INTERNATIONAL STANDARDS AND WESTERN PRACTICES: SEARCH FOR WAYS TO DEVELOP AN INTERNAL CONTROL SYSTEM

Abstract

The article is devoted to the study of internationally recognized publications of the Committee of Sponsoring Organizations (COSO) of the US National Commission on Financial Reporting Fraud on the organization of an internal control system (COSO model) and a risk management system (COSO ERM concept), the instruction of the International Organization of Supreme Audit Institutions (INTOSAI) on internal control in the public sector (INTOSAI 9100 standard) and the practices of the USA, the European Union and the UK on the organization and effective functioning of the internal control system (ICS) and internal audit in public sector institutions in order to identify ways to improve the ICS in public sector institutions of Ukraine, the implementation of which is expected to lead to an increase in the effectiveness of the ICS, in particular in the Ministry of Defense of Ukraine and its subordinated institutions.
The article highlights the formation of the ICS structure according to the COSO model and provides a definition of its functions, goals and criteria for measuring the level of effectiveness. A comparison of the ICS and criteria for measuring its level of effectiveness according to the COSO model and according to the Foundations of Internal Control Functioning in Budget Fund Managers, which determine the issues of organizing and functioning of the ICS in state bodies of Ukraine and in institutions (organizations, enterprises) belonging to the sphere of management of such bodies, is presented. The essence of the risk management system (RMS) according to the COSO ERM concept is revealed and a characteristic is given for determining its effectiveness. A generalization of the provisions of the INTOSAI 9100 standard and the practice of Western countries regarding the organization and effective functioning of the ICS in public sector institutions is presented. The role and effectiveness of the functioning of the internal audit in the structures of the SCM and SRM are shown.
Based on the results of the study, substantiated proposals were formed to improve the domestic regulatory and legal framework on internal control issues, organization and functioning in state bodies of Ukraine within the framework of the implementation of budget programs of the RMS, as a subsystem of a comprehensive ICS, and introduce in state bodies of Ukraine an annual assessment (in the form of self-assessment) of the ICS, the internal audit system (IAS) and RMS, as well as reporting on the effectiveness of their functioning. At the same time, attention was focused on the importance of developing in state bodies of Ukraine such a mechanism that will ensure proper interaction and maximum independence of the internal audit function (on the one hand - in the organizational structures of the state body and institutions subordinate to such a body, on the other - in the structures of the ICS and RMS), which will contribute to maintaining the integrity and effectiveness of the functioning of the IAS, as a subsystem of a comprehensive ICS.