Evaluating Effects of Digital Transformation on Quality of Financial Reporting in Nairobi City County Government, Kenya

Abstract

Despite the Nairobi City County Government's implementation of policies designed to ensure high-quality financial reporting and enhance accountability and transparency, these measures have not fully achieved their intended outcomes. Persistent deficiencies in financial reporting quality, coupled with an increase in deceptive practices, have undermined public trust. While digital transformation holds promise for improving financial reporting, existing empirical research is limited by conceptual, methodological, and contextual gaps. This study evaluates the impact of digital transformation on financial reporting quality within Nairobi City County Government. The target population comprised 287 officers from the Finance and Economic Planning Department, from which a sample of 105 respondents was purposively selected. Utilizing both descriptive and explanatory research designs, the study employed structured questionnaires to collect primary data, which were analyzed to produce descriptive and inferential statistics. The study concludes that big data technology has a significantly positive effect on quality of financial reporting (p<0.01; r= 0.618; β = 0.185) as block chain technology has a significantly positive effect on the quality financial reporting (p<0.01; r=;0.447 =0.254) and cloud computing technology has a significantly positive effect of quality of financial reporting in Nairobi City County Government (p<0.01; r= 0.696; β= 0.599). Additionally, there is a positive significant effect of robotic process automation on the quality of financial reporting in Nairobi City County Government (p<0.01; r= 0.5.2.5; β=0.368). Furthermore, readiness to innovate significantly moderates the relationship between digital transformation indicators and financial reporting quality, with a moderating effect of 5.07%, which negatively impacts financial reporting quality in Nairobi City County Government. The research would provide decision-makers in Nairobi City County Government with valuable insights into the dynamics of digital transformation. This information would be used to formulate regulations aimed at enhancing the quality of financial reporting.