The Economic Value of Auditing and its Effectiveness in Public School Operations

37 Pages Posted: 11 Sep 2009

See all articles by Yoshie Saito

Yoshie Saito

Old Dominion University - College of Business & Public Administration

Christopher S. McIntosh

University of Idaho

Date Written: August 28, 2009

Abstract

We examine the impact of auditing on public school operations with two objectives: to investigate whether audits provide economic benefits to stakeholders, and how complex compliance rules impact auditing effectiveness. Utilizing auditing time data and a unique opportunity presented by the Quality Basic Education Act in Georgia, we estimate the relative performance of school district operations employing a stochastic frontier estimation technique. We find that auditing produces real economic benefits for stakeholders by mitigating inefficiency in the use of school resources. We also find that stringent compliance rules reduce an audit’s effectiveness but auditors’ experience can help to overcome the problems. The lack of disclosure of auditing costs hinders the ability to conduct a cost-benefit analysis of new requirements. Our analysis supports the notion that auditing is vital to establish governance mechanisms and disclosure of auditing costs is important to adequately evaluate a new policy.

Keywords: Auditing effectiveness, public school auditing, agency theory, economic value of auditing

JEL Classification: M40, M48, M49

Suggested Citation

Saito, Yoshie and McIntosh, Christopher S., The Economic Value of Auditing and its Effectiveness in Public School Operations (August 28, 2009). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1463709

Yoshie Saito (Contact Author)

Old Dominion University - College of Business & Public Administration ( email )

Norfolk, VA 23529-0222
United States

Christopher S. McIntosh

University of Idaho ( email )

Department of Agricultural Economics and Rural Soc
Moscow, ID 83844-3172
United States

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