Public Audit Research Articles

Unintended environmental consequences of anti-corruption strategies

High agricultural profits motivate politicians to collude with local elites and ignore illegal conversion of natural forests. Fighting corruption through fiscal audits can improve local governance in general but may also unintentionally intensify such collusion and rent extraction activities within the less scrutinized forestry sector. This paper highlights such unintended consequences of a federal anti-corruption strategy in Brazil by documenting the causal effects of randomized fiscal audits on deforestation dynamics, a non-targeted outcome. Between 2003 and 2011, public audits of federal funds increased deforestation by about 10% in municipalities of the Brazilian Amazon within the first three years after the audit. The audits triggered forest loss, especially during election years, in municipalities governed by first-term mayors who managed to win re-elections afterward, and in places with a high share of cattle ranching, indicating potential collusion between local politicians and the agricultural sector.

Exploring the challenges and barriers to implementing public auditor recommendations in Ghana’s public sector

Exploring the challenges and barriers to implementing public auditor recommendations in Ghana’s public sector

Penta helix collaboration in the completion of follow-up of public financial audit results in Indonesia

Penta helix collaboration in the completion of follow-up of public financial audit results in Indonesia

Public Sector Audit Reforms and Financial Management

Developing economies across the world face high public corruption and weak financial management, and the role of sound audit practices in shaping the narratives is still at the exploring stage in most countries in sub-Saharan Africa. This research explores the nexus between public audit reforms and public sector financial management using survey research design and Nigeria as a case study. Participants in the study were drawn from The Office of the Auditor General of the Federation (OAuGF) Headquarter in Abuja. Agency theory anchored this study and simple descriptive analytics was used in testing the seven hypotheses. The research established that: the recent audit reforms carried out in Nigeria are considered necessary for better public sector financial management; Nigeria’s audit system has a strong connection with public sector financial management; there is a need for the establishment of Federal Audit Service Commission (FASC) in Nigeria; the recent audit reforms will block treasury loot and leakages in Nigerian public funds management; Nigeria needs effective audit laws to wholesomely fight corruption through recent audit reforms; and the recent Nigerian audit reforms embrace integrity, transparency and accountability in the management of public funds. The study makes the following recommendations: there is a need for audit staff orientation and professional development in order to promote their overall productivity and efficiency; there is a need for the establishment of Federal Audit Service Commission (FASC) in order to promote the independence of Nigerian Audit system from executive interferences; Nigeria audit laws should be strengthened to curtail fund leakages, wastages of public property, and promotion of value-for-money expenditures; and the recent audit reforms carried out by the government of Nigeria should be sustained and given all necessary supports in order to achieve the desired results.

An examination of Pacific nations ‘legislatures’ interactions with Supreme Audit Institutions and the impact on audit quality

Purpose The purpose of this paper is to report a study of public accountability within the political and economic structures that characterise Pacific nations. The authors examine audit quality with respect to Pacific Island nations’ governmental reporting to investigate ways to improve accountability in a region that is economically and environmentally challenged. Design/methodology/approach The authors examine whether audit quality in Pacific Island nations is associated with the practical arrangements of Supreme Audit Institutions (SAIs), taking into account external factors. The “practical arrangements” include the independence of a SAI (regarding its staffing and funding) and also the requirement for it to report to the Executive. The financial setting in each jurisdiction has been seen to impact the quality of financial reporting and auditing. The authors examine mediating factors such as income, political stability and education that may also impact audit quality. This study uses publicly available databases as well as jurisdictional annual reports and the associated audit opinions and management letters (where available). Jurisdictional reports on public financial management were also analysed. Findings The authors find that public sector audit quality is low in many Pacific countries, concluding that public accountability is impaired. While the authors recommend changes to the practical arrangements that can improve audit quality, the mediating factors also impact audit quality. They argue that a renewed focus on financial capability could enhance public accountability in these nations, but there are limiting factors that are difficult to overcome. Practical implications There are problems in providing accountability for public sector activities in Pacific nations. The authors suggest that improvements to the appointment and funding of SAIs to enhance their independence will help to reduce these issues. Originality/value The authors present a framework for analysing SAIs’ practical arrangements and audit quality that includes variables that may mediate the effects of these practical arrangements. They apply the model to 20 Pacific jurisdictions, showing that the practical arrangements of a SAI directly impact audit quality. Nevertheless, there are instances where audit quality is poor despite good practical arrangements, implying that mediating factors also play a substantial role in determining audit quality of a SAI.

