Hidden costs: a case study in an internal audit unit of the public sector

Abstract

Objective: The objective of this paper is to identify the factors with potential to generate hidden costs in the Brazilian Army (EB) in the activities of one of its internal audit units.Method: This is a descriptive research using a qualitative and quantitative approach applied to a single case study. Data were collected from 76 Brazilian Army units, with 139 respondents. Data analysis includes interviews with auditors, document content analysis and in loco observation, complemented by a questionnaire applied to the auditees.Originality/Relevance: The research is relevant because it identifies from the point of view of internal auditors and audited units possible dysfunctions that generate hidden costs to the public sector. The results highlight the need for changes in EB to accompany public sector reform movements, which seeks efficiency and focus on the performance of organizations.Results: The results reveal that the factors that generated hidden costs are related to the lack of observation of inefficiencies and fraud in the management of the audited units; the negative impact on the institution's image; and the costs resulting from the fraud investigation process that should have been avoided by the existing controls.Theoretical/Methodological contributions: The research contributes empirically by demonstrating the relevance of strategic cost management in the public sector, especially auditing, in identifying points that generate unnecessary costs for the public treasury.