Is Auditing Worth the Effort? The Impact of Internal Auditing on Local Fiscal Outcomes

Abstract

Internal auditing systems are aimed to provide independent and objective assessments regarding decisions, processes, and procedures and to identify barriers to organizational effectiveness. While research has shown that such systems indeed achieve their goals, it is unclear whether such effective auditing systems and also efficient. The current study aimed to deal with this gap and investigated the contribution of effective internal auditing to local governments' fiscal outcomes and the factors that exacerbate or attenuate this relationship. We empirically tested our model in the Israeli local government setting using multi-source data from 644 employees, 277 managers, and 68 auditors in 68 local authorities. Our results generally support a relationship between several indicators of the effectiveness of internal audits and the local fiscal outcomes of the authorities as measured by self-income and collection efficiency ratios. Moreover, the extent to which the local authority's employees regarded their workplace as open to change and as suffering from organizational politics moderated this relationship. Theoretical and policy-related contributions are discussed.

Keywords:

• Effectiveness
• internal auditing
• local fiscal outcomes
• local governance
• openness to change
• organizational politics

Additional information

Notes on contributors

Dana R. Vashdi

Dana Vashdi is Professor of Public Administration and Management at the School of Political Science, The University of Haifa, Israel. Her research focuses on public management and teamwork, and specifically on learning and innovation in such work, employee well-being and employee creativity. She has published in journals including Academy of Management Journal, Journal of Applied Psychology, and Public Administration Review.

Anna Uster

Anna Uster, Ph.D., is a lecturer in the Division of Public Administration and Policy at The Max Stern Yezreel Valley College, Israel. Her research focuses on local service delivery in networked governance, citizens-users’ participation and government-nonprofit relationship. She has published in journals including Regional Studies, Local Government Studies, American Review of Public Administration.

Eran Vigoda-Gadot

Eran Vigoda-Gadot is Professor of Public Administration and Management at the School of Political Science, The University of Haifa, Israel. He served as the Herta and Paul Amir Dean of the Faculty of Social Sciences. Founder of the Center for Public Management and Policy (CPMP) and the Public Organizations and Public Policy Interdisciplinary Behavioral Lab (POP-I-Lab). Vigoda-Gadot is the author and co-author of 12 books and symposiums, and many articles and book chapters.

Moshe Mizrahi

Moshe Mizrachi, Ph.D., graduated the doctoral studies in Public Administration and Management at the School of Political Science, The University of Haifa, Israel. Currently, he is a Director of Internal Audit at the Ministry of Internal Security.