A knowledge gap

Although evidence suggests that public sector auditing helps to combat corruption, according to a study from 2018 titled Public sector accounting and corruption: A literature review, “there is still a huge gap in the knowledge of this area, especially concerning the functional role of public sector auditing in corruption detection and deterrence in developing countries. Moreover, there is a scarcity of literature that explains in depth how audit types conducted by the Supreme Audit Institution (SAI) may contribute to a reduction in corruption, and which types of audit are more effective. There is also minimal in-depth sharing on the challenges that public sector auditing faces in detecting and preventing corruption”.

Auditing away corruption

The literature on the role of auditing in detecting and deterring corruption in developing countries is remarkably sparse . Most existing literature reiterates the potential of public sector auditing and auditing's potential to detect corruption; emphasises that auditing represents a crucial component of accountability and is needed for the public sector to achieve integrity and improve its operations; claims that auditing needs to be reasonably accurate, complete and unbiased; and reinforces that people expect auditing to fight corruption in the public sector. Only a few studies conclude from available evidence that audits actually curb corruption.

Avis et al. (2017: Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians (pdf), 2018: Do Government Audits Reduce Corrupt Politicians?, see also Ferraz and Finan 2008: Exposing corrupt politicians: The effects of Brazil's publicly released audits on electoral outcomes) use Brazil’s anti-corruption programme as a case to the extent to which government audits reduced corruption. The programme randomly audits municipalities for their use of federal funds. The study found that an audit reduces future corruption by 8 percent. They also found that “releasing audit results before mayoral elections reduced the vote share for corrupt incumbent mayors and decreased their likelihood of being re-elected” and that “local media played a large role in sharing information about the audit results with voters”.

Based on their studies, Avis et al. identified four mechanisms through which audits could deter corruption:

1. Electoral accountability: If audits increase the perceived future probability of being exposed to voters, then mayors who are concerned about re-election may refrain from corruption.

2. Judicial accountability: If audits increase legal or reputational costs, mayors may refrain from corruption even in the absence of re-election incentives.

3. Political selection: If audits allow voters to punish corrupt mayors and reward good incumbents through re-election decisions, then we would expect better politicians in places where the incumbent was audited before the election.

4. Political entry: If audits change the political environment, new, less corrupt candidates may run for office.


In another study on the effect of audits on corruption in Brazilian municipalities (Lichand & Fernandes 2019: The dark side of the contract (pdf)), a strong warning signal was sent. They found that local spending is reduced and vendors move to a different municipality when audits make it impossible for bureaucrats to capture rents and for private contractors to over-invoice on public contractors. In other words, auditing can have no overall net effect, as auditing can simply displace corruption to other localities.

However, audits can be used for political purposes and can therefore be counterproductive. SAIs can be used against the opponents of the incumbent regime and ruling party, with the intent of strengthening the incumbent and possibly the authoritarian tendencies of the regime. Thus, a public auditing institution with professionality and a good track record can have very negative side-effects: they can strengthen the incumbent at the cost of the opposition and facilitate and entrench authoritarianism. Who should watch the watchdog? More on this theme can be found in a U4 publication, Auditing the auditors: International standards to hold supreme audit institutions to account.

Much of the literature on public audits and corruption asks what audits and SAIs can possibly do, what they should achieve, but says little on the conditions under which they can possibly achieve the ideals. For instance, it is pointed out that auditors can point out where opportunities for corruption exist, they can help in identifying indicators or symptoms of fraud, they can raise the ‘red flags’, they can identify weaknesses in internal control mechanisms, and they can expose extravagant lifestyle (conspicuous consumption) and unusual behaviour. Very few studies on auditing explore the obstacles that public sector auditing faces, especially in developing countries.

Stages and principles

The many principles for public sector auditing and audit processes are developed on a wish-for basis and normative statements, rather than empirical studies of what works. Some of these studies exploring what auditors should do can be rather convincing.


