Page 73 - Azerbaijan State University of Economics

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

There are types of audits in the public sector, namely financial audits (including
compliance) and performance audits (Dwiputrianti, 2011). Compliance auditing
refers to the traditional forms of an audit that next to financial auditing has been
known since Ancient Egypt and China. The conception of state auditors
independence and self-dependence was firmly established, the consolidation of legal
provisions in public finances auditing was founded, and the basic institutional
patterns of the public auditing were grounded, namely auditing chambers headed by
the Auditor General (Yuliia & A, 2018). Performance auditing is defined as an
impartial assessment of the economy and efficiency of auditee activities, as well as
the efficacy of public-sector programs.

Public Sector Audit is conducted to protect public-owned resources by ensuring
adequate accountability; upholding standards of conduct in the public service, and
helping public services get value for money. The International Organization of
Supreme Audit Institutions (INTOSAI) defines public sector auditing as an
examination of the operations, activities, and systems of a given entity to verify that
they are being carried out or functioning in accordance with specific goals, budgets,
rules and requirements (Oyebisi, 2017).Because the public sector's ability to deliver
services successfully and carry out programs in an equitable and appropriate manner
is measured primarily by its ability to deliver services, public sector audit activities
should have the authority and competency to evaluate financial and program
compliance, effectiveness, economy, and efficiency. Auditors must also safeguard
the public sector's basic principle, as it serves all citizens.

2.2Theoretical Framework
2.2.1Agency Theory
Agency theory has evolved along two paths since its origins in information
economics: positivist and principal-agent. The contract between the principal and the
agent is a common unit of analysis in both streams. They also have similar beliefs
about people, organizations, and data. Their mathematical rigor, dependent variable,
and style, on the other hand, differ (Eisenhard, 1989).Some scholars argue that the
audit helped promote public sector accountability and emphasize that public sector
audit is a key element in examining and evaluating government accountability for
the use of public funds and the delivery of public services. Public sector audits can
be an essential element in ensuring the efficiency, effectiveness and accountability
of government to the public (Dwiputriant, 2011).

73