「사립학교법」과 「개인정보 보호법」의 괴리에 관한 고찰: 징계사유조사와 징계의결요구를 중심으로

Among the many challenges regarding the interpretation and application of the Personal Information Protection Act, we paid attention to the conflict between the Private School Act and the Personal Information Protection Act, which are facing in the self-audit practice of school corporations, and discussed solutions to them. Specifically, how to interpret Article 18 of the Personal Information Protection Act determines whether the audit is legal or illegal under the Private School Act, and there are cases in which audit personnel at school corporations are accused of criminal matters. Based on this awareness of the problem, this paper ① presented possible case, ② looked at the actual laws surrounding self-audit, ③ introduced the decisions of the Personal Information Protection Committee, ④ identified the application of the Personal Information Protection Act through in-depth interviews with investigative police officers, and ⑤ presented solutions to the case and promoted legislative suggestions. Investigative police officers who participated in the interview answered that they did not clearly understand the Personal Information Protection Act, and that the concept of the Personal Information Protection Act itself was ambiguous and faced considerable difficulties. As an improvement plan, it was suggested that Article 18 (2) of the Personal Information Protection Act should add “in the case of “audit” in public institutions (to which the Personal Information Protection Act applies) as a requirement for the use of personal information outside the purpose and provision of it to a third party, or include “school corporations and affiliated schools” in Article 2 (4) of the Public Audit Act.

Analysis of foreign practice of forming indicators for auditing the efficiency of government agencies' activities

The article highlights the topical problem of analysing and managing the effectiveness of public bodies' performance on the basis of international experience. The introduction argues the significance of effective public administration to ensure socio-economic stability and security of national resources. The aim of the study is to adapt foreign methodologies and practices to optimise the use of public funds in Kazakhstan. The literature review presents performance audit as a result of the development of result-oriented budgeting and a factor contributing to the efficiency of public bodies. Key aspects are considered: the role of publicity and transparency in governance, the effectiveness of public audit bodies and the reduction of irregularities in budget spending. Special attention is paid to international standards and practical experience of performance audit, emphasising adaptation to the specifics of Kazakhstani legal regulation and national traditions. The article analyses the challenges faced by Kazakhstani authorities in implementing a system of performance audit indicators, including the choice and methodological justification of indicators, as well as their role in assessing the performance of state structures.

New development: Assurance on public sector sustainability reporting—time to be proactive

IMPACT This article highlights the relevance of assurance of sustainability reporting (SR) in the public sector, discussing who can develop the assurance process and what standards can be used for this purpose. It provides a contribution in an original and new area that will be of interest to standard setters, supreme audit institutions, practitioners and scholars in the field of public sector accounting and auditing. The article contributes to the creation of a legitimate space for SR for public sector entities.

THE INFLUENCE OF AUDIT DELAY, SIZE OF PUBLIC ACCOUNTING FIRM, AUDIT OPINION, AND MANAGEMENT CHANGE ON AUDITOR SWITCHING

This study explores the impact of audit delay, the size of public accounting firms, audit opinions, and management changes on auditor switching among companies listed on the Indonesia Stock Exchange. The research aims to identify the key factors that influence a company's decision to switch auditors. Using logistic regression analysis and secondary data from financial reports, the study introduces a unique approach by simultaneously analyzing four independent variables, which is rarely done in prior studies. The results reveal that audit delay and management changes significantly affect auditor switching, while the size of public accounting firms and audit opinions do not have a significant impact. The findings suggest that operational and managerial factors play a more critical role in auditor switching decisions compared to financial factors. Theoretically, the study supports the relevance of agency theory in explaining auditor switching, particularly in addressing conflicts of interest between management and shareholders. Practically, these results provide valuable insights for company management when deciding to switch auditors and highlight the importance for regulators to implement policies that enhance transparency and audit quality, strengthening corporate governance practices in Indonesia.

Digital transformation in public sector auditing: between hope and fear

ABSTRACT This paper explores the imaginaries of public sector auditors on public value creation due to digital transformation (DT). The study is based on the case of the Supreme Audit Institution (SAI) in Norway – the Office of the Auditor General (OAG). We find diverging imaginaries regarding the potential impact of DT on creating public value through enhancing public accountability that represent the gap between technological hopes and human fears regarding DT for public value creation. This gap highlights the need to properly explore the downsides of DT in the theory and practice of public sector auditing.

