Abstract
This research shows that auditing services have a considerable impact on reducing the deficits in local budgets. We argue that this happens because of the enhanced transparency of the local officials’ actions and the incentives of auditing reports acting as a constraining device for any malfeasance. We used the reports of audit commissions in Kazakhstan and suggested a new approach of how to detect whether local officials misused public funds. By focusing on the plausible effect of the reports and rational incentives to misappropriate we unraveled that the newly appointed akims are less likely to engage in corruption. When their municipalities come into the scrutinize of being audited, this lead to not only to considerable practically benefits, but also enables researchers to discover important mechanisms of improving accountability For example, we could detect that when any types of officials know that they are about to face no audititing, they are more likely to engage in corruption. Overall, our approximate estimates indicate that there was a considerable reduction in misappropriation on the local levels caused by auditing serives in Kazakhstan in the last two years. This accounts for tremendous growth in the levels of public satisfaction by government workings.