Making Auditors Effective

Public auditors are commonly assumed to enhance the accountability of decision-makers. However, they have not yet been subject to systematic theoretical and empirical economic analysis. This book is the first comprehensive attempt to analyze the influence of various auditor regimes on policy outcome. We identify two important features that shape government performance: the audit mandate and the auditor selection mechanism. Typically, public auditors conduct financial audits ex post to policy decisions. We show that a more comprehensive audit mandate including ex post performance audits as well as a full set of ex ante audits improve government performance. Ex ante audits range from the analysis of the budget draft to the audit of individual policy projects in the decision-making process. We provide evidence that auditors with a strong audit mandate should be directly elected by the citizens rather than appointed by government officials. Direct election and a broader audit mandate including ex ante audits, constitute a new paradigm in the design of public auditing institutions. Finally, we transfer findings from public to private sector auditing.