Does the Presence of Internal Audit Affect the Outcome of a Municipality’s Financial Audit?

Journal of Applied Business and Economics, 2020, Vol. 22, No. 10: 124-137

14 Pages Posted: 1 Oct 2020 Last revised: 2 Dec 2020

See all articles by Carl Gabrini

Carl Gabrini

Wright School of Business, Dalton State College

Bruce McDonald

North Carolina State University

Robert Eger

Government of the United States of America - Graduate School of Business and Public Policy

Date Written: August 17, 2020

Abstract

Several recent studies have examined whether the presence of internal audit in the public sector affects the outcomes of external audits. The issue is important because all government leaders face pressure to justify program and organizational unit value in measurable ways or risk budget reductions and elimination. The earlier studies offer mixed conclusions focusing on larger cities and state agencies. Our study examines the same issue but focuses on larger and smaller cities. Using data from a population of Florida cities we test using logistic regression whether external audit outcomes differ between those cities with and those without an internal audit function. Our results show that cities with an internal audit function are more likely to receive a clean audit report than those without one.

Keywords: Auditing, Internal Audit, Government

Suggested Citation

Gabrini, Carl and McDonald, Bruce and Eger, Robert, Does the Presence of Internal Audit Affect the Outcome of a Municipality’s Financial Audit? (August 17, 2020). Journal of Applied Business and Economics, 2020, Vol. 22, No. 10: 124-137, Available at SSRN: https://ssrn.com/abstract=3675175 or http://dx.doi.org/10.2139/ssrn.3675175

Carl Gabrini

Wright School of Business, Dalton State College ( email )

650 College Drive
Dalton, GA 30720
United States
(706)272-4466 (Phone)

HOME PAGE: http://www.daltonstate.edu

Bruce McDonald (Contact Author)

North Carolina State University ( email )

School of Public and International Affairs
Campus Box 8102
Raleigh, NC 27695
United States
919-515-2481 (Phone)

HOME PAGE: http://www.brucemcdonald.com

Robert Eger

Government of the United States of America - Graduate School of Business and Public Policy ( email )

555 Dyer Road
Monterey, CA 93943
United States
831-656-7625 (Phone)

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