The assessment of wemaps audit requirements based on deep learning

ABSTRACT As a specialized map product, Wemaps must comply with relevant laws and regulations. Map audit plays a crucial role in ensuring map quality by preventing the production and dissemination of problem maps, as well as safeguarding national sovereignty, security, and interests. The user base for Wemaps is diverse, encompassing various types of maps, vast amounts of map data, and high expectations for timely dissemination. However, the current map audit process is inefficient and burdensome, failing to meet the specific needs of Wemaps audits. The key to solving this problem lies in the ability to automate and rapidly assess the audit requirements of Wemaps, approving those that require audit and promptly releasing those that do not. This study aims to establish an automated Wemaps audit assessment model using convolutional neural networks and transfer learning methods. By doing so, the burden of map audit can be reduced, and dissemination efficiency can be improved. The main contributions of this study are as follows: (1) Establishment of a dataset for assessing Wemaps audit requirements. (2) Utilization of VGG16 and ResNet50 neural network models for assessing Wemaps audit requirements; (3) Development of an optimal Wemaps audit assessment model through various experiments and training methods. (4) Analysis of factors influencing audit assessments based on measurement indicators and visualized results of the model. The experiments demonstrate that this method achieves high accuracy and can provide assessment services for public map audit requirements.

Risk and conditioning factors in the public internal control. Weaknesses in public management concerning the procurement of expenditure files

IMPACT The article provides new insights in the analysis of risks to improve the efficiency and effectiveness of public management. Public auditors and internal control professionals in public institutions should be looking for continuous improvement. Transparency, delimitation of competences, contractual procedures, budget management and special payment procedures are identified by the authors as the main areas of management risk faced by public control professionals. The case study country, Spain, like many other EU countries, has a combined internal control model, using an ex-ante control complemented by ex-post control. The main conclusions reached in this article can be applied to other European countries that use similar control models to improve risk management and internal control in their public sectors.

Methodologies and best practices for audit and compliance in governmental financial management

This review paper explores the methodologies and best practices in audit and compliance in governmental financial management. It provides a comprehensive overview of the regulatory framework and standards governing public sector audits, discusses the types of audits commonly conducted, and outlines the typical audit processes. The paper identifies significant challenges faced in governmental auditing, such as limited resources, the complexity of operations, and resistance to change. It highlights the critical role of risk management and technology in addressing these challenges. Furthermore, it emphasizes the importance of ongoing training and capacity building for auditors and compliance officers. The paper concludes by considering emerging trends in the field, such as the integration of artificial intelligence and the emphasis on sustainability. It offers recommendations for further research to enhance the efficacy of governmental audit and compliance practices. Keywords: Governmental Financial Management, Audit Processes, Compliance, Risk Management, Public Sector Accountability.

The Real Effects of PCAOB Inspection Reports on the M&A Deals of Non-Big 4 Accounting Firms

ABSTRACT Mergers and acquisitions (M&As) are an important way for non-Big 4 accounting firms to grow their businesses. Non-Big 4 firms also account for the vast majority of PCAOB inspections. Consistent with negative inspection reports signaling low quality at inspected firms, we find that non-Big 4 accounting firms conduct fewer M&A deals after they receive negative inspection reports. Additional analyses support our hypothesized signaling mechanism: (1) the chilling effect of inspection reports on M&A activity is stronger when the inspected firm’s business is focused on public company audits, (2) the effect is stronger when stakeholders at the target firm know less about the acquirer because the acquirer is located in a different city, and (3) clients at the target firm switch to new firms rather than move over to the acquirer if the acquirer received a negative inspection report prior to the M&A date. JEL Classifications: D82; G34; G38; M42; M48.

Pengaruh Peran Komite Audit, Reputasi Akuntan Publik dan Opini Audit Terhadap Auditor Switching Secara Voluntary

This research aims to examine the influence of the role of the audit committee, public accountant reputation and audit opinion on voluntary auditor switching in financial sector companies listed on the Indonesia Stock Exchange (BEI) for the 2019-2022 period. This research is quantitative research. The sampling technique uses purposive sampling. The number of samples during the research year amounted to 92 data. The statistical method used is logistic regression analysis. The research results show that the role of the audit committee and audit opinion do not have a significant effect, but the reputation of public accountants has a negative effect on voluntary auditor switching in financial sector companies listed on the Indonesia Stock Exchange (BEI) in the 2019-2022 period.

An improved identity-based public audit protocol for cloud storage

With the rapid development of informatization, a vast amount of data is continuously generated and accumulated, leading to the emergence of cloud storage services. However, data stored in the cloud is beyond the control of users, posing various security risks. Cloud data auditing technology enables the inspection of data integrity in the cloud without the necessity of data downloading. Among these, public auditing schemes have experienced rapid development due to their ability to avoid additional user auditing expenses. However, malicious third-party auditors can compromise data privacy. This paper proposes an improved identity-based cloud auditing scheme that can resist malicious auditors. This scheme is also constructed on an identity-based public auditing scheme using blockchain to prevent malicious auditing. We found the scheme is not secure because a malicious cloud server can forge authentication tags for outsourced data blocks, while our scheme has not these security flaws. Through security proofs and performance analysis, we further demonstrate that our scheme is secure and efficient. Additionally, our scheme has typical application scenarios.

