INTERNAL CONTROL FUNCTION AND FINANCIAL REPORTING QUALITY OF PUBLIC HOSPITALS IN OGUN STATE, NIGERIA

Abstract

Inadequate control activities in public hospitals have contributed to financial opacity and weakened decision-making among healthcare practitioners, underscoring the need for robust internal control systems. This study examines the effect of internal control systems on the quality of financial reporting in selected secondary and tertiary public hospitals in Ogun State, Nigeria. Internal control was assessed with control environment, risk assessment, control activities, information and communication, and monitoring. Financial reporting quality was measured using the dimensions of relevance, faithful representation, timeliness, and understandability of financial reports. Adopting a descriptive survey design, the study collected data from 213 internal auditors and accountants, selected through stratified random sampling from a population of 456 officers involved in financial reporting. A structured questionnaire, based on a five-point Likert scale, was administered both physically and electronically via Google Forms. The results show that internal control mechanisms significantly improve the relevance of financial reports, with control activities exerting the strongest influence by enhancing reporting usefulness through authorizations, verifications, and reconciliations. Similarly, faithful representation was most influenced by a strong control environment, indicating that governance, ethical leadership, and institutional values foster credible and unbiased reporting. Timeliness was also improved across all internal control dimensions, with control activities again standing out as the most effective in ensuring prompt disclosures through operational checks and approvals. In contrast, none of the internal control components had a significant impact on the understandability of financial reports, despite exhibiting positive but weak effects, suggesting that clarity is shaped more by report presentation formats and users’ financial literacy. The study recommends institutionalizing internal control frameworks to promote transparency, strengthen compliance through clear policy enforcement, and enhance staff training to improve report clarity and overall financial management.