Bayesian inference of local government audit outcomes

The scandals in publicly listed companies have highlighted the large losses that can result from financial statement fraud and weak corporate governance. Machine learning techniques have been applied to automatically detect financial statement fraud with great success. This work presents the first application of a Bayesian inference approach to the problem of predicting the audit outcomes of financial statements of local government entities using financial ratios. Bayesian logistic regression (BLR) with automatic relevance determination (BLR-ARD) is applied to predict audit outcomes. The benefit of using BLR-ARD, instead of BLR without ARD, is that it allows one to automatically determine which input features are the most relevant for the task at hand, which is a critical aspect to consider when designing decision support systems. This work presents the first implementation of BLR-ARD trained with Separable Shadow Hamiltonian Hybrid Monte Carlo, No-U-Turn sampler, Metropolis Adjusted Langevin Algorithm and Metropolis-Hasting algorithms. Unlike the Gibbs sampling procedure that is typically employed in sampling from ARD models, in this work we jointly sample the parameters and the hyperparameters by putting a log normal prior on the hyperparameters. The analysis also shows that the repairs and maintenance as a percentage of total assets ratio, current ratio, debt to total operating revenue, net operating surplus margin and capital cost to total operating expenditure ratio are the important features when predicting local government audit outcomes using financial ratios. These results could be of use for auditors as focusing on these ratios could potentially speed up the detection of fraudulent behaviour in municipal entities, and improve the speed and quality of the overall audit.

DISTINCTIVE FEATURES OF ORGANIZATION OF STATE AUDIT TYPES

At the current stage of the global development of inter-economic relations in the economy, Kazakhstan urgently needs to improve the mechanisms of influence of states on socio-economic issues. The introduction of state audit that meets international standards and includes an audit of financial statements, compliance and efficiency is also included in the Concept of a new budgetary policy of the Republic of Kazakhstan. The current model of government audit in Kazakhstan began in 2015 with the adoption of the Law of the Republic of Kazakhstan "About State Audit and Financial Control". In the studies carried out, many problematic issues of government audit are considered in depth: ways of introducing modern forms and types of audit and control, such as strategic audit, audit of the effectiveness of the use of budget funds, assessment of strategic plans of government agencies and the activities of the quasipublic sector and their impact on economic development. In general, state audit is seen as a holistic and independent assessment of the effectiveness of audit objects, covering not only financial issues, but also all areas of their activities with the presentation of effective recommendations based on identified deficiencies and proposals for risk management. This article discusses the theoretical foundations, models and types of governmental audit in the Republic of Kazakhstan, as well as the possibility of applying international experience in the development of the Kazakhstani model of governmental audit.

The effect of audit of outgoing leading officials’ natural resource accountability on environmental governance: evidence from China

Purpose This paper aims to examine the relationship between the audit of outgoing leading officials' natural resource accountability and environmental governance, as well as the internal mechanism of audit of outgoing leading officials' natural resource accountability that plays a role in national environmental governance. Design/methodology/approach Based on city-level panel data from 2012 to 2015, this paper adopts a difference-in-difference model to examine the role of government audit in national governance from an environmental perspective. Furthermore, using a mediating effect model, the study sheds light on the internal mechanism of audit of outgoing leading officials’ natural resource accountability that plays a role in national environmental governance. Findings This paper finds that: the implementation of the audit of outgoing leading officials’ natural resource accountability has significantly improved the water quality of the pilot area, but its effects on waste gas and smoke are not obvious; environmental supervision partly plays a mediating role in the improvement of regional environmental governance by the audit of outgoing leading officials’ natural resource accountability; the audit of outgoing leading officials’ natural resource accountability can complement the incentive mechanism of promotion. The older the local officials are, the more obvious the effect of the audit of outgoing leading officials’ natural resource accountability on the environmental quality of the pilot areas is. Originality/value This paper reveals the role of government audit from the perspective of environmental governance. It provides empirical evidence for policy regarding the audit of outgoing leading officials' natural resource accountability.

Determinants Of Auditor Motivation In The Government Audit market

Act No. 15/2006 is concerned with the Audit Board of the Republic of Indonesia (BPK), while its authority is vested article 9 (1). In performing its duties, the BPK has an authority to recruite experts and/or auditors externally on behalf of the BPK. This provides a great opportunity for motivated external auditors to audit state finances. To have a better knowledge of the audit bid in the government sector, it is important to understand external auditor opinion on their motivation in pursuing audit engagements on the government audit market. Based on the above idea, the objectives of this study are to examine: the influence of audit fees, auditor competence and regulation changes on auditor motivation. This study uses survey methods on 191 external auditors (partners) public accounting firms registered in the BPK selected by random sampling from the study population. Data was collected through questionnaires and evaluated for validity and reliability before hypotheses testing. The descriptive analysis and multiple regresions are used to analyze and evaluate the hypothesis testing by using SPSS 24 software. The empirical result using multiple regression shows that audit fees, auditor competence and authoritative changes positively significantly effect on auditor motivation.