Does it really matter who audits the public sector? An agency theory analysis

Chand, Suresh. (1997). Does it really matter who audits the public sector? An agency theory analysis Master's Thesis, Dept. of Commerce, University of Queensland.

       
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Author Chand, Suresh.
Thesis Title Does it really matter who audits the public sector? An agency theory analysis
School, Centre or Institute Dept. of Commerce
Institution University of Queensland
Publication date 1997
Thesis type Master's Thesis
Total pages 95
Language eng
Subjects 14 Economics
Formatted abstract The paper examines the question of whether there is any effect on the costs borne by the taxpayers if, on one hand, the Auditor General audits the public sector, or, on the other, private auditors do the job. First, a theoretical analysis of auditor independence, information asymmetry, and accountability reveals that the total agency costs borne by the taxpayers will be less if they use the Auditor General to audit the public sector. The three primary reasons identified are (a) the Auditor General is less likely to compromise his/her independence, (b) the audit scope of the Auditor General is wider than that used by the private auditors, and (c) the Auditor General directly reports to parliament. Second, the paper describes exploratory research on who taxpayers prefer as the auditor of the public sector. One hundred and twenty questionnaires were used to obtain responses to four different audit scenarios. Once again, the Auditor General was preferred as the auditor for the public sector. Reasons given for preferring the Auditor General were to some extent similar to the reasons identified in the theoretical analysis. Reasons given for not choosing private auditors included lack of trust in private auditors, commercial (profit maximizing) objectives of private auditors and perceived increase in the risk of collusion between private auditors and management of public enterprises. Nevertheless, for public enterprises with highly commercial operations, private auditors were preferred mainly because of their expertise relative to the Auditor General.

 
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