Internal audit is an important management function that covers accounting, financial analysis, and control, compares and evaluates the entity’s actual result achieved and its goals and objectives. Internal audit regularly monitors activities of all control targets, identifies the reasons for deviations from standards, fluctuations from the objectives set for a particular target, to promptly remedy any identified violations. Most of the standards on external audits can be applied to internal audits, for example, those relating to audit planning, the concept of audit risk, assessing the impact of internal control on the reliability of financial statements and others. A distinctive feature of an internal audit standard is that it contributes to the effective management of a company or a group of companies. This paper describes the methods for the internal audit of settlements in the corporate system.
The above method will allow verifying the compatibility of analytical and synthetic accounting data, as well as the correlation between indicators reported in different financial reporting forms, at the initial stage and in accordance with the objectives set for any control item of internal audit. Their incompatibility can be indicative of inaccuracies in the reported data. Therefore, if necessary, a 100% check of statements should be conducted by breaking down summary indicators into individual ones. Moreover, the proposed model, made in the form of a chess table, allows to accelerate internal audit, determine the main methods and procedures for its implementation, establish a group of people directly or indirectly related to the identified inconsistencies, and determine the amount of material damage inflicted on entities or individuals.
The materiality of errors should be quantitively and qualitatively assessed. For the quantitative assessment, the auditor should compare the errors found and the degree of materiality established at the planning stage. For the qualitative assessment, the auditor should rely on his/her own practical experience and knowledge.
When analyzing the errors discovered by the audit, it is necessary to determine the degree of their influence on the reliability of the accounting (financial) statements.
The list of audited documents, identified errors, and violations, as well as the auditor’s opinion based on the findings made during the audit, should be recorded in the working documents.
Based on the goals, the work done to collect evidence, the matrixes filled out in the table and their analysis, the internal auditor can make a preliminary summary of the results of the internal audit and determine the matters that should be reported in his/her opinion. By applying this method for internal audit of settlements in corporate systems, the degree of compliance with the accounting standards and reporting rules can be determined. The advantage of this technique is that the number of control items is not limited.
Income Taxes: Objective Values or Subjective Values as They Result from Financial Statements that Contain Subjective Data or Values Determined Subjectively by Financial Reporting Preparers?