Competitive Strategies for Small Audit Firms

Synopsis The research problem We examine whether small audit firms adopt niche strategies to compete in the public company audit market. To that end, we focus on auditors servicing clients from one industry only (which we label as a nationwide single-industry focus) and test its association with audit quality and pricing. Motivation Prior research on auditor competition has mainly focused on the large (mainly Big Four) audit firms. While large and small audit firm markets are two distinct markets, little is known about competitive strategies of small audit firms in the public company audit market. The test hypotheses Our first hypothesis is that small audit firms adopting a single-industry focused strategy supply higher audit quality compared with audit firms that do not adopt a single-industry focused strategy or a simple industry specialization strategy, ceteris paribus. Our second hypothesis is that small audit firms adopting a single-industry focused strategy engage in discount pricing compared with audit firms that do not adopt a single-industry focused strategy or a simple industry specialization strategy, ceteris paribus. Target population The U.S. commercial banking sector covering the period 2004–2020. Adopted methodology Multivariate analyses adopting linear and probit models. Analyses To test our first hypothesis, we run a bank audit quality model using loan loss provisions as the dependent variable for our main analyses. Subsequent analyses adopt restatement, going concern, and internal control weaknesses models. To test our second hypothesis, we rely on a bank audit fee model. All models include relevant controls established in previous research and those for self-selection. Findings The evidence suggests that small audit firms adopting a nationwide single-industry focus are able to provide higher audit quality (compared with other rivals, even industry specialists) while at the same time charging lower audit fees implying cost efficiencies that are passed on to the client due to their focused expertise.

A systematic review of public sector audits in Indonesia

The literature on public sector auditing in Indonesia remains nascent and requires further exploration. This study aims to provide a comprehensive overview and serve as a reference for future research in this field by analyzing the trends, developments, and prospects for further research on Indonesian public sector audit literature. This study uses a systematic literature review covering 36 articles from 2015 to 2022. It also highlights recent advancements and outlines recommendations for further research. Seven key categories for future research are identified: audit quality, audit findings and opinions, fraud, auditor characteristics, financial report quality, transparency and accountability, and emerging themes. The findings indicate that even while academic publications are on the rise, more thorough and diverse research is still required. The study indicates that research on public sector auditing in Indonesia is still in its infancy, with chances to investigate fraud, audit quality, audit findings and opinions, transparency, accountability, and emerging themes. This study's contribution is that it offers a thorough summary and a point of reference for upcoming investigations into public sector auditing in Indonesia.

Public accountability and auditing: Why and when do state auditors conduct broad audits?

AbstractPublic servants who monitor and supervise the administrative and political systems must consider the extent to which they are willing to stretch the boundaries of their role for holding public servants accountable. We develop an analytical framework of the factors that influence the decisions of such officials, focusing on state auditors. Using new institutionalism, we suggest that the social, cultural, and political context figures more prominently in state auditors' strategic calculations than purely professional considerations or individual factors. This bottom‐up perspective sheds new light on the role of such officials in democratic systems, and their dependence on citizens' awareness and active support in promoting accountability. We illustrate the theoretical framework using examples from Israel.

TRA-PS: Accountable data Pub/Sub service with fast and fine-grained controllable subscription

The Cloud-based data publish/subscribe (Pub/Sub) service presents a selective manner for publishers and subscribers to share and receive data, where confidentiality and authorized access to the data are the fundamental security properties. Therefore, the methodology of attribute-based keyword search (ABKS) was applied that recently considered bilateral access control between the publisher and subscriber. However, existing data Pub/Sub solutions fail to take into account the following features: (i) the efficient revocation of subscribers; (ii) the traceability and auditability of subscriptions; (iii) the excessive time cost of decryption procedure. Therefore, we propose TRA-PS, an accountable data Pub/Sub service that implements efficient revocation, traceability, and public auditability for subscriptions. Technically, we refine the secret key of subscriber in the classic ABKS schemes with associating its identity information and binding accountability module. In addition, we implement TRA-PS and evaluate its practical performance compared to state-of-the-art work in the real cloud environment. Besides achieving accountable property, TRA-PS significantly diminishes the decryption time cost (number of attributes/keywords is 25) by 91.8%, independent of the number of attributes/keywords.