The quality of accounting information systems is a critical factor for economic development because it supports decision-making and future planning. Regulators in Saudi Arabia have issued numerous rules, regulations, and instructions to ensure the authenticity of accounting information. The most recent is the Financial Control System Project, which includes a set of procedures and application methods to achieve its objectives.
This study aims to measure the impact of financial control procedures and their application methods on the quality of accounting information systems. It also examines the indirect relationship between financial control procedures and accounting information quality through financial control application methods. The analytical descriptive approach was used to analyze data; a questionnaire was distributed via social media and email, and 101 valid responses were analyzed.
The study found a positive and significant effect of financial control procedures and their application methods on the quality of accounting information systems, and an indirect relationship between financial control procedures and accounting information quality through financial control application methods. The study recommends regularly evaluating financial control procedures to ensure objectives are achieved.
Financial Control ProceduresMethods of Applying Financial ControlQuality of Accounting InformationPublic SectorEnterprise Resource Planning System (ERP)Introduction
The public sector represents the largest economic component compared with other sectors, as the state bears responsibility for its financing and optimal management. In Saudi Arabia, the government sector encompasses all economic activities aimed at the public interest, with ownership belonging to the state, providing products and services to all segments of society. It includes a wide range of government agencies, public institutions, and public companies.
The public sector is the portion of the economy that provides essential services to citizens through government units, whose scope varies by country. To assess the sufficiency of resources in covering expenditures for continuing public services, an annual general budget is prepared.
The state budget relies on vast accounting information characterized by qualities that enable decision-making and forecasting, notably relevance and reliability, per FASB Statement No. 2 (1980). Ensuring the quality of accounting information in the public sector requires modern methods supervised by oversight bodies. For example, the European Parliament activated financial control by establishing bodies to monitor the financial and banking sectors, providing early warning of potential crises.
In Saudi Arabia, tools have been developed to ensure the reasonable assurance of financial data across public entities, including strengthening internal audit units and issuing regulations such as the State Revenues System (Royal Decree No. M/68 of 18-11-1431H) and most recently the Financial Control System Project, which aims to activate financial control through related procedures and enhance integrity and transparency.
This study investigates the extent to which financial control procedures affect the quality of accounting information, measuring the mediating role of financial control application methods in Saudi public sectors.
Theoretical Framework and Literature ReviewFinancial Control
Control emerged to address potential deviations and errors that impede achieving planned goals. Financial control specifically oversees funds—both collection and expenditure—and has grown in importance with the expansion of economies. It comprises coherent procedures and methods that help entities ensure objectives are met.
Governments emphasize financial control to reduce administrative corruption (e.g., abuse of office, favoritism, bribery) and to safeguard public interests. Forms of financial control include ex-ante, concurrent, and ex-post controls; internal and external controls.
The Financial Control System Project (Ministry of Finance, 2021) defines financial control as “a set of procedures that provide reasonable assurance about the validity of transactions in government units that have a financial impact on their statements and final accounts, and their compliance with relevant regulations, instructions, and bylaws.”
Objectives of the Financial Control System ProjectEnsure the soundness of operations materially affecting the state budget, financial statements, and final accounts.Enhance integrity, responsibility, and transparency among those applying financial control.Activate financial control by developing internal control systems within government units.Strengthen control over revenue collection and expenditure in line with relevant regulations.Methods of Applying the Financial Control System ProjectSelf-control: applied by government units via their internal control systems.Direct control: applied by the oversight body through assigning financial controllers to government units.Digital and technical control: evaluates information systems and electronic data for effectiveness.Report control: assesses financial reports issued by government units to verify control efficiency.Quality of Accounting Information
Accounting information quality is the credibility of information in financial reports, ensuring usefulness to users without misstatement or bias, prepared under recognized accounting standards to achieve intended objectives.
