The study aimed to examine the effect of audit legal frameworks on public expenditure management in public service entities in Ethiopia. Both primary and secondary data were used to carry out this study. The primary data was collected from 136 randomly selected auditors from the Office of the General Auditor (OFAG). Secondary data were collected from the review of related literature. A structural equation model was used to investigate the relationship between public sector audit legal frameworks and public expenditure management. The findings of the study revealed that audit legal frameworks have both direct and indirect effects on public expenditure management in public sector entities. The audit legal frameworks improve the audit quality of the office and also create a deterrent effect on parties involved in the management of public expenditures. The legal department of the office should design a system to collect information on the loopholes in the audit legal framework, review them, and provide solutions accordingly. This paper contributes to the literature on the role of auditing in the management of public expenditures.
 

Key words: audit, expenditure, legal-framework, structural, and deterrent
 

JEL classification: H83, G32