Audit Centralization and Audit Quality: Evidence from Chinese Cities

Jian Chu, Raymond Fisman, Yongxiang Wang and Maoliang Ye

No 34776, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Audit design invokes a tradeoff between a monitor’s local knowledge and their independence from influence. We study this tradeoff in the context of a pilot program in six Chinese provinces in 2016, in which provincial governments were given control over budgeting and personnel decisions for city audits. Using a difference-in-differences framework we show that, compared to non-pilot provinces, centralization increases detection of suspicious expenditures by over 50%. These improvements occur also in cities with auditors appointed pre-2016, suggesting that stronger incentives and greater resources rather than auditor selection explain the improvements. Consistent with this interpretation, we find that financial (but not human) resources devoted to city audits increase with centralization. Further results show that centralization’s benefits are strongest in provinces that centralized audit office financing as part of the reform – particularly in poorer cities – suggesting a role for resources in improved performance.

JEL-codes: H11 H26 H71 (search for similar items in EconPapers)
Date: 2026-01
Note: DEV PE
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w34776.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:34776

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w34776
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().