Voluntary adoption of the International Standards on Auditing (ISA) in local government audits—empirical evidence from Finland

IMPACT

This article will be useful to policy-makers and public sector managers in terms of understanding how public audit regulation affects audit practitioners in determining applicable audit standards. Over 70% of chartered public finance auditors in Finland were found to voluntarily adopt the International Standards on Auditing (ISA) despite a regulatory environment where the ISA were not strictly required in local government audits.

ABSTRACT

A growing literature has identified several factors differentiating public and private sector auditing, which might advocate differences in audit regulation between these sectors. This article contributes to the existing literature by examining the voluntary adoption of International Standards on Auditing (ISA) in local government audits. The empirical data in this article is based on a survey of all Finnish authorized public sector auditors. The results show that voluntary adoption of ISA in local government audits is increasing, which can be explained using the institutional theory of influencing forces.

KEYWORDS:

• External audit
• Finland
• institutional theory
• international standards on auditing (ISA)
• local government
• national audit standards

Disclosure Statement

No potential conflict of interest was reported by the author(s).