Academic journal article Public Administration Quarterly

Local Government Staff Involvement in the External Audit Process: Reassessing Independent Auditee Satisfaction Levels among Professionally Administered County Governments

Academic journal article Public Administration Quarterly

Local Government Staff Involvement in the External Audit Process: Reassessing Independent Auditee Satisfaction Levels among Professionally Administered County Governments

Article excerpt

INTRODUCTION

The local government audit process has been scrutinized closely for several decades. Initial emphasis was placed on the quality of audits following the financial crises in major cities during the 1970s and 1980s. Upon implementation of financial benchmarks and more stringent internal control mechanisms including additional state oversight of local government finances, the audit process had become customary. Under these same conditions, auditors are still finding errors among key exhibits (Modlin, 2012). Now, with an excessive number of local governments experiencing deficits and additional financing issues regarding cost finding activities, the audit process and the effectiveness of financial auditors are facing additional scrutiny. Auditors determine if local governments have followed and accurately presented its financial reports according to state laws, regulations, and generally accepted accounting principles (GAAP) (Holder, 2004; Gauthier, 1989). Audit reports provide state oversight bodies as well as local government officials more clarity concerning financial transactions that can have an impact on stability. For these reasons, continued examination of the factors associated with auditee satisfaction among local governments is a major contribution to practitioners and the academic community.

This article examines the perceived levels of satisfaction of independent auditor performance among finance officers in professionally administered county governments that are under heavy state oversight within the audit solicitation process. A primary model will be constructed to determine the probability of satisfaction based on a number of factors. In addition, three additional models are developed to further evaluate determinants of auditee satisfaction through audit quality attributes. Although most studies focus on actual auditor staff, this study examines the role of local government officials in that process in addition to perceptions of audit quality.

Most local governments, including those within this study, are required by state law to conduct a financial audit at the end of the fiscal year by a qualified independent auditor. Since this process occurs annually, proper evaluation of the auditor's performance should be attainable by the finance officer. Findings from North and South Carolina county governments indicate that the probability of overall higher satisfaction levels are achieved as a result of (1) designated official responsibility for final decision on auditor selection, (2) the audit report was submitted to the state oversight agency on time, (3) an increased involvement of the county manager or administrator, (4) the scrutiny of government-wide statements in comparison to other statements by the auditor, (5) an elevated number of people assigned to the audit process, and (6) higher levels of finance officer experience.

The next section of the paper discusses previous research surrounding auditor satisfaction and gaps within the literature which provide the basis for this study. In the third section, the methods of the study along with the research model are presented. The findings are presented and discussed in the fourth section with the study's conclusion presenting the study's limitations and some discussion.

PREVIOUS FINDINGS

Auditor satisfaction studies have traditionally correlated with auditor quality. The quality of financial audits within the private sector has been the subject of much research (Mock and Samet, 1982; Schroeder, Soloman, and Vickrey, 1983; Carcello, Hermanson, and McGrath, 1992; Sutton, 1983; Sutton and Lampe, 1983; Behn, Carcello, Hermanson, and Hermanson, 1997). Among the findings, there were two general conclusions. First, audit team factors appeared to contribute more to audit quality compared to firm characteristics; and second, customer service attributes such as responsiveness to the client, expertise, and positive rapport with the clients also contributed to audit quality (Behn, Carcello, Hermanson, & Hermanson, 1997). …

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