Who Audits America's Local Governments? Government Clients Move Downstream to Regional and Local Audit Firms

摘要

Starting in the late 1990s, auditor-client relationships were subjected to four shocks: Y2K fears; financial frauds, such as Enron, WorldCom, and Tyco; the Sarbanes-Oxley Act of 2002, especially Section 4; and the 2008 financial crisis. A major private sector trend has also played out in the public sector, namely, a move away from national, Big 4 or 5 audit firms to smaller regional and local firms. As federal grants to state and local governments continue to balloon in number and size, Congress has relied on audits to track their use. This article analyzes the numbers of audits of local governments between 1997 and 2012 and who conducted them. The types of opinions issued were also tracked, showing a decrease in "modified" audit opinions. According to the GAO, the audits have often been "haphazard," uncoordinated, and ignored financial controls. The trend toward using regional or local audit firms is viewed as troubling.