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Determinants of Municipal Audit Committees
William R. Baber, The George Washington University
Angela K. Gore, University of Oregon
Kevin T. Rich, University of Oregon
Jean X. Zhang, The George Washington University
ABSTRACT. Municipal audit committees monitor the financial reporting, oversee the internal control system, and engage external auditors to performed audits. In this paper we study factors associated with the likelihood of having an audit committee. The analysis is inspired by similar work in the private sector context, but distinguishing features of the study consider how statutory provisions and political competition influence the benefits and incentives to establish audit committees. The results are generally consistent with arguments and perspectives developed in the private sector. More specifically, the evidence is consistent with a characterization where municipal governments establish audit committees in deference to contracting arrangements created in response to resource demands, state-imposed provisions or provisions in municipal charters that influence the ability of direct voter participation in the governance process, and the level of political competition.
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