The Auditing of Local Government Financial Management in Azerbaijan: Comparative Analysis

The audits conducted in Azerbaijan mainly aim to obtain reasonable assurance about whether the financial statements of economic entities are free of material misstatement. Historically, the practices of audit function were directly associated with the interests of firms and their owners. Yet there has been a pressing need to audit the financial affairs of governments in respective countries over the past decades. It is in the first place attended by improvement of fiscal transparency and accountability by promoting good practices of audit function and enhancement of efficiency in government’s management.
Local governments’ financial management is markedly different from the similar system in the business sector, since accounting of the private sector must provide for profit and market adaptation. But the local government function is limited to State Budget subsidies and it is chiefly targeted at rendering public services rather than making profit. Therefore, accounting standards used by local governments must cover and/or reveal budgeting and realities of budget execution as a major mechanism for management of financial resources.
Undoubtedly, it is just possible to assess how far the accounting system is effective thanks to its adequate scrutiny. The results of the audit of local governments’ financial management and auditors' reports provide the solution to a number of issues. First, such reports highlight full and factual information on how far the efficiency of receipts and expenditures forecast is enhanced and the financial operations are performed.
Secondly, it makes possible an assessment of the actual financial needs to implement a multiple of social and economic programmes of local governments. Thirdly, it provides for fiscal transparency in the local government function. Finally, it helps to measure the efficiency and effectiveness of programmes implemented by local governments.
Proceeding from the above above-mentioned, we can classify into three groups potential users of information on the system of local government audit. The group of external users of financial information includes local communities, donors and funders, sellers of goods (work, services) for local governments. The group of internal users of financial information includes specialists employed by local bodies (financial managers, experts in charge of supervising budget planning, et al, in particular). The last group of information users is the group that is a key factor in greatly enhancing the performance of local governments, yet this group has not been directly involved in their daily function. It consists of state-run structures rendering subsidies to local governments in diverse forms, as well as legislative structures. The former particularly may require a special accountability system to make sure how far the use of the subsidies is effective.