Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)



First Advisor

Bart P. Hartman


The Governmental Accounting Standards Board (GASB) established that financial reports of governmental entities should assist users in assessing accountability of politicians and bureaucracies (GASB 1987, 100.103). Auditing standards promulgated for the governmental environment similarly emphasize administrative accountability to the public. Government Auditing Standards (GAS) require auditors to determine whether a governmental entity has complied with all applicable laws and regulations. If noncompliance is found to have a material effect on the financial statements, governmental auditors are required to report it. This study examined what level of reporting auditors use and what factors contribute to a lack of consensus in reporting decisions. Specifically, auditor reporting decisions concerning municipal compliance with the Louisiana Local Government Budget Act were investigated. The Budget Act requires municipalities to amend their budgets if actual expenditures will exceed the budget by more than five percent. Auditors experienced in governmental auditing participated in an experiment, involving a small municipality that had contracted for an audit in accordance with GAS. Subjects were asked where they would report noncompliance with the Budget Act. Four independent variables were hypothesized to have an impact on reporting decisions: unfavorable budget variance, fiscal stress, political turnover, and employment sector of the auditor. Data were analyzed with chi-square tests, ordinal probit analysis, and correlation statistics. Budget variance and employment sector of the auditor were found to affect reporting decisions. Neither fiscal stress nor political turnover was significant, however. Auditors working for the Legislative Auditor of the State of Louisiana reported all instances of noncompliance at the maximum disclosure level, the Compliance Report. Auditors employed in the private sector, however, apparently judged the materiality of noncompliance. When budget variance was sixteen percent, private sector auditors, like legislative auditors, reported noncompliance in the compliance report. However, when budget variance was seven percent, private practitioners chose lower levels of disclosure, such as footnotes or a management letter. Finally, legislative auditors demonstrated higher consensus than private practitioners.