Academic journal article Asian Social Science

International Concept of an Assessment of Internal Control Efficiency in the Conduct of an Audit

Academic journal article Asian Social Science

International Concept of an Assessment of Internal Control Efficiency in the Conduct of an Audit

Article excerpt

Abstract

Internal control in the conduct of an audit creates real prerequisites for successful business development and growth of competitiveness of the enterprise. The main advantages of the availability of internal control system in the organization consist in the fact that in internal control may improve the quality of accounting of the company; internal control system has a positive effect on the further development of business. Another advantage of the presence of the internal control system is to improve the quality of work of the branches and structural divisions of the company in connection with the supervision of their activities. Internal control system the company is able to identify the hidden reserves on the use of material and labor resources, and stimulate the development of measures for reduction of production cost. In the article the notion and the basic elements of the internal control system during the conduct of an audit. Reviewed international framework for internal control in the conduct of an audit, which are used for the development of domestic procedures of internal control. The comparison and analysis of the concepts of internal control on the proposed criteria: definition; target group; orientation; principles; goals and objectives; composition; performance evaluation.

Keywords: internal control, the internal control system, internal control concepts, standards, efficiency

1. Introduction

Internal control as one of the functions of management is a system of ongoing monitoring and verification of the functioning of the organization in order to assess the reasonableness and effectiveness of managerial decisions, to identify abnormalities and adverse situations, timely informing management to make management decisions on elimination, reduction, risk management activities (Armour, 2000).

The internal control system should include: control environment, the species composition of the internal control, the description of subjects and objects of the internal control (Figure 1).

Key integrated element of the internal control system is the control environment, the role of which is to create conditions for effective interaction of the elements of the internal control system (Burtsev, 2000). Its status depends directly from the policy of the higher management of the company (Chenhall, 2003).

At the present stage in the development of effective internal control system at the international level has developed some concepts:

COSO "Internal control: an integrated approach" (the concept was developed by the Committee of Sponsoring Organizations of the Treadway Commission's Internal control-Integrated Framework) (Committee of Sponsoring Organizations of the Treadway Committee, 1992), SAC "Control and audit systems" (developed by the Institute of Internal Auditors Research Foundation's Systems Auditability and Control) (Mair, 2002), COBIT "Control objectives when using information technologies" (the concept was developed by ISACA, the Information Systems Audit and Control Foundation's Control Objectives for Information and related Technology) (IT Governance institute, http://www.isaca.org), SAS 55 ? SAS 78 (standards on consideration of the internal control structure in an audit of financial statements, approved by the American Institute of Certified Public Accountants' Consideration of the Internal Control Structure in a Financial Statement Audit) (American Institute of Certified Public Accountants. Statement on Auditing Standards No. 53 and No. 78), Article 404 of Sarbanes-Oxley Act (Sarbanes-Oxley Act of 2002, https://www.sec.gov/about/laws/soa2002.pdf).

2. International Concept of Internal Control

The concept of the COSO (1992) "Internal control: an integrated approach" defines the main provisions of the building of internal control, based on the monitoring of economic risks (Committee of Sponsoring Organizations of the Treadway Committee, 1992). Currently these provisions are taken as a basis in the majority of developments in this area and have become widely used. …

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