This study aims to examine whether the integrity of local government institutions influences financial reporting quality.
This study uses the Integrity Assessment Index issued by the Indonesian Corruption Eradication Commission to measure local government organizational integrity. Audit results serve as proxies for financial reporting quality (FRQ). The data set includes 391 district governments and 90 city governments in Indonesia from 2019 to 2021.
The results indicate that local governments with stronger integrity demonstrate higher financial reporting quality, as reflected in cleaner audit opinions and fewer audit findings. These findings highlight the critical role of organizational integrity in enhancing FRQ.
To the best of the authors’ knowledge, this study is the first to highlight the significance of assessing local government integrity levels. It contributes to the literature by establishing a link between organizational integrity and FRQ. The findings provide insights into how strengthening integrity within public organizations can accelerate financial accountability and transparency improvements.
