External Audit and Fiscal Transparency: An Empirical Analysis (original) (raw)
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External Audit and Fiscal Transparencey: An Empirical Analysis
National Research University Higher School of Economics, 2021
The aim of this study is to examine the socio-economic, institutional, and political factors affecting external audit, with the use of an international comparison. In addition, the effect of external audit on fiscal transparency was analyzed. Although many empirical studies in the literature handle the factors affecting fiscal transparency, there are only a few empirical studies that focus on the factors affecting external audit and the impact of external audits on fiscal transparency. However, there is not one study dealing with the factors affecting external audit through making use of international comparisons. In this study we attempt to discover the factors affecting external audit and examine, using an international comparison, the impact of external audits on fiscal transparency. The Open Budget Survey published by the International Budget Partnership in 2017 was used to measure external audits. In the study, consisting of 115 countries, the effect of democratization level, government debt level, government balance, gross domestic product (GDP) per capita, legislative budget oversight, the SAI's audit diversity and the effect of a judicial model of the SAI on external audit were investigated. The effect of external audit on fiscal transparency is tested for 115 countries using the Two-Stage Least Squares Method (2SLS). According to the analysis, it is determined that the level of democratization, gross domestic product (GDP) per capita, budget oversight of the legislature, audit diversity of supreme audit institution and judicial model of supreme audit institution have significant and positive effects on external audit. It is also determined that external audit has a significant and positive effect on fiscal transparency.
The effect of fiscal transparency on corruption: A panel cross‐country analysis
Public Administration, 2019
Both academicians and practitioners have advocated for increased fiscal transparency in government as a means of promoting budget discipline, improving functioning of the public sector, fostering greater accountability, and fighting the global menace of corruption. Despite worldwide calls for greater disclosure, empirical analyses of whether and how fiscal transparency actually affects governance outcomes are still limited. This study draws on public choice and principal-agent theories to demonstrate how public disclosure of budgetary information helps deter government corruption. The data from 95 countries over the period 2006-14 provide evidence that more fiscally transparent countries are perceived as less corrupt. We also find that fiscal transparency matters most at the final stages of the budget process when information disclosure reflects actual government spending. Data also confirm that a Citizens Budget can serve as a strong anti-corruption tool. 1 | INTRODUCTION Transparency is widely recognized as a pillar of good governance (e.g., Piotrowski and Van Ryzin 2007; Kosack and Fung 2014; Neshkova and Rosenbaum 2015). Access to information about government activities and resultant outcomes is critical for ensuring democratic accountability (e.g., Heald 2003; Alt et al. 2006). As a term, transparency in government refers to 'openness of the governance system through clear processes and procedures and easy access to public information for citizens' (Kim et al. 2005, p. 649). Transparency has many facets, and fiscal transparency is a particularly crucial aspect of democratic governance due to the central role of budgets in government operations. Kopits and Craig (1998, p. 1) define fiscal transparency as 'openness toward the public at large about government structure and functions, fiscal policy intentions, public sector accounts, and budget projections'. When budgets and
Budgetary Transparency and Democracy: The Effectiveness of Control Institutions
The objective of this paper is to identify the effectiveness of the Supreme Audit Institutions (SAIs) and of the legislatures in relation to the fiscal transparency of countries. To test the theory empirically, an analysis was also conducted of how transparency improves accountability and how transparency and accountability jointly relate to the degree of democracy of a country and to the perception of corruption. To conduct the proposed test, multiple linear regression models were used with the ordinary minimum squares method. The data were obtained from official reports on transparency, democracy and corruption, such as Open Budget Partnership, Transparency International, The Economist Intelligence Unit’s Index and Index Mundi. The results have shown that countries in which the legislatures and the SAIs have greater constitutionally determined interdependence have greater budgetary transparency. It was also found that countries that are more transparent have more and better accountability mechanisms and, consequently, a greater level of democracy and less corruption, all of which points to the importance of transparency in the process of democratic consolidation.
Institutional Quality and Fiscal Transparency
SSRN Electronic Journal, 2000
This paper uses new data on fiscal transparency for a cross-section of countries; these data possess several advantages. First, the data are based on in-depth reports using a standardized methodology and protocol. Second, this study covers 82 countries, more than previous comparable studies. Third, the fiscal measures used have been obtained with the collaboration of government authorities, which makes them particularly reliable. Finally, the data collection has been undertaken at a high level. These new data permit examination of a relevant but little-studied issue, the role of institutional quality in a country's fiscal transparency. It is shown that there is in fact a causal relationship between institutions and transparency. The findings are robust to changes in specification and a host of transparency sub-measures.
2013
R allocating, and spending public resources are among the primary functions and policy instruments of any government. Government budgets, as well as off-budget fiscal instruments such as state-owned enterprises and sovereign wealth funds, profoundly affect economies, societies, and ecoystems. Decisionmaking around government revenues and expenditures has historically been shrouded in secrecy—the purview of heads of state, finance ministers, and central bankers, along with a few select officials in executive agencies. Often, other ministries, government branches (including parliaments), the business community, civil society organizations, and the broader citizenry have had little or no access to information on public financial management. The quantity and quality of engagement and the inclusion of these nonexecutive actors in fiscal decisionmaking and oversight processes have been severely limited. In recent years, however, interest and action with respect to transparency, participat...
