Key findings:

Key findings from the research on village financial reports in Situbondo Regency include: The role of the inspectorate, professionalism, and use of information technology positively influence report quality. However, organizational commitment does not moderate this influence. These factors play crucial roles in enhancing the accuracy and quality of financial reporting in the region.

What is known and what is new?

The known aspect in this abstract is the focus on factors influencing the quality of village financial reports. The new contribution is the specific examination of the role of the inspectorate, professionalism, and information technology, highlighting their impact on financial report quality in Situbondo Regency, with insights on organizational commitment as a moderating factor.

What is the implication, and what should change now?

The implication of this research on village financial reports in Situbondo Regency is the importance of factors like the role of the inspectorate, professionalism, and information technology in influencing report quality. Changes needed include enhancing these factors to improve financial reporting accuracy and transparency, potentially through targeted training and technology integration.

The demand for implementing public sector accountability for the realization of good governance is increasing in the current era of bureaucratic reform. This demand requires the implementation of a reliable and good internal monitoring function over the use of funds for government implementation which ensures equitable activities in accordance with established policies and plans. as well as provisions that apply effectively, efficiently and economically (Attachment to Regulation of the Minister of State for Apparatus Empowerment Number 5 of 2008). Internal supervision is one of the preventive measures taken by the government to realize good governance that leads to a clean government. Based on Government Regulation Number 60 of 2008 concerning the Government Internal Control System (SPIP), internal supervision within the Central and Regional Government is carried out by the Government Internal Supervisory Apparatus (APIP) [1].

The poor quality phenomenon of village financial report information provides opportunities for irregularities and errors in the financial sector. Based on the results of initial interviews conducted by researchers with Mrs. Imelda Susanti as Head of the Village Administration, Finance and Asset Development Section, Village Government Development Sector, Situbondo Regency Community and Village Empowerment Service, explained that the problem that often occurs in village financial management lies in the delay in completing the DD and ADD Accountability Reports. For example, the reporting deadline was set on June 30th, but there are still many villages in Situbondo Regency that have not completed it until the end of June 30th [2].

This opinion is also reinforced by the opinion of Mr. Lalu Pulih Hakkiyah as Village Administration, Finance and Asset Development staff who said that village Accountability Reports often experience problems due to a lack of understanding by village officials in using the Siskeudes application, so they often experience errors in the input process and this results in a lack of completeness of the Accountability Reports reported [3].

The results of the interview provided the conclusion that this problem cannot be taken lightly because if there are errors in presenting financial reports then the information presented will also be wrong and of course it will make it difficult for village officials to be held accountable [4]. Data from Situbondo Regent Regulation Number 2 of 2023 regarding details of village funds for each village in Situbondo Regency for the 2023 fiscal year.

Table 1

Details of the Largest and Smallest Village Funds in Situbondo Regency 2023.

Source: Situbondo Regent Regulation Number 2 of 2023

Based on the details of village funds, it shows in Table 1 that the Situbondo Regency area with the criteria for villages that receive the largest village funds and the smallest village funds is in accordance with data obtained from Situbondo Regent Regulation Number 2 of 2023 regarding details of village funds for each village in Situbondo Regency for the 2023 fiscal year. This object is to represent the entire population in this study, and to find out whether differences in the distribution of village funds can also affect the quality of the financial reports produced.

Research by Edi & Enzelin (2022) [5] showed that the role of the inspectorate influences the quality of financial reports. However, there is a research gap in the results of research conducted by Yulianti et al., (2022) [6] showed that the role of the inspectorate has no effect on the quality of financial reports. Research by Trisna Yudi Asri & Suariedewin (2023) [7] showed that the use of information technology has an effect on the quality of financial reports. However, there is a research gap in the results of research conducted by Tri et al., (2022) [8] showed that the use of information technology has no effect on the quality of financial reports. Research by Sukri et al., (2021) [9] showed that professionalism influences the quality of financial reports. However, there is a research gap in the results of research conducted by Fauziah & Yuskar (2023) [10] that showed that professionalism has no effect on the quality of financial reports. Research by Napitupulu et al., (2022) [1] showed that organizational commitment influences quality of financial reports. However, there is a research gap in the results of research conducted by Meliana (2021) [2] showed that organizational commitment has no effect on the quality of financial reports.