Two fundamental qualitative characteristics are required:
Relevance: Information must meet intended purposes, be timely, predictive, and decision-useful.Reliability: Information must be faithful, free from undue bias and error, verifiable, represent economic events faithfully, and be neutral among users.Study Framework
The study adopts Baron and Kenny’s (1986) mediation model to assess the indirect effect of the mediating variable (methods of applying financial control) on the relationship between the independent variable (financial control procedures) and the dependent variable (quality of accounting information).
Study framework based on Baron & Kenny (1986) mediation model
Prior Studies
Several studies have evaluated financial control and its contribution to the public sector:
Amer & Al-Sharbini (2017): Evaluated Egypt’s financial control system in the Nile specialized channels; found a positive relationship between structural, regulatory, and human-resource criteria and the effectiveness of the control system.Akinwunmi & Akinola (2019): Assessed financial control and accountability in Nigeria’s public sector; found effective controls and a positive relationship between federal revenues and expenditures.Rareh & Noureddine (2020): Studied pre-control’s role in detecting deviations in public spending in municipalities; found financial control significantly detects errors despite spending delays.Al-Wadi & Bani Khalid (2021): Examined the role of financial control over overseas treatment expenses in Kuwait; found a significant moderate relationship.Ahlam & Khair Eddine (2018): Showed internal control contributes to accounting information quality in the Skikda Port Company.Sawitri et al. (2019): Found human resource competence, IT use, and internal control positively affect timeliness of financial reporting in Jombang General Hospital, Indonesia.Pinem & Rahmayuni (2020): Found IT use and internal accounting control positively affect the value of financial information in Kalimantan.Bajseer & Saeed (2020): In Saudi non-profits, IT, governance, and strategic control improved relevance and faithful representation of accounting information.Unayzah & Khanjar (2021): Found strong relationships between internal control components and accounting information quality in Iraqi public units.
Distinctiveness of the current study: It is the first to jointly examine the impact of financial control procedures on accounting information quality with the mediating role of financial control application methods (self-control via internal control systems and direct control via financial controllers) across a wide range of Saudi public sub-sectors. It also develops measures for financial control procedures and application methods based on state regulations (Ministry of Finance, 2021).
Similarities with prior studies: The study evaluates financial control systems and their application methods (self-control and direct control) as mediators, aligning with studies on internal control’s effect on accounting information quality.
Research Problem
The Saudi public sector is vast and critical to state revenue and expenditure. Its numerous units generate large volumes of accounting information impacting national income. This raises questions about the truthfulness and relevance of such information used to determine annual revenues and expenditures. The state has implemented internal and external controls to provide reasonable assurance on accounting information quality. The main research question is:
To what extent do financial control procedures and their application methods affect the quality of accounting information systems in the public sector of the Kingdom of Saudi Arabia?
Research Objectives
Main objective: Develop a framework to measure the direct and indirect impact of financial control procedures and their application methods on the quality of accounting information in the Saudi public sector.
Sub-objectives:
Assess financial control procedures, self-control, and direct control in the Saudi public sector.Measure the direct impact of financial control procedures on accounting information system quality.Measure the impact of financial control procedures on their application methods in the public sector.Measure the indirect impact of financial control procedures on accounting information system quality via financial control application methods.Research Significance
Scientific significance: Expands theoretical understanding of accounting information quality and its determinants alongside emerging concepts in government units (financial control and its tools/methods) and their direct/indirect effects on accounting information quality.
Practical significance: Enhances financial control in government entities to obtain high-quality accounting information through proper procedures and application methods, considering internal control systems to ensure decision-useful information. It also positions financial control as a means to correct errors and deviations and to respond to emergencies through qualified financial controllers and internal control staff.
Research HypothesesH1: Financial control procedures and their application methods have a significant effect on the quality of accounting information in the Saudi public sector.H2: Financial control procedures have a significant effect on the self-control application method in the Saudi public sector.H3: Financial control procedures have a significant effect on the direct control application method in the Saudi public sector.H4: Financial control procedures have a significant effect on the quality of accounting information in the presence of financial control application methods in the Saudi public sector.Study DesignMethodology
The descriptive approach was used to examine the impact of financial control procedures and application methods on accounting information quality. A partial survey approach was adopted due to the large, geographically dispersed population and cost considerations. Data were analyzed using quantitative methods and statistical tools (SPSS).
