The Effect of Accounting Information System on Financial Reporting Quality in Housing Cooperative Societies in Nairobi County

Abstract

Quality financial reporting reflects comprehensive and transparent financial information over a specific period so as not to mislead investors in their decision-making. As management, investors, shareholders, investors, governments, and regulators make decisions based on financial reporting, financial reporting becomes an important process for companies and investors as it provides key information that these stakeholders and investors need for long-term financial decisions, and thus this study seeks to investigate the effect of accounting information system on financial reporting quality in housing cooperative societies in Nairobi County. The research used a quantitative technique, with data collected utilizing structured questionnaires. The target group for this research report was 132 housing co-operatives in Nairobi County, Kenya where a sample of 124 housing co-operatives-calculated using Yamanes formula-were drawn from the target population. In this study, questionnaires were the primary method of collecting data from participants, guaranteeing the quality of the primary data. Both descriptive and inferential statistics were used in the research, the former by means of measures like frequency and percentage and the mean and standard deviation, and the latter by means of tools like the Spearman correlation and multiple linear regressions. Tables, charts, and graphs were used to lay up the analysis results for ease of consumption. The data was analyzed using a 95% confidence interval and a 5% significant level. The descriptive statistics showed that most housing cooperatives use an accounting software that is able to track all the transaction, the accounting software is not able to automatically update the transactions in real-time. In addition, it was shown that the accounting information software enables the implementation of internal controls in the accounting information system. The respondents further said that most housing cooperatives have independent processes, checks and evaluation of control activities on an ongoing basis in the housing accounting information system. On staff motivation, it was shown that most housing cooperatives do not have the policy of retaining and promoting the employee with the highest work experience. The results also showed that majority of the internal Auditors in the housing cooperatives are certified by the relevant bodies. Lastly, it was shown that internal auditors have basic training on operations of housing cooperatives. The correlation coefficient shows that all the 5 independent variables had a strong positive and significant positive Pearson correlation coefficient with quality of financial reporting which was confirmed by the regression analysis where each independent variable showed a positive and significant beta coefficient. The study draws a conclusion that accounting software, internal controls, accounting personnel competence, internal auditor independence and internal auditor tenure are very instrumental in ensuring quality of financial reports. This study recommends that the management of these housing cooperatives upgrade the accounting software, the human resource department of the housing cooperatives put in place a policy of motiving those employees who have outstanding performance and they should put in place a policy of retaining the most qualified and experienced employees to make them competitive in the market. This study suggests that similar study be conducted in other firms especially the manufacturing sector to establish if similar findings may be observed.