Page 55 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.79, # 2, 2022, pp. 51-63

following specific goals, budgets, rules, and requirements (Oyebisi, 2017). Because the
public sector's ability to deliver services successfully and carry out programs in a fair and
proper 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 principles, as it serves all citizens.

Since the public sector differs from the private sector in many respects, including its
accounting and financial reporting, the public sector will define audit quality
differently from the private sector. For example, the absence of a profit motive
differentiates the public sector from a corporate entity. Due to the need that only
public sector auditors be appointed to examine public sector administration, there is a
consequent dominance of public sector auditors. Lack of competition at the public
sector level degrades audit quality. However, the background knowledge and abilities
of auditors can improve the governance of the public sector (Aida Hazlin Ismail,
2019). Controlling systems intended to enhance audit process results are necessary to
achieve an overall quality audit. Quality control procedures are a crucial step in the
auditing process. Error reduction and increased check efficiency have long been the
goals of auditing practice. The addition of automation to the auditing profession had
a role in the 21st century's advancement of auditing. Computer-assisted auditing
procedures are now one of the fundamental techniques used in the auditing profession
(Jassim, 2019).

Theoretical Framework
The Principal Agency 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
audits are 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
the government to the public (Dwiputriant, 2011). According to (Bedasso, 2020), a
principal-agent relationship exists in the public sector. Officials working as the
principal (public) agent must answer the principal regularly for their resource usage
and stewardship, and the extent to which the public's goals have been met. Effective
auditing mitigates the risks that come with a principal-agent relationship.

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