One of the studies that outlines the principles needed for audits to work properly (and other government institutions of oversight and control) is the chapter on audits in the classic World Bank publication The Role of Parliament in Curbing Corruption. Here, Stapenhurst and Titsworth list six necessary conditions for effective audits:

Supportive environment: SAIs function within a wider institutional setting and are only effective to the extent that they are permitted to conduct their work. As SAIs are not anti-corruption agencies, it is also essential that they collaborate and coordinate their work with other anti-corruption and law enforcement institutions.

Clear mandates: Auditing mandates should be rooted in a set of rules and boundaries agreed to by parliament.

Independence: Independence is a basic feature. Independence must be clearly enunciated, and the personal independence (based on appointment and secure tenure) of the auditor general or court of audit members must be clearly established in legislation and acknowledged in tradition. Autonomy is essential for an auditor general, given the need to report directly to parliament without interference from other government branches. Another dimension of independence is the freedom to determine the scope and substance of audits.

Adequate funding, means, and staff: SAIs require adequate funding, equipment, and facilities. Governments must recognise the costs and the high returns of audits and provide commensurate funding. The professionalism of audit institutions is a key factor of their success and effectiveness in fulfilling their mandate and countering corruption. This means that the qualification and technical expertise of staff needs to be of high quality.

Sharing of knowledge and experience: International exchanges of ideas, knowledge, and experience are an effective means of raising the quality of audits, harmonizing standards, sharing best practices, and generally helping SAIs fulfil their mandates.

Adherence to international auditing standards: Audits are more effective when SAIs adhere to appropriate professional auditing standards, such as those promulgated by the International Organization of Supreme Audit Institutions (INTOSAI).

Another study on whether good auditing generates less public sector corruption (Gustavson & Sundstrom 2016: Organizing the Audit Society: Does Good Auditing Generate Less Public Sector Corruption?), argues that good auditing is based on three principles: independence, professionalism, and recognising the people as the principal. The study argues that auditing which is organised according to these principles has the potential to contribute to well-functioning public administrations with a low degree of corruption.


Some SAIs have taken specific measures to embed anti-corruption approaches into their work from the planning process onwards. One study argues that the auditing process entails three major phases (planning, execution, and reporting) and that an anti-corruption focus can and should be integrated in all three stages (U4 Expert Answer 2010: Corruption, auditing and carbon emission reduction schemes).

At the planning stage, the auditor should identify high risk areas within the entity on which the audit focuses, based on an initial risk assessment on an entity-wide basis. Commonly perceived high-risk areas include contracts of service/procurement, inventory management, sanctions/clearances, programme management, revenue receipts, cash management, general expenditure, and other areas which interface with the public. Auditors should then identify red flags for each of the specific high-risk areas. Further examination may be needed to determine whether the identified fraud and corruption risks exist, considering the evidence obtained during the audit process (ibid.).

In a U4 publication, The role of supreme audit institutions in combating corruption (pdf), Evans (2008) argues that SAIs can play an important role in the detection of corruption by identifying and monitoring corruption “hotspots”. By focusing audit efforts on areas known to be susceptible to corrupt practices, such as public procurement, SAIs can assist other anti-corruption players by producing hard financial data. Such risk-based approaches to auditing can be built into the planning process.

At the execution level, auditors must perform auditing procedures in response to the identified fraud and corruption risks. This can involve changing the nature, timing or extent of the auditing procedures to obtain more reliable corroborative evidence of fraud and corruption opportunities identified in the risk assessment (U4 Expert Answer 2010).

At the reporting level, auditors should document all above activities and their results for supporting their conclusions and for future reference, including discussions among audit team members, procedures performed to obtain information, fraud and corruption risks identified, etc. (ibid.).

​ 'Walk the talk'

According to Jeppesen (2019: The role of auditing in the fight against corruption), the link between corruption and auditing is little researched and provides ample opportunities for further research. An obvious opportunity is to explore the expectation gap between the public and the auditors on the latter’s (in)ability to prevent, detect and report on corruption, highlighted by the public reactions to the FIFA scandal, for instance. Another research opportunity is in accounting's possible role in breaking institutionalised corruption, and to include new areas of work in the jurisdiction of auditing, (i.e. to go beyond the limit of their traditional role in checking compliance with established criteria.