http://www.ijssit.com © Kamita, Oluoch 593 EFFECT OF OUTSOURCING OF ACCOUNTING SERVICES ON QUALITY OF FINANCIAL REPORTING AMONG SMALL MICRO ENTERPRISES IN KENYA (A Survey of Nairobi County) 1* Wanjane Bob Kamita bobkamita@gmail.com 2** Dr Oluoch Oluoch oluochjoluoch@gmail.com 1,2 Department of Economics Accounting and Finance, Jomo Kenyatta University of Agriculture and Technology, Kenya Abstract: This study examined whether the financial reporting quality is related or associated with outsourcing accounting services. The study singled out on SMEs in Nairobi County, this was found appropriate because of the high number of SMEs and diversity in businesses conducted in the County. Existing evidence have shown that outsourcing the accounting services has a significant impact on the quality of financial reporting. Outsourced book keeping, outsourced tax returns and outsourced internal audits have proved to be positively impact the quality of financial reporting. Objectives: The study was guided by To examine the impact of outsourcing of book-Keeping; To analyze the impact of outsourcing of internal audit services effect; To the investigate of outsourcing Tax reporting on quality of Financial Reporting among SMEs in Kenya. Methodology: Through descriptive districts and Chi-square analysis methods, the study will test the effects of outsourced accounting services with data collected through questionnaires with a sample of 284. The study was limited to Nairobi County and only sought registered businesses. Finding: This study finds that there is significant relation between outsourced accounting services and quality of financial reporting. From the analysis, it is vivid that outsourcing accounting services, the quality of financial reporting is increased making it more reliable and understandable. Keywords: Accounting Services, Book Keeping, Internal Audit, Quality Financial reporting 1. INTRODUCTION The most important objective of financial reporting is delivering financial information to various stakeholders concerning the performance of the accounting entity. The statements prepared need to meet qualitative characteristics as defined by International Accounting Standards Board (IASB) (2008). In 2003 the Kenyan government through the Ministry of Planning issued a strategic blue print that identified the contribution of SMEs in elevating the Kenyan economy to a medium sized economy through implementation of four key pillars one the pillars being industrialization, nevertheless, 15 years down the road the status of small and medium sized business has worsened because of high failure rate. There is no clear model of classifying SMEs, some authors classify businesses based on assets others on the employees’ number. In developing economies businesses are classified with respect to the number of employees. A business with 50 to 99 employees is a medium sized establishment, 10 to 49 employees is a