My journey of being a government auditor and an economist led me to a powerful realization: public auditing is not just about compliance and accountability; it’s about shaping economic systems, ensuring resource efficiency, and fostering sustainable development.
As an "Auditonomist"—a blend of auditor and economist—I aim to bridge the gap between these two fields, applying economic principles to enhance the role of Supreme Audit Institutions (SAIs).
The key question we should ask is: How can SAIs play a more strategic role in driving economic stability and growth?
Why the Economics of SAIs Matters?
At the core of every SAI lies its mandate to ensure that public resources are used effectively, efficiently, and in line with legal frameworks. However, to truly understand the value of SAIs, we need to look beyond their traditional functions. In today’s interconnected world, where economies are shaped by complex dynamics, SAIs have the potential to influence economic outcomes significantly.
SAIs contribute to economic stability by safeguarding public funds, identifying inefficiencies, and preventing corruption. These functions align with fundamental economic theories such as agency theory, which suggests that public officials (agents) must be accountable to the public (principals) for how they use resources. But SAIs can go further—by aligning their audit frameworks with broader economic goals, such as enhancing productivity, promoting innovation, and ensuring sustainable development.
What Drives the Economic Impact of SAIs?
1. Performance Audits for Economic Efficiency
Performance audits, traditionally focused on the 3Es—economy, efficiency, and effectiveness—offer critical insights into how public resources are used. From an economic perspective, these audits help governments allocate resources in ways that maximize utility. Consider, for instance, how SAIs can help reduce government inefficiency by auditing infrastructure projects. Performance audits could identify procurement delays and cost overruns in large-scale public works, leading to reforms that saved billions of dollars. These savings are reinvested into public services, fostering economic growth.
2. Detecting Corruption: Audits as a Tool for Economic Integrity
Corruption is a major hindrance to economic development. Studies consistently show that corruption distorts markets, increases inequality, and reduces public trust. SAIs, by exposing corrupt practices, play a key role in maintaining the integrity of economic systems. For example, SAI could uncover a massive corruption scheme, recovering billions in lost revenues. This not only restored public confidence but also stabilized economic conditions, as transparent markets attract investment and foster growth.
3. Environmental Audits for Sustainable Development
SAIs can also contribute to long-term economic sustainability by focusing on environmental audits. As economies face growing challenges from climate change, ensuring that public funds are invested in sustainable projects becomes critical. SAIs could conduct environmental audits to ensure that climate mitigation policies were both cost-effective and aligned with national sustainability goals. The economic benefits of these audits are twofold: avoiding the costs of environmental degradation and creating sustainable economic models that benefit future generations.
How SAIs Can Leverage Economic Principles?
SAIs can further enhance their impact by applying economic concepts such as cost-benefit analysis, opportunity cost, and fiscal multipliers. These tools allow auditors to quantify the broader economic impact of government programs and policies, giving policymakers actionable insights.
Cost-Benefit Analysis in Public Audits
Cost-benefit analysis (CBA) provides a framework for evaluating whether the benefits of a public project outweigh its costs. SAIs can incorporate CBA into their audits, especially in sectors like infrastructure, health, and education. For example, when auditing a government’s education program, SAIs can assess whether the long-term economic benefits (such as improved workforce productivity) justify the immediate costs. This approach not only improves resource allocation but also ties audit findings to broader economic objectives.
Opportunity Cost in Government Spending
One of the most underutilized concepts in public auditing is opportunity cost—the value of the next best alternative foregone. SAIs can assess whether governments are making optimal spending decisions by considering the opportunity cost of certain investments. For instance, if a government spends excessively on defense at the expense of education or healthcare, the SAI can highlight the economic trade-offs and recommend a more balanced allocation of resources.
Fiscal Multipliers and Audit Recommendations
SAIs can enhance their recommendations by considering the fiscal multiplier effect—how government spending in one area can stimulate broader economic activity. Audits that focus on social safety nets, for example, can reveal how cash transfers to low-income households increase consumption, which in turn boosts demand and stimulates economic growth. By highlighting these effects, SAIs can provide a more comprehensive economic rationale for their recommendations.
How SAIs Drive Fiscal Stability and Economic Growth?
One of the most critical contributions of SAIs is their role in maintaining fiscal stability. By ensuring that governments manage debt responsibly, avoid unsustainable deficits, and comply with budgetary laws, SAIs act as guardians of fiscal health. In countries where public debt is a pressing concern, SAIs can audit the management of sovereign debt, ensuring that borrowing aligns with long-term economic goals and does not jeopardize future growth.
Following the debt crisis, sAIs played a key role in reviewing the country’s fiscal policies and making recommendations that were critical to restoring investor confidence. Through its audits, the SAI not only ensured compliance with bailout conditions but also provided the government with a roadmap for achieving fiscal consolidation, which ultimately contributed to economic recovery.
What Can Be Done: Moving Towards a Smart SAI
The future of SAIs lies in embracing the concept of a Smart SAI—one that integrates economic analysis, digital tools, and real-time data to enhance its audit functions. SAIs, with its digital system, has already demonstrated the potential of such an approach. By automating data collection and analysis, SAI has increased audit efficiency, reduced costs, and provided more timely insights. This shift towards data-driven audits can further align SAIs with economic objectives by providing governments with the information they need to make agile and informed decisions.
In addition, by expanding their audits to cover emerging economic issues such as climate change, energy security, and digital economies, SAIs can stay ahead of the curve and ensure that governments are prepared for future challenges.
>>> SAIs as Engines of Economic Growth <<<
The concept of the Auditonomist underscores the potential for SAIs to drive not just accountability but also economic growth and stability. By applying economic principles to public auditing, SAIs can ensure that governments make efficient, effective, and sustainable use of public resources. As economies around the world face increasing complexity, SAIs must evolve and embrace their role as both auditors and economists, guiding nations toward more prosperous and sustainable futures.
For SAIs to realize their full economic potential, they must integrate performance audits with broader economic goals, fight corruption to ensure market integrity, and embrace innovation in digital auditing. In this way, SAIs can truly become engines of economic growth, contributing to long-term fiscal stability and the well-being of future generations.
As we continue to develop the role of SAIs globally, the question is no longer whether SAIs can influence economic development—it’s how we can maximize their economic impact. This is the essence of being an Auditonomist, linking economics and auditing for the betterment of society.
Dr. Sutthi Suntharanurak
