Cloud Accounting Practice and Financial Reporting Quality: Lessons from Small and Medium Enterprises (SMEs) In Southwestern Nigeria

In the digital age, technological advancements have revolutionized business operations, particularly in the area of financial reporting. Traditional accounting methods, which depend on manual bookkeeping and on-premises software, often encounter inefficiencies that hinder timely and accurate financial reporting. This has prompted the adoption of cloud accounting, which is expected to enhance financial reporting quality by providing real-time data access, automating accounting processes, and improving data security. The move toward cloud-based solutions is driven by the increasing demand for efficiency, accuracy, and transparency, especially in dynamic and competitive business environments. However, despite its clear advantages, the adoption of cloud accounting among SMEs in Nigeria remains limited, mainly due to concerns over data security, internet access, and implementation costs. This study explores the impact of cloud accounting on the financial reporting quality (FRQ) of Small and Medium-sized Enterprises (SMEs) in Southwestern Nigeria, focusing on the influence of Platform as a Service (PaaS), Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Network as a Service (NaaS) on FRQ. Primary data were collected from registered SMEs in the Southwestern region, and data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The findings reveal that cloud accounting significantly improves FRQ, with SaaS having the most substantial direct impact. PaaS positively influences data security practices (DSP), which enhances the accuracy and transparency of financial reporting. While IaaS has a moderate direct effect on FRQ, it plays a crucial role in ensuring system reliability and operational efficiency. NaaS also contributes by strengthening network security and data integrity, indirectly supporting high-quality financial reporting. The study concludes that adopting cloud accounting solutions is essential for SMEs in Southwestern Nigeria to enhance financial reporting practices, reduce data security risks, and improve decision-making. The study recommends strengthening cybersecurity measures, investing in digital infrastructure, and developing regulatory frameworks to fully leverage the benefits of cloud accounting for SMEs in Nigeria.