Internal Control Systems And Their Effect On Expenditure Reporting Accuracy

Abstract

This study investigates the effect of internal control systems on expenditure reporting accuracy within public sector institutions, emphasizing the role of control mechanisms in ensuring financial transparency and accountability. Using a quantitative research design, data were collected from 212 financial officers, accountants, and internal auditors across government organizations. Five core components of internal control—Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring—were analyzed through reliability tests, exploratory and confirmatory factor analyses, regression modelling, and structural equation modelling (SEM). The results demonstrate that all internal control components significantly and positively influence expenditure reporting accuracy, with Control Activities and monitoring exerting the strongest effects. The combined model explains 67% of the variance in reporting accuracy, highlighting the integrated nature of internal control systems in supporting reliable financial processes. These findings underscore the importance of strengthening procedural checks, risk-focused assessments, communication frameworks, and supervisory oversight to enhance the quality of expenditure reporting. The study contributes to the broader discourse on public financial management reforms and offers actionable insights for improving fiscal discipline and reporting integrity.