Auditors and fiscal policy: Empirical evidence on a little big institution

► Public auditors can play a crucial role in the policymaking process. ► In addition to standard expost audit competences, such as the audit of compliance with accounting rules, public auditors can be equipped with ex ante audit mandates to evaluate the budget draft and individual policy alternatives before policy decisions. ► The additional information provided by auditors with such a mandate reduces the information asymmetry in the policy process between well organized special interests and unorganized common pool interests. ► Empirical evidence on the impact of local auditors with an extended audit mandate in Switzerland suggests statistically and economically significant negative effects on tax rates and public expenditures.