Auditor expertise: Evidence from the public sector

This paper is the first attempt to study the relationship between public auditor expertise and fiscal performance. I find that states requiring the auditor to hold a professional degree feature significantly higher credit ratings and lower expenditures and debt.

► Public auditors can play a crucial role in the policymaking process. ► Competent auditors detect inaccurate fiscal reporting with higher probability. ► Auditor expertise should improve the informational content of fiscal information. ► Requirement for public auditors to hold professional degree improves fiscal outcomes. ► Auditor expertise correlated with higher credit ratings, lower expenditures and debt.