Accounting ethical practices, organizational culture, and financial reporting quality in Busoga sub-region local governments

Abstract

The study explored the mediating role of organizational culture in the relationship between accounting ethical practices and financial reporting quality in LGs in the Busoga sub-region, Uganda. The study was guided by the following objectives: to examine the relationship between accounting ethical practices and financial reporting quality of LGs in the Busoga sub-region in Uganda; to assess the relationship between accounting ethical practices and the organizational culture of LGs in the Busoga sub-region in Uganda; to assess the relationship between organizational culture and financial reporting quality of LGs in the Busoga sub-region in Uganda and to establish the mediating role of organizational culture in the relationship between accounting ethical practices and financial reporting quality of LGs in the Busoga sub-region in Uganda. A study was rooted on the Stewardship and Contingency theories. A cross-sectional research design was adopted. A population of 172 with a sample of 120 was selected. A survey tool was used on quantitative approach. The study found that (1) the relationship between accounting ethical practices and financial reporting quality exists; (2) the relationship between accounting ethical practices and organizational culture was evident; (3) the relationship between organizational culture and financial reporting quality was confirmed; and (4) the mediating role of organizational culture in the relationship between accounting ethical practices and financial reporting quality was found to be partial. From 120 LGs in Busoga sub-region, 112 participated accounting for 93.3% response rate. This study makes the following important contributions to the financial reporting quality literature: (1) Organizational employees, particularly those involved in financial management, should receive regular training on ethical standards, relevant laws, and the consequences of unethical behaviour, in particular on the integral use of accounting systems, to enhance financial reporting quality. (2) Local governments should be grounded on a strong organizational culture that promotes integrity and good ethical behaviour, which are fundamental to accurate financial reporting; (3) finally, organizations should align financial reporting objectives with the company’s core mission by ensuring that financial data not only meets regulatory and performance standards but also reflects the values and long-term vision of the organization. However, the study was limited to cross-sectional research design and quantitative approach which may not generalize to other organizations or local populations. Therefore, future research should consider a hybrid approach to provide deeper insights into FRQ in LGs to explore cause-and-effect relationships through repeated observations overtime.