Internal Control Reporting Practices in the Municipal Sector.

Abstract ABSTRACT: Recently, there have been many pronouncements and proposals concerning the evaluation and maintenance of internal control systems and related reports by management and by auditors. Some municipal government units already publish the type of internal control information being proposed. This article critically analyzes the internal control reporting practices of municipalities. A content analysis of a sample of municipal reports suggests that existing disclosures do not answer questions of risk exposure, costs and benefits, and the meaning of the diversity of report forms. Further, the municipal sector's experience implies that control disclosures will affect cost/benefit evaluations by management and the auditors' ability to persuade management to implement controls. Some controls which were previously unacceptable can be expected to be implemented due to the perceived benefit of avoiding public reports of management's inaction with regard to auditors' control suggestions.