Do Government Audits Reduce Budgetary Non-Compliance?<br>—An Empirical Analysis of Budget Execution Audits in Central Government Departments in China

Over the years, audit reports released by audit departments have highlighted numerous instances of budgetary non-compliance during budget execution, involving substantial amounts of budget funds. Some of these non-compliance issues are closely related to budget adjustments. Although budget adjustments do not necessarily involve budgetary non-compliance, irregularities in budget adjustments undermine the legitimacy of the budget and the sustainability of public finances. To effectively regulate budget adjustments, reduce instances of budgetary non-compliance, and improve the standardization of budget execution, we established panel data on the budget execution audit of central departments from 2008 to 2017 to analyze the impact of government audit coverage, supervisory functions, and advisory functions on budgetary non-compliance. The results are as follows: Firstly, there is a significant negative correlation between budget adjustments and budgetary non-compliance, with the regulation of budget adjustments being effectively strengthened. Secondly, audit coverage is significantly negatively correlated with budgetary non-compliance, while audit supervision functions show a significant positive correlation with budgetary non-compliance. However, the advisory functions have yet to demonstrate their effectiveness. Thirdly, audit functions do not exhibit a relationship with budgetary non-compliance in the subsequent year, indicating that the deterrent effect of government audits requires further improvement.