IDEAS home Printed from https://ideas.repec.org/p/cra/wpaper/2009-20.html
   My bibliography  Save this paper

Auditor Expertise: Evidence from the Public Sector

Author

Listed:
  • Mark Schelker

Abstract

Public Auditors 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 are 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 find that States requiring the auditor to hold a professional degree feature significantly lower debt and expenditures as well as higher credit ratings.

Suggested Citation

  • Mark Schelker, 2009. "Auditor Expertise: Evidence from the Public Sector," CREMA Working Paper Series 2009-20, Center for Research in Economics, Management and the Arts (CREMA).
  • Handle: RePEc:cra:wpaper:2009-20
    as

    Download full text from publisher

    File URL: http://www.crema-research.ch/papers/2009-20.pdf
    File Function: Full Text
    Download Restriction: no

    File URL: http://www.crema-research.ch/abstracts/2009-20.htm
    File Function: Abstract
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brenda Van Tendeloo & Ann Vanstraelen, 2008. "Earnings Management and Audit Quality in Europe: Evidence from the Private Client Segment Market," European Accounting Review, Taylor & Francis Journals, vol. 17(3), pages 447-469.
    2. Anderson, Sarah & Habel, Philip, 2009. "Revisiting Adjusted ADA Scores for the U.S. Congress, 1947–2007," Political Analysis, Cambridge University Press, vol. 17(01), pages 83-88, December.
    3. von Hagen, Jurgen & Wolff, Guntram B., 2006. "What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3259-3279, December.
    4. Alesina, Alberto & Perotti, Roberto, 1996. "Fiscal Discipline and the Budget Process," American Economic Review, American Economic Association, vol. 86(2), pages 401-407, May.
    5. Mark Schelker, 2012. "The influence of auditor term length and term limits on US state general obligation bond ratings," Public Choice, Springer, vol. 150(1), pages 27-49, January.
    6. Sattar A. Mansi & William F. Maxwell & Darius P. Miller, 2004. "Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market," Journal of Accounting Research, Wiley Blackwell, vol. 42(4), pages 755-793, September.
    7. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
    8. Claudio Ferraz & Frederico Finan, 2008. "Exposing Corrupt Politicians: The Effects of Brazil's Publicly Released Audits on Electoral Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 703-745.
    9. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    10. James E. Alt & David Dreyer Lassen & Shanna Rose, 2006. "The Causes of Fiscal Transparency: Evidence from the American States," EPRU Working Paper Series 06-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    11. Schelker, Mark & Eichenberger, Reiner, 2010. "Auditors and fiscal policy: Empirical evidence on a little big institution," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 357-380, December.
    12. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115, pages 200-249.
    13. von Hagen, Jurgen & Harden, Ian J., 1995. "Budget processes and commitment to fiscal discipline," European Economic Review, Elsevier, vol. 39(3-4), pages 771-779, April.
    14. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    15. Mark Schelker & Reiner Eichenberger, 2003. "Starke Rechnungsprüfungskommissionen: Wichtiger als direkte Demokratie und Föderalismus? Ein erster Blick auf die Daten," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(III), pages 351-373, September.
    16. Reiner Eichenberger & Mark Schelker, 2007. "Independent and competing agencies: An effective way to control government," Public Choice, Springer, vol. 130(1), pages 79-98, January.
    17. Yu, Fang (Frank), 2008. "Analyst coverage and earnings management," Journal of Financial Economics, Elsevier, vol. 88(2), pages 245-271, May.
    18. Eichenberger, Reiner, 1994. "The Benefits of Federalism and the Risk of Overcentralization," Kyklos, Wiley Blackwell, vol. 47(3), pages 403-420.
    19. Craig Depken & Courtney Lafountain, 2006. "Fiscal consequences of public corruption: Empirical evidence from state bond ratings," Public Choice, Springer, vol. 126(1), pages 75-85, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Niccolò Persiani & Alberto Romolini & Claudia Galanti, 2015. "Il nuovo sistema di controlli di regolarità amministrativa e contabile nel Servizio Sanitario Italiano: i Percorsi Attuativi della Certificabilità," MECOSAN. Menagement e economia sanitaria, FrancoAngeli Editore, vol. 2015(94), pages 31-50.
    2. repec:spr:ecogov:v:19:y:2018:i:1:d:10.1007_s10101-018-0201-8 is not listed on IDEAS
    3. Mark Schelker, 2016. "Unabhängige Finanzkontrolle in der Demokratie," CREMA Working Paper Series 2016-06, Center for Research in Economics, Management and the Arts (CREMA).

    More about this item

    Keywords

    public auditor; auditor expertise; auditor competence;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cra:wpaper:2009-20. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna-Lea Werlen). General contact details of provider: http://edirc.repec.org/data/cremach.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.