Procurement practices and the municipality auditing market
Description
In this study, we conduct a comprehensive analysis of municipal auditing, examining its various stages: procurement, decisions on selection criteria, auditor selection, the rendering and payment of services, and the audit opinion provided. Our setting is Portugal, where external auditing of municipal accounts has recently been introduced. Our dataset is unique, combining newly collected survey data with non-publicly available information. We find that the majority of municipalities procure auditing services through direct selection and choose auditors based on the lowest-price criterion. However, municipalities that adopt more sophisticated procurement processes—where political competition is lower and citizen interest is higher—rely less frequently on the lowest-price criterion. The selected auditor is typically a firm (rather than an individual Certified Public Accountant [CPA]) and is never one of the Big Four firms. Audit fees are higher when the level of citizen interest increases and lower when the municipality has an internal auditing office. Finally, when the auditor issues a qualified opinion, audit fees are also higher.
Copyright Date
January 2017
Publication Date
1-1-2017
Keywords
Local government, Political competition, Lowest price selection criterion, Audit fees, Portugal
Conference
Annual meeting of the Accounting and Finance Association of Australia and New Zealand, July 2017, Adelaide, Australia
