Towards sustainable accountability: knowledge management and compliance readiness in accounting standards reform of Islamic cooperative

Abstract The transition from Indonesian Financial Accounting Standards for Entities without Public Accountability (SAK ETAP) to Financial Accounting Standards for Private Entities (SAK EP), alongside the requirement to comply with Sharia Accounting Standards (SAK Syariah), presents significant compliance challenges for Islamic cooperatives (Baitul Maal wa Tamwil/BMTs). Drawing upon Institutional Theory and New Institutional Economics (NIE), this study examines the factors influencing compliance readiness and investigates the mediating role of knowledge management in facilitating accounting standards reform. Using survey data collected from 99 respondents representing 15 Islamic cooperatives in Banyumas, Indonesia, and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM), the study evaluates the effects of financial literacy, cooperative governance, and technology adoption on compliance readiness. The findings reveal that cooperative governance and technology adoption positively influence compliance readiness both directly and indirectly through knowledge management. Knowledge management emerges as a critical organizational capability that transforms governance structures and technological resources into sustainable compliance outcomes. Financial literacy does not exert a significant direct effect on compliance readiness; however, its indirect effect through knowledge management is supported, suggesting that individual knowledge contributes to compliance only when institutionalized through organizational learning processes. Total effects analysis further indicates that technology adoption represents the strongest predictor of compliance readiness. The study contributes to the accounting standards adoption literature by integrating Institutional Theory and New Institutional Economics to explain how organizations respond to regulatory change through capability-building mechanisms. The findings suggest that sustainable accountability is achieved not merely through regulatory compliance but through the development of governance structures, technological capabilities, and knowledge management systems that support long-term organizational adaptation. Practical implications are offered for policymakers, cooperative associations, and Islamic cooperative managers seeking to strengthen compliance readiness during accounting standards reform. By showing how governance, technology adoption, and knowledge management strengthen transparent financial reporting and regulatory accountability in Islamic cooperatives, this study contributes to Sustainable Development Goal 16, particularly Target 16.6 on developing effective, accountable, and transparent institutions.