Stewardship Theory

Stewardship theory is a situation where management is not motivated by individual goals but it is more focused on the main goal, namely the interests of the organization [11]. As demands for accountability increase in public sector organizations, it becomes increasingly difficult for principals to carry out their own financial management functions, so that the role of accounting is needed in separating duties between ownership and management functions in order to realize public welfare and accountability for the management of state assets [12].

Quality of Financial Reports

The purpose of financial reports based on PSAK Number 1 is to provide information regarding the financial position, financial performance and cash flow of an entity that is useful for the majority of report users in making economic decisions. Financial reports also show the results of management's accountability for the use of the resources entrusted to them. The qualitative characteristics of financial reports are characteristics that make the information in financial reports useful for users in making decisions of economic value [13].

Hypothesis 

The Inspectorate is tasked with ensuring that financial reports are free from allegations of material misstatement which will later be examined by the BPK (Financial Audit Agency). Inspectorate officials must have an honest, independent attitude and always be open to all results found and immediately provide recommendations for improvements to improve the quality of Regional Government Financial Reports. In other words, the quality of the audit will have an impact on the quality of the LKPD [14].

H1: The role of the Inspectorate influences the Quality of Village Financial Reports

The use of technology can help prepare quality financial reports, of course with a good system so that it can produce financial reports that have a minimal error rate. Information technology is really needed by organizations or entities to help achieve their goals, but procuring information technology requires a large investment. Information technology investments that have been made by the company must be able to be implemented optimally. Information technology in an organization is not enough to just be managed (managed) by the information technology department, but must be managed (governed) professionally [15].

H2: The use of information technology influences the quality of village financial reports

Professionalism can be seen from a firm attitude to carry out work using the skills one has, in fulfilling social obligations regarding the importance of a role and the benefits of a profession, an attitude in making decisions without being influenced by other parties, being confident in the professional regulations that are carried out, and establishing good relationships with fellow professionals. The quality of financial reports can increase if the professionalism of financial management of each employee also increases [11].

H3: The use of information technology influences the quality of village financial reports

Organizational commitment is built on the basis of workers' trust in the organization's values, workers' willingness to help realize organizational goals and loyalty to remain members of the organization. If workers feel that their souls are tied to existing organizational values, they will feel happy at work, so they will have responsibility and awareness in running the organization [12].

H4: Organizational Commitment moderates the Inspectorate's Role in the Quality of Village Financial Reports

Employees with good commitment will determine how much their performance will be achieved in the organization because of the growing sense of love for their work. The existence of organizational commitment will have a good influence, especially in producing financial reports. In a government context, officials who have high organizational commitment will use the information they have to prepare financial reports [13].

H5: Organizational Commitment moderates the use of information technology on the quality of village financial reports

Organizational commitment is something that is related to the level of involvement of individuals in the organization where they carry out work to remain in the organization. If employees or government officials have a high level of commitment to the organization, the information on financial reporting produced will be of higher quality [14].

H6: Organizational Commitment moderates Professionalism on the Quality of Village Financial Reports

Organizational commitment does not moderate the influence of professionalism on the quality of village financial reports in Situbondo Regency. In other words, the level of organizational commitment does not significantly affect the relationship between professionalism and the quality of financial reporting.

Research Methods

The population in this study were all villages in Situbondo Regency, totaling 132 villages in Situbondo Regency. Researchers used a purposive sampling method. Determining respondents with a total of 264 respondents with 2 respondents in each village in Situbondo Regency, namely the village head and financial report preparation staff in each village in Situbondo Regency. The data analysis method used is Partial Least Square [16].

