Factors influencing the perceptions of the quality of financial reporting of Non-Governmental Organizations in Nairobi County, Kenya
Date
2023
Authors
Mundia, B. N.
Journal Title
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Volume Title
Publisher
Strathmore University
Abstract
Poor financial reporting practices among some Kenyan NGOs have adversely affected their financial performance. Coupled with this fact is that NGO donor funds have been decreasing. The motivation for this study was to establish whether the implementation of an effective internal control system, using a computerized accounting system, and having an internal audit function would lead to an improvement in the perception of the quality of financial reporting by NGOs in Nairobi County, Kenya and if NGO size and NGO age have a controlling effect. An explanatory research design was used in this study. The target population of the study was the 285 NGOs that existed in Nairobi in 2020, each being represented by its Finance Director, 160 public/governmental external auditors and 424 private auditors in Nairobi County, Kenya, who audit NGOs, totaling to 869 respondents. A simple random sampling technique was used to sample a total of 408 respondents to represent the views of the target population. The sample size comprised of 134 NGOs represented by their Finance Directors, 75 public/governmental external auditors and 199 private external auditors. Also, the study covered a sample of 35 large NGOs which makes up 70% of the total number of large NGOs for the review of their financial statements for the financial year 2021 to determine the level of compliance with the Deloitte 2021 IFRS checklist. Structured questionnaires were used to collect primary quantitative data from the sampled respondents to address the stipulated objectives. The researcher used a multiple linear regression model to explain the influence of internal control systems, internal audits, and computerized accounting systems on the perceptions of the quality of financial reporting of the NGOs in Nairobi County, Kenya, addressing the first, second, and third specific objectives of the study. The findings were that the implementation of internal control systems, the effective usage of an internal audit department and the adoption of computerized accounting systems boost the level of the perceptions of the quality of financial reporting of the NGOs in Nairobi County, Kenya. Finally, the study, found that NGO size negatively affects the perceptions of the quality of financial reporting of the NGOs while NGO age positively affects the perceptions of the quality of financial reporting of the NGOs. The findings were corroborated by the findings of an examination of the financial statements of the 35 large NGOs: their financial statements complied with all the IFRS disclosure requirements based on the Deloitte 2021 IFRS disclosure checklist: in addition, the NGOs’ financial statements had been audited by Auditors registered with the Institute of Certified Public Accountants of Kenya (ICPAK) as mandated by the NGO Coordination Board and the audit reports of all the NGOs stated that the auditors were of the opinion that the financial statements had been prepared in accordance with IFRSs.
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Citation
Mundia, B. N. (2023). Factors influencing the perceptions of the quality of financial reporting of Non-Governmental Organizations in Nairobi County, Kenya [Strathmore University]. http://hdl.handle.net/11071/13404