Does Performance Audit Make a Difference in Danish Municipal Administration?

Jens Peter Brusen Rasmussen

Student thesis: Master thesis


My interest in writing this paper has been driven by the puzzle of decline and re-assurance. During my studies and in the media, I have been introduced to many of the negative associations and decline of public auditing: It rests on distrust and imposes an unnecessarily rigid administrative burden on public organisations and institutions. Consequently, the political landscape wishes to remove this burden by setting the audit threshold higher and loosening the auditing requirements.
The very same media and politicians, however, are re-assured of the necessity of public auditing and new legislation when accounts are found to be defective, fraud is detected, and waste of public means is revealed. Yet many people wonder whether the audit makes a difference. Why the same mistakes seem to be made time and time again – projects delayed, budgets violated, excessive abuse of public means.
Since 1998 performance audit has been a mandatory part of municipal auditing, and the auditor has gradually expanded his role. Instead of only controlling whether accounts are according to standards he now also assesses whether the municipal administration works economically, efficiently and effectively. Whether performance audit itself is effective and makes a difference depends on the extent to which the public organisations and institutions learn from the audit they are subject to and make actual change.
By applying auditing methods, theory and modelling to the overall question: Does Performance Audit Make a Difference in Danish Municipal Administration?, this paper investigates the perceptions of the effectiveness of the performance audit among the employees of the finance departments in the Danish municipalities. My research is based on 85 responses to questionnaires from municipal employees who have experienced the audits. The survey data obtained are analysed regarding the impact of performance audit on municipal administrations.
The analysis indicates that performance audits have positive impact on perceived usefulness and to some extent improvement, - if the right conditions are present. These include not least a number of institutional preconditions in the form of political attention towards the audit work, power in the central administration to dictate financial management and internal controls across the municipality as well as awareness in the finance department of the fact that performance audit may also cause (negative) change in the form of further work and controls, should they not be according to standards.
The strategic choice of conducting performance audits seems to be warranted. When it comes to the issue of how to conduct these audits for achieving high impact, this paper provides input on issues that auditors need to consider in their audit planning, in the form of the above mentioned institutional preconditions. In addition, the auditors should agree with management on how to audit target and activity management in decentralised institutions. This would make the audit even more useful for the municipality.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2020
Number of pages100
SupervisorsKim Klarskov Jeppesen