Descriptive Statistics 

Descriptive statistical analysis in research is basically a process of transforming research data in tabulated form so that it is easy to understand and interpret. This research uses descriptive statistics to determine the description or description of data which can be seen from the average (mean), maximum and minimum values ​​and standard deviation of the research variables [17]. The results of descriptive statistical data processing for research variables appear in Table 2 below:

Table 2

Descriptive Statistics Results

Source: Data is processed, 2024.

Hypothesis testing

Based on the data processing that has been carried out, the results can be used to answer the hypothesis in this research. Hypothesis testing in this research was carried out by looking at the T-Statistics values ​​and P-Values ​​values. The research hypothesis can be declared accepted if the P-Values ​​< 0.05. The following are the results of hypothesis testing obtained in this research through the inner model:

Figure 1. Partial Least Square Testing Model SmartPLS 6.0

Source: Data is processed, 2024

Table 3

Influence Between Variables

Source: Data is processed, 2024

1. Path Coefficients value from moderation 1 namely the role of inspectorate (X₁) on Quality of Financial Reports (Y) which is moderated by Organizational Commitment (Z) is β = 0,045 has positive value. The value of p-values is 0,656. This result is not significant because the value of p-value is more than 0.05. So, based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, the Role of the Inspectorate (X1) which is moderated by Organizational Commitment (Z) is not proven to have an effect on the Quality of Financial Reports (Y).

    

2. Path Coefficients value from moderation 2 namely information technology utilization (X₂) on the Quality of Financial Reports (Y) moderated by Organizational Commitment (Z) is β = 0.024, which is positive. The p-value is 0.753, this result is not significant because the p-value is more than 0.05. So, based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, the Utilization of Information Technology (X2) moderated by Organizational Commitment (Z) is not proven to have an effect on the Quality of Financial Reports (Y).

    

3. Path coefficient value from moderation 3 namely professionalism (X₃) on the Quality of Financial Reports (Y) which is moderated by Organizational Commitment (Z) is β = -0.223, which is negative. The p-value is 0.058, this result is not significant because the p-value is more than 0.05. So, based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, Professionalism (X₃) which is moderated by Organizational Commitment (Z) is not proven to have an effect on the Quality of Financial Reports (Y). 

    

4. Path Coefficient Values ​​from the Role of the Inspectorate (X₁) on the Quality of Financial Reports (Y) is β = 0.493, which is positive. The p-value is 0.000. This result is significant because the p-value is less than 0.05. So based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, the role of the Inspectorate is determined (X₁) proven to influence the Quality of Financial Reports (Y).

    

5. Path Coefficient Values ​​from the Information Technology utilization (X₂) on the Quality of Financial Reports (Y) is β = 0.633, which is positive. The p-value is 0.000. This result is significant because the p-value is less than 0.05. So based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, the Utilization of Information Technology (X₂) proved to influence the Quality of Financial Reports (Y).

    

6. Path Coefficient Values  of Professionalism (X₃) on the Quality of Financial Reports (Y) is β = 0.383, which is positive. The p-value is 0.000. This result is significant because the p-value is less than 0.05. So, based on the calculated values ​​of path coefficients and p-values ​​on the influence between variables, Professionalism (X₃) proved to influence the Quality of Financial Reports (Y).

The Influence of the Inspectorate's Role on the Quality of Financial Reports

The Inspectorate is tasked with ensuring that financial reports are free from allegations of material misstatement which will later be examined by the BPK (Financial Audit Agency). Inspectorate officials must have an honest, independent attitude and always be open to all results found and immediately provide recommendations for improvements to improve the quality of Regional Government Financial Reports. In other words, the quality of the audit will have an impact on the quality of the LKPD.

The results of this research are in line with research conducted by Napitupulu et al., (2022) [1] showed that the role of the inspectorate influences the quality of financial reports.

The Effect of Using Information Technology on the Quality of Financial Reports

The use of technology can help prepare quality financial reports, of course with a good system so that it can produce financial reports that have a minimal error rate. Information technology is really needed by organizations or entities to help achieve their goals, but procuring information technology requires a large investment. Information technology investments that have been made by the company must be able to be implemented optimally. Information technology in an organization is not enough to just be managed (managed) by the information technology department, but must be managed (governed) professionally.

