial reporting regulations and
producing accurate financial statements. Hence, local authorities should further enhance the enforcement of a
well-organized and efficient internal control mechanism. This measure would guarantee that the financial reports
generated adhere to set criteria while improving the openness and responsibility of local government finances,
hence bolstering public and stakeholder confidence in local government.
The regression coefficient for utilizing the information technology variable is 0.5. This implies that local
government financial report quality will improve by a factor of 0.5 for each incremental unit increase in the
adoption of information technology. This demonstrates how the positive impact of information technology
utilization on financial reporting quality can be observed. The regional financial management information
system's implementation variable has a regression coefficient of 0.5. Regional government financial reporting
quality, will decline as the implementation of regional financial management information systems increases by
one unit. Based on these findings, it appears that adopting a regional financial management information system
could yield no positive outcomes other than a decline in the quality of financial reporting. In addition, the
implementation variable of the internal control system possesses a regression coefficient of 1.5. This indicates
that with each incremental unit of internal control system adoption, the quality of financial reports produced by
local government will increase proportionally. Establishing and operating an internal control system profoundly
influences the enhancement of financial report quality. To enhance the accuracy and reliability of their financial
reporting, it is recommended that local governments prioritize the expansion of internal control system
implementation.
4. Conclusion
The investigation findings may be organized according to the subsequent framework: The impact of information
technology on the quality of financial reporting by local governments is negligible. This exemplifies the
necessity for enhanced implementation of information technology in computer maintenance and care to ensure
computers' effectiveness in generating legally mandated financial reports for the government. Utilizing a
financial management information system by local administrations has a beneficial effect on the caliber of
financial reports they produce. Excellent implementation of a regional financial management information
system, with a strong emphasis on data security, suitability, speed and accuracy of access, and reporting option
diversity, will yield financial reports that surpass the predetermined benchmarks for government financial
reports. Financial reports of the local government are of a higher caliber when internal control systems are in
place. A system of internal controls comprising the control environment, risk assessment, control actions,
communication, and monitoring will be implemented to ensure the production of accurate financial reports that
satisfy the requirements for government financial reports. The implementation of regional financial management
information systems, the concurrent use of information technology, and the installation of internal control
systems all influence the quality of financial reports generated by regional administrations. Thus, to ensure that
high-quality financial reports that comply with established standards are produced, local governments should
consistently improve their use of information technology, adopt financial management information systems, and
put internal control systems in place.
Given the conclusions and various existing limits, several recommendations may be made to the relevant
stakeholders. It is recommended that questionnaires be administered to governmental entities with broader
jurisdictions, such as provincial governments, to acquire a more comprehensive understanding of how regional
governments handle financial reports, the implementation of financial management information systems, and the
utilization of internal control systems. Other independent variables that may influence the quality of financial
reports from regional governments include the presence of financial administration officials, the enforcement of
regional financial supervision, and compliance with government accounting standards. As such, further
investigation is expected to provide a deeper understanding of the factors influencing the caliber of financial
reports generated by local governments. There are several limitations to this study. The limitations of the
research sample restrict the generalizability of the findings to all regional governments in Indonesia.
Moreover, the study's independent factors can only partially explain the variation in financial report quality. It is
crucial to remember that the caliber of local government financial reports may also be impacted by other
variables outside the study model's purview. To get more extensive findings, it is advisable for additional studies
to broaden the range of samples and take into account other variables that may impact the accuracy of local
government financial reports.

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