Population and Sample
The population comprises accountants, internal auditors, financial department managers, and financial controllers across Saudi public sectors. A non-probability (convenience) sample was used due to difficulty enumerating the population. Following Bougie & Sekaran (2016), a sample size between 30 and 500 is acceptable. A total of 200 questionnaires were distributed; 101 valid responses were received (50%).
Data Sources
Primary data: A questionnaire was used to collect data, distributed via social media and email. It consisted of two parts: general information (sector type, job title, education, experience, specialization, accounting information system used, duration of use) and four main constructs measured on a five-point Likert scale:
Financial control procedures (5 items) derived from the Ministry of Finance’s Financial Control System (2021).Internal control (self-control) as a financial control application method (6 items) from the Financial Control System and literature.Financial controller evaluation (direct control) as a financial control application method (4 items) from the Financial Control System.Accounting information quality (6 items) from Bajseer & Saeed (2020).
Secondary data: Definitions and materials from the Financial Control System project, books, and prior studies were used to design the questionnaire and select the sample.
Statistical Tools
SPSS was used. For sample characteristics: percentages and frequencies. For validity and reliability: Pearson correlation and Cronbach’s alpha. For main variables: means and standard deviations. For hypothesis testing: simple and multiple linear regression; Sobel test for mediation.
Study Model
The mediation model is specified as:
Where \(X\) = financial control procedures, \(M\) = methods of applying financial control (self-control, direct control), \(Y\) = quality of accounting information.
Validity and Reliability of the InstrumentContent validity
The questionnaire was reviewed by three accounting/auditing faculty members and two financial controllers; feedback was incorporated.
Internal consistency
Pearson correlations for each construct were strong and significant at 0.05, ranging 0.815–0.863.
Table 3 summarizes the respondents’ characteristics.
General characteristics of the sample (n=101)
Variable
Category
Frequency
Percent
Government sector type
Ministry
33
32.7%
Diwan (courts/audit bureaus)
23
22.8%
Universities
20
19.8%
Municipalities
12
11.9%
Institutions
7
6.9%
Authorities
6
5.9%
Job title
Accountant
37
36.6%
Internal auditor
18
17.8%
Financial department manager
15
14.9%
Financial controller
17
16.8%
Other
14
13.9%
Specialization
Accounting
81
80.2%
Management
10
9.9%
Finance
6
5.9%
Other
4
4.0%
Education
Diploma
7
6.9%
Bachelor
67
66.3%
Master
24
23.8%
PhD
3
3.0%
Years of experience
< 5 years
22
21.8%
5–10 years
40
39.6%
11–15 years
19
18.8%
> 15 years
20
19.8%
Accounting information system (ERP)
Oracle
31
30.7%
SAP
22
21.8%
Other ERP-based
14
13.9%
Non-ERP / unknown
34
33.7%
Duration of system use
< 1 year
14
13.9%
1–5 years
31
30.7%
6–10 years
19
18.8%
> 10 years
37
36.6%
Descriptive Analysis of Main Variables
Likert scale interpretation: 1–1.79 very low; 1.80–2.59 low; 2.60–3.39 moderate; 3.40–4.19 high; 4.20–5 very high.
Financial control procedures
Mean = 4.28 (very high), SD = 0.861, indicating strong adherence to procedures.
Evaluation of financial control procedures
Item
Mean
SD
Level
Ensuring validity of operations affecting final accounts
4.37
0.833
Very high
Assessing efficiency and effectiveness of internal controls
4.23
0.870
Very high
Ensuring compliance with laws, bylaws, and instructions
4.28
0.861
Very high
Promoting responsibility, integrity, and transparency
4.27
0.882
Very high
Ensuring revenue collection and expenditure follow regulations
4.27
0.859
Very high
Self-control (internal control system)
Mean = 3.896 (high), SD = 1.006, indicating good self-control practices.
