International public sector accounting standards compliance and financial reporting quality of ministries, departments and agencies in Rivers State

Abstract

As the demand for transparency and accountability in public financial management has been on the rise, there is a need to have the International Public Sector Accounting Standards (IPSAS) effectively implemented in Government institutions. The implementation of compliance to the IPSAS standard however, has been mixed and affects the quality of financial reporting among the Ministries, Departments and Agencies (MDAs) in Nigeria. The study examines the link between IPSAS compliance and financial reporting quality of MDAs in Rivers State moderated by internal audit quality. This research is based on three theories which are institutional theory, agency theory and stewardship theory. A cross-sectional survey research design was used that was based on the positivist paradigm. The number of employees of the selected five MDAs were 742 and the sample size of the respondents (N) was 254 using Yemane sampling size calculation. Proportionate stratified and simple random sampling techniques were used. Structured questionnaires were used for collecting primary data. Descriptive statistics, Spearman's rank order relationship coefficient and partial relationship analysis was performed on the data at 0.05 level of significance. The results indicate that there is positive and significant relationship between compliance with accrual basis with financial reporting relevance (ρ = 0.297 and p = 0.000), compliance with accountability with financial reporting relevance (ρ = 0.431 and p = 0.000) and compliance with comparability with financial reporting relevance (ρ = 0.520 and p = 0.000). Partial results for the relationships also indicated that the relationship between IPSAS compliance and financial reporting quality is significant without the inclusion of the internal audit quality (r = 0.663, p = 0.000). The study concludes that compliance with IPSAS effectively significantly contributes to the promotion of financial reporting quality in MDAs in Rivers State. The study suggested the need to improve compliance monitoring, build the capacity of internal audits, and ensure continuous capacity building of the internal audits. The inclusion of the complementary relationship between IPSAS compliance and financial reporting quality moderated by the quality of internal audit has added to the knowledge of the study because of the existing knowledge gap that identified this study.