Budget Transparency, Fiscal Performance, and Political Turnout: An International Approach
Public Administration Review, 2009
Bernardino Benito is a professor of public sector accounting at the University of Murcia in Spain. He has more than 40 publications in national and international books and journals to his credit. He also has directed research programs related to the public sector, especially to the economy, effi ciency, and effectiveness of the different services in this sector. He is a member of the team that established the basic guidelines for accounting reform in the European Union.
Fiscal Transparency and Economic Outcomes
2005
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper develops indices of fiscal transparency for a broad range of countries based on the IMF's Code of Good Practices on Fiscal Transparency, using data derived from published fiscal transparency modules of the Reports on the Observance of Standards and Codes (ROSCs). The indices covers four clusters of fiscal transparency practices: data assurances, medium-term budgeting, budget execution reporting, and fiscal risk disclosures. More transparent countries are shown to have better credit ratings, better fiscal discipline, and less corruption, after controlling for other socioeconomic variables. JEL Classification Numbers: E62, E44, P0
The impact of external public audit on the budget deficit
Eirp Proceedings, 2014
Objectives: Public imbalances can cause extensive problems both on public finances and economy. Regardless of the constitution and destination of funds it is absolutely necessary to verify their correct accounting, collection type and expense in accordance with applicable regulations, and if due attention is paid to obtain an optimal balance between resources and results. Therefore it is useful to study the role of public audit in the formation and use of public funds to indicate its impact on the budget balance. Prior Work: This paper presents the evolution of synthetic budgetary indicators during 2010-2013 and the impact that the external public audit had on the budget deficit. Approach: In order to highlight the importance and necessity of public audit activity it has been analyzed its influence in the formation and use of public funds and the extent of implementation of the recommendations made in the audit reports. Results: In the study conducted we have set out several conclusions regarding definite reality according to which financial resources materialize a large part of GDP, so that advocates for public performance of the audit. Implications: The need for public audit can be viewed through the prism of the three classes of economic and financial interests, namely: the interests of public entities, third party interests of consumers of public goods and services and state interests. Value: This paper highlights the importance and the impact of public external audit activity on public financial funds and invites the interested readers on the topic to get involved by providing feedback in order to improve this activity in Romania.
The Causes of Fiscal Transparency: Evidence in the Brazilian States
Revista Contabilidade & Finanças, 2014
The transparency of governments to their citizens is seen as a necessary factor in democratic accountability and, consequently, in the consolidation of democracy. Although the importance of transparency in government is often highlighted, its causes are still unknown, especially in the Brazilian context. Following the trend of international empirical research, this exploratory study investigates the relationships between three sets of variables (current and past fiscal variables, socioeconomic variables and political variables) and fiscal transparency in the Brazilian subnational context. To identify the relationship between fiscal, socioeconomic and political variables and fiscal transparency, the multiple linear regression technique was used. Prior to conducting the regression using the method of ordinary least squares, factor analysis was used, aiming to group the fiscal and socioeconomic variables into factors not only to reduce their quantity but also to eliminate their multicollinearity problems. Political variables, due to their qualitative nature, remained in their original form. The factor analysis sorted the variables into two groups: fiscal and socioeconomic factors. Because multiple regression allows only for the evaluation of the relationship between the parties included in the sample and the reference party, an F test was used to assess differences in the level of transparency among political parties. The results indicated that fiscal and socioeconomic variables explain the transparency levels of the Brazilian States. However, the political variables were not significant, indicating that the disclosure of fiscal information in Brazil seems not to be influenced by political ideologies. Furthermore, it is evident that the lack of a regulatory model of transparency in the budget process leads States to disclose a great deal of information about budget execution. Finally, the findings indicate that as an instrument for democratic consolidation, fiscal transparency remains incipient in Brazil.
FISCAL TRANSPARENCY AND ECONOMIC PERFORMANCE
Recent research has shown a robust relation between institutions and the economic performance of countries. A less satisfactory conclusion, however, has been drawn on the link between measures of institutions quality and policy making tools. This paper is an initial attempt to present an institutions-related variable, fiscal transparency, which is connected with economic performance and also has a neat policy dimension. Although a measure of fiscal transparency can be regarded as an interesting alternative to other institutions measures in terms of its proxy potentiality, it can also be considered a direct measure of institutional quality. In this sense, Adam Smith's development views provide a perspective where the absence of agents able to influence the government paved the way to the improvement in living standards. This is precisely what fiscal transparency is about. By defining the scope and responsibilities of the government in a clear manner, making available the fiscal information for the population, openly preparing and executing the budget, and assuring the integrity of fiscal procedures, a transparent fiscal environment limits corruption and diversion and, therefore, facilitates development and the increase in living standards. This paper presents a new data set on fiscal transparency based on an IMF assessment of progress on the implementation of the Fiscal Transparency Code by 45 countries in the fiscal modules of Reports on Observance of Standards and Codes. Our empirical estimations show a strong link from fiscal transparency to per capita income. Standard steps on budget preparation and execution, and fiscal procedures are identified as a set of policy tools to improve the fiscal transparency of countries and provide a growth impulse.