Page 69 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 1, 2022, pp. 69-79

THE EFFECT OF AUDIT LEGAL FRAMEWORKS ON PUBLIC
EXPENDITURE MANAGEMENT (THE CASE OF PUBLIC
SECTOR ENTITIES IN ETHIOPIA)

Samuel Atsibha Gebreyesus

Consultant and lecturer, Ethiopian Civil Service University Addis Ababa,Ethiopia
Azerbijan State University Of Economics (UNEC)
Email sasaamiya@gmail.com; gebreyesus.samuel.atsibha@unec.edu.az
ORCID https://orcid.org/0000-0001-6508-9753

Received: January 28; accepted May 20, 2022; published online June 24, 2022

ABSTRACT
The study aimed to examine the effect of audit legal frameworks on public
expenditure management in public service entities in Ethiopia. Both primary and
secondary data were used to carry out this study. The primary data was collected
from 136 randomly selected auditors from the Office of the General Auditor
(OFAG). Secondary data were collected from the review of related literature. A
structural equation model was used to investigate the relationship between public
sector audit legal frameworks and public expenditure management. The findings of
the study revealed that audit legal frameworks have both direct and indirect effects
on public expenditure management in public sector entities. The audit legal
frameworks improve the audit quality of the office and also create a deterrent effect
on parties involved in the management of public expenditures. The legal department
of the office should design a system to collect information on the loopholes in the
audit legal framework, review them, and provide solutions accordingly. This paper
contributes to the literature on the role of auditing in the management of public
expenditures.

Key words: audit, expenditure, legal-framework, structural, and deterrent

JEL classification: H83, G32

1. INTRODUCTION
An audit is an objective assessment of a company's financial statements with the aim
of forming an opinion about the statements' accuracy and fairness. Generally, audits
are conducted to give financial statements legitimacy for use by parties other than
those who prepared them (Okafor, 2011).Public-sector auditing can be defined as a
systematic procedure for impartially gathering and assessing data to ascertain if facts
or real circumstances meet predetermined standards.

69