Evaluation of self-control (internal control)
Item
Mean
SD
Level
Presence of a clear annual plan
4.14
0.895
High
Duties divided so each employee’s work is overseen
3.65
1.126
High
Responsibilities clearly assigned to identify errors/negligence
3.82
1.081
High
Instructions to record transactions immediately
3.96
0.937
High
No employee reviews work they performed
3.89
1.048
High
Use of dual controls where relevant
3.91
0.949
High
Direct control (financial controller)
Means 3.72–4.00 (high); SDs indicate similar views.
Evaluation of direct control (financial controller)
Item
Mean
SD
Level
Provision of specialized training for development
3.85
1.099
High
Independence and objectivity
3.91
1.207
High
Due professional care and disclosure of conflicts
4.00
0.969
High
Financial incentives for protecting public funds
3.72
1.159
High
Accounting information quality
Mean range 3.62–3.87 (high); average SD 1.029.
Evaluation of accounting information quality
Item
Mean
SD
Level
Information available on time without delay
3.71
1.061
High
Information enables forecasting
3.62
1.058
High
Information available when needed
3.83
1.039
High
Information is relevant to decisions
3.86
1.039
High
Information is objective
3.87
0.913
High
Information is accurate and error-free
3.71
1.061
High
Hypotheses Testing
Simple and multiple linear regressions were used; Sobel test assessed mediation.
Regression results for direct and mediated effects
Outcome
Predictor
B
SE
t
p
Y (Accounting information quality)
X (Financial control procedures)
0.655
0.099
6.628
0.000
M (Methods of applying financial control)
X (Financial control procedures)
0.761
0.076
10.000
0.000
Y (Accounting information quality)
X (Financial control procedures)
0.075
0.114
0.657
0.513
Y (Accounting information quality)
M (Methods of applying financial control)
0.762
0.106
7.179
0.000
Sobel test for indirect (mediated) effect
a
b
Sa
Sb
Z
p
0.761
0.762
0.076
0.106
5.839
<0.001
Findings:
H1 supported: Financial control procedures significantly and positively affect accounting information quality.H2 supported: Financial control procedures significantly and positively affect self-control.H3 supported: Financial control procedures significantly and positively affect direct control.H4 supported via full mediation: Direct effect of procedures on information quality becomes non-significant when methods are included; Sobel test Z=5.839 (p<0.001) indicates a significant indirect effect through application methods.
Thus, financial control procedures improve accounting information quality through the application methods (self-control and direct control) in the Saudi public sector.
ResultsSelf-control is reinforced across government units via internal control systems, annual plans, clear written procedures, and responsibility assignment, reducing material errors and deviations.Accounting information in the public sector exhibits high quality, aided by integrated ERP systems (Oracle, SAP), enhancing objectivity, predictiveness, and decision-usefulness.Accounting information quality is positively influenced by financial control procedures, providing reasonable assurance of objectivity and reliability for decisions.Self-control and direct control are positively influenced by financial control procedures, reflecting the organizing role of procedures in enabling control functions.Accounting information quality is positively influenced by the application methods of financial control (internal control and financial controllers), confirming their role as tools ensuring high-quality information.Financial control procedures affect accounting information quality indirectly through self-control and direct control, highlighting the need for capable staff and systems to implement procedures effectively.RecommendationsContinuously evaluate financial control procedures in public sectors to ensure objectives are met; review results before and during implementation to address weaknesses and reinforce strengths.Government unit managers should precisely define staff duties to ensure internal control success.Provide ongoing training and awareness for financial controllers to enhance their professional skills.Increase attention to accounting information that influences future decisions to support strategic planning.Recognize that procedures alone are insufficient; effective implementation requires control teams and systems to operationalize the Financial Control System.Study Limitations
The study is limited to the public sector (mandated to financial control), to the Eastern and Central regions of Saudi Arabia, and to the period of 2021 (questionnaire distribution).
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