The results of this research are in line with research conducted by Meliana (2021) [2] showing that the use of information technology has an effect on the quality of financial reports.

The Influence of Professionalism on the Quality of Financial Reports

Professionalism can be seen from a firm attitude to carry out work using the skills one has, in fulfilling social obligations regarding the importance of a role and the benefits of a profession, an attitude in making decisions without being influenced by other parties, being confident in the professional regulations that are carried out, and establish good relationships with fellow professionals. The quality of financial reports can increase if the professionalism of financial management of each employee also increases.

The results of this research are in line with research conducted by Lian & Kusumah (2022) [3] showing that professionalism influences the quality of financial reports.

The Role of Organizational Commitment in Moderating the Inspectorate's Role in the Quality of Financial Reports

Organizational commitment has no effect because the village government in Situbondo Regency has a normative commitment, which means that village governments in Situbondo Regency tend to work in organizations for reasons of obligation and responsibility to remain in the organization. The village government in Situbondo Regency has not been able to implement its responsibilities properly, and there is a lack of loyalty of village employees towards government organizations, as well as a lack of effectiveness and efficient financial management and have not been able to minimize the lack of commitment required by being accountable for managing village finances.

The results of research conducted by Firdaus et al., (2020) [4] showed that organizational commitment has no effect on the quality of financial reports.

The Role of Organizational Commitment in Moderating the Use of Information Technology on the Quality of Financial Reports

Organizational commitment has no effect due to the lack of awareness of the village government in Situbondo Regency within the organization regarding its duties and responsibilities, such as delaying work, this results in delays in village financial reporting in Situbondo Regency. The village government's commitment in Situbondo Regency was held to support village government accountability in preparing financial reports and reviewing the implementation of village financial reporting activities. Commitment relates to activities or acting independently in village financial implementation activities in Situbondo Regency.

The results of research conducted by Edi & Enzelin (2022) [5] showed that organizational commitment has no effect on the quality of financial reports.

The role of organizational commitment in moderating professionalism on the quality of financial reports

Organizational commitment has no effect because the village government in Situbondo Regency has not been fully able to demonstrate accountability for the reliability of the village government's financial reports and there is a lack of cooperation between the village government and village officials. Even though the village government in Situbondo Regency has implemented this as well as possible, the reality is that the village government in Situbondo Regency has not been able to prove that they are capable of producing good quality financial reports, here the organizational commitment of the village government in Situbondo Regency has not been able to produce active participation from all village government parties in Situbondo Regency to improve the quality of financial reports, as well as improve the performance of each village government in Situbondo Regency.

The results of research conducted by Yulianti et al., (2022) [6] showed that organizational commitment has no effect on the quality of financial reports.

Conclusions

1. The research results showed that the role of the Inspectorate influenced the quality of financial reports. The quality of financial reports.
2. The research results showed that professionalism influenced the quality of village financial reports in Situbondo Regency.
3. The research result showed that the information technology utilization influenced the quality of financial reports in Situbondo Regency.
4. The research results show that Organizational Commitment does not moderate the influence of the Inspectorate's Role on the Quality of Village Financial Reports in Situbondo Regency.
5. The research results show that Organizational Commitment does not moderate the influence of the Use of Information Technology on the Quality of Village Financial Reports in Situbondo Regency.
6. The research results show that Organizational Commitment does not moderate the influence of Professionalism on the Quality of Village Financial Reports in Situbondo Regency.

Recommendations 

1. For future researchers, it is best to coordinate before distributing the questionnaire so that the intended respondents are in place.
2. It is hoped that future researchers will add samples other than the Village Head and Village Secretary so that they can reflect the process of preparing village financial reports as a whole.

Funding: No funding sources.

Conflict of interest: None declared.

Ethical approval: The study was approved by the Institutional Ethics Committee of University of Jember.

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