EFFECTS OF CONTROL ENVIRONMENT AS A COMPONENT OF INTERNAL CONTROL SYSTEM ON THE QUALITY OF FINANCIAL REPORTING INFORMATION IN LOCAL GOVERNMENTS OF RWANDA
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Abstract
Control environment is one of the elements of internal control systems that enables management to remain focused on the entity's pursuit of its operations and the production of high-quality of financial reporting information. Despite the adoption of an internal control system, including a control environment, by Rwandan local governments, there are numerous recurring issues with their financial reporting information. These issues include unrecorded transactions, a lack of evidence of approval of modifications, fraud, and embezzlement. This study investigated how control environment affected the quality of financial reporting information in local governments of Rwanda. The study was carried out in 30 districts. Primary data was collected using the questionnaire and secondary data was collected from district financial reports and the reports from Office of Auditor General. To analyse data both descriptive and inferential statistics were used. Descriptive study's findings revealed that the degree of control environment was high, with a mean of 4.02 and a standard deviation of 0.78 and the level quality of financial reporting information was high. Primary data revealed a poor quality of financial reporting information in the local governments. Using inferential statistics, the model summary of control environment on financial reporting information showed that a unit change in environmental control may explain 68.4% of the change in quality of financial reporting information. Linear equation revealed control environment as independent variable significantly predicts the quality of financial reporting information in local governments of Rwanda. Training about financial report analysis and interpretation for the members of Board of directors of the districts should be organized.
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References
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