INTERNAL CONTROL SYSTEMS AND QUALITY OF FINANCIAL STATEMENTS IN LOCAL GOVERNMENTS IN NORTHERN UGANDA: THE CASE OF NWOYA DISTRICT LOCAL GOVERNMENT
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Date
2026-04
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Gulu University
Abstract
This study examined the effect of internal controls systems on the quality of financial statements in Nwoya District local government. The objectives of the study were: to assess the internal control systems put in place in Nwoya DLG, to examine the level of quality of financial statements of Nwoya DLG, to establish the relationship between internal control systems and quality of financial statements in Nwoya DLG, and to examine the intervening
effect of financial regulatory frameworks on the relationship between internal control systems and quality of financial statements in Nwoya DLG. The study used a descriptive survey research design and adopted a cross sectional research design on a sample of 95 respondents from a population of 107 Nwoya District local government staff that included all the different cadres and strategists determined using purposive sampling. Quantitative data was collected
by use of a questionnaire and analyzed using Statistical Packages for Social Scientists (SPSS). The study established that there is a positive significant relationship between internal control systems and quality of financial statements being revealed by a moderate level of internal control systems and also a moderate level of the quality of financial statements being produced. The study found moderate significant positive relationship between most of the constructs of internal control systems (control activities and control environments) and quality of financial statements except risk assessments and mitigation which had a weak relationship with the quality of financial statements. The study further found out that financial regulatory frameworks has a significant intervening effect on the relationship between internal control systems and quality of financial statements. The study thus concluded that control activities, control
environments and risk assessments and mitigation affects the quality of financial statements. Therefore, the researcher recommends that entities such as Nwoya District local government should establish an appropriate internal control systems in place so as to significantly influence the quality of financial statements that is produced since for instance according to study findings, adherence to control activities leads to improvement in quality of financial statements and adherence to control environments leads to improvement in quality of financial statements. The Financial Regulatory Framework should be followed when preparing financial statements since it has a positive influence on the relationship between internal control systems and quality of financial statements.