An analysis for defining minimum financial/accounting requirements for municipalities in the state of Pernambuco, Brazil

Abstract

This article presents a quantitative model to predict the minimum financial/ accounting requirements for a municipality to exist. The political discussion about the creation of new towns should receive scientific and technical contributions from the accounting sciences. There are 5,561 towns in Brazil, distributed in five macro-regions (North, Northeast, West-Central, South, and Southeast) and 27 states. Pernambuco is part of the Northeast, which is formed by nine states. It has 185 towns and a population of 7,910,992 inhabitants (IBGE, 2000). The study presented in this article develops a model of a typical discriminating function for the municipalities of Pernambuco that will reveal the different aspects of financial/ accounting management in order to improve municipal accounting and auditing, incorporating tools for analyzing the quantitative methods applied to accounting.