This study aimed to examine the effect of dynamic capabilities, accrual-based SAP implementation, and quality of human resources on the quality of local government financial reports. The samples in this study were employees in the regional apparatus organization (OPD) ofMadiun City that are directly related to the use and presentation of financial statements, namely the authority of the budget user, to the agency/office, employees in the accounting and finance division (treasurer). The sampling technique used purposive sampling with employee criteria in Madiun City OPD directly related to financial reporting, namely budget users, cusa budget users, treasurers, and the accounting department. The tests used multiple regression and path analysis.The results showed that dynamic capabilities, accrual-based SAP implementation and HR quality significantly influence the quality of financial statements. Dynamic capability has a direct effect on the quality of financial statements and is also proven to have an indirect effect on the quality of financial statements through the implementation of accrual-based SAP. Testing the variable elements of dynamic capabilities, and the results of learning capabilities and sensing capabilities affect the financial statements.

dynamic capabilities; SAP implementation; financial statements