The Effect of Digital Accounting System Implementation on Financial Reporting Quality: The Moderating Role of Digital Literacy in SMEs

Abstract

This paper develops a theoretically grounded conceptual framework examining how digital accounting system implementation affects financial reporting quality in small and medium-sized enterprises (SMEs), and how digital literacy moderates this relationship. The conceptual problem addressed concerns persistent SME reporting weaknesses including delayed bookkeeping, incomplete transaction documentation, limited audit trails, and weak compliance with accounting standards alongside theoretical inconsistencies in prior literature regarding conditions under which accounting digitalization translates into improved reporting outcomes. Drawing on the DeLone and McLean Information Systems Success Model, the Technology Acceptance Model (TAM), and socio-technical systems theory, this paper conceptualizes digital accounting system implementation through five dimensions: automation, real-time recording, system integration, data security, and reporting standardization. Financial reporting quality is framed using six IFRS qualitative characteristics: relevance, faithful representation, timeliness, comparability, understandability, and verifiability. The framework's novel contribution lies in repositioning digital literacy encompassing application skills, data literacy, cybersecurity awareness, and digital problem-solving capacity as a post-adoption organizational capability that determines whether accounting technology generates decision-useful financial information, rather than merely an adoption antecedent. This repositioning addresses a critical gap in both accounting information systems (AIS) and technology adoption literatures. The paper contributes an integrated, empirically testable model for strengthening SME financial accountability through technology governance and human capability development.