Public Audit Offices are fundamental institutions to supervise government agents. Without accurate information principals would find it hard to make adequate decisions. Since agents face strong incentives to misreport, competent audits of financial information is crucial. This paper is the first attempt to study the relationship between auditor expertise and fiscal performance. More competent auditors are more effective supervisors; they reduce the leeway of agents to misreport and improve fiscal outcomes. The empirical results support this hypothesis. I found that States requiring the auditor to hold a professional degree feature significantly lower expenditures and debts and higher credit ratings.
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Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number
2009-20.
Find related papers by JEL classification: H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General H10 - Public Economics - - Structure and Scope of Government - - - General
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