This case study uses qualitative and quantitative analyses to examine the impact of the annual audits undertaken by the Audit Commission (hereafter the AC) at London Borough of Lambeth (LBL) on its management control system (MCS). The analysis reviews the audits undertaken between the years 2000 and 2010 and analyses the management reaction to these results to identify the impact on MCS. The objective of the research was achieved by developing research questions which served as a research framework. The study focused primarily on three research questions: (1) have the audit scores of the AC influenced MCSs at LBL?; (2) how has the audit scores of the annual audits completed by the AC influenced the MCS of LBL?; and (3) why has the audit scores of the annual audits completed by the AC influenced MCS at LBL?. The theoretical framework used in this study focused on three bodies of literature: the work of the Audit Commission, auditing and audits scores, and MCSs. The thesis used content analysis to analyse LBL’s submissions; audit results and recommendations; and improvement plans. Data for the analysis were collected via documentation, archival records, interviews, and direct and participant observation. As a local government authority, LBL receives most of its annual finance from central government to deliver services to local residents and businesses. As a result the central government, through the AC, audits them every year to ensure that they are effective and efficient with their resources. Between the years 2000 and 2004, LBL audit scores were one star out of possible four stars and this represented considerable risk to its continuous survival. It is worth noting that a council with more than three consecutive score of one star is classified as a failing organisation and that council is taken into ‘special measures’ – a situation where the central government takes administrative control of the council. The trend of audit scores at LBL had indicated the council needed to improve in the areas of: • Financial planning and monitoring; • Service performance improvement in areas such as cultural services; • Performance management processes; and • Use of resources and internal capabilities. After the audit recommendation of 2004, the council developed an improvement plan. This led to the implementation of the new financial control systems, performance management procedure and personnel control system. LBL’s performance measurement imitates the balanced scorecard approach developed by Kaplan and Norton (1992). The reactions at LBL are congruent with the findings of Asel (2009) which demonstrated that organisations with high perceived uncertainty are more likely to change their MCS. The research objectives limited the study scope which has opened opportunities for future research in local authorities such as: MCS as a package; the influence of other stakeholder; trade union contribution to MCS; and organisational leadership at local authorities. It is also worth noting that the Department of Communities and Local Government (DCLG) is in a consultation process with an intention to outsource the work of the AC with effect from 2012/13 audits (www.audit-commission.gov.uk).