Interesting point, but the authors makes a couple of flawed assumptions. First, he seems to imply that auditors have a degree of power much higher that what would occur in reality. Performance of an audit is far from "handing over effective control". Auditors could simply opine on the Fed's performance towards achievement of it stated dual mandate - something there is currently no shortage of from politically charged, agenda pushing Nobel laureates. Much like Chairman Bernanke and the rest of the Fed do not have to take the advice from all of the other Monday morning quarterbacks in the media, they, likewise would not need to implement auditor recommendations. Next, he seems to believe that the Fed is currently "insulated from political pressures". Although somewhat subtle, the pressures and distorted incentives are rampant in the current setup. A read of Neil Barofsky's book will help to shed some light on these.

Libertarians may accept an audit as a sub-optimal, slight step in the right direction, but short of abolishing the Fed, what is really needed is transparency and accountability. It is only with sufficient information that the public can hold central bankers "democratically accountable".