Improving the process of identification and response by the internal audit service

Economic Annals-ХХI: Volume 146, Issue 11-12, Pages: 135-139

Citation information:
Smetanko, O. (2014). Improving the process of identification and response by the internal audit service. Economic Annals-XXI, 11-12, 135-139. https://ea21journal.world/index.php/ea-v146-34/

Oleksandr Smetanko
PhD (Economics),
Associate Professor,
Kyiv National Economic University named after Vadym Hetman
54/1 Peremohy Ave, Kyiv, 03680, Ukraine
smetanko@mail.ru

Improving the process of identification and response by the internal audit service

Abstract. Introduction. The topicality of the research is due to the need of adapting it to the specifics of the risk-based internal audit, the system of indicators, the use of which in the process of planning and testing allows effective monitoring of the changes in key performance indicators of a business entity with regard to the impact of individual risk factors and responsibility centers.

Purpose. The purpose of the article is aimed at improving the process of identification, evaluation and determination of the methods of response by the internal auditors on risks through the adaptation of indicators (KPI and VBM) with the accounting systems and internal controls.

Methods. The methods of financial mathematics, auditing, economic analysis, probability theory, expert and statistical methods are used in the article.

Results. The approach to the development and adaptation of the balanced indicators – performance indicators to the specifics of the internal audit system, is offered, which allows internal auditors to respond to the occurrence of the risk in a timely manner, both at the planning stage and in the process of testing

Risk assessment can be carried out with the use of the correlation matrix of materiality and risk, which allows the managers of IAS (internal auditors) to obtain various combinations of the options and the probability of a significant impact of risk factors on the key performance indicators (KPI or VBM) of the enterprise.

In the article the correlation matrix of materiality and risk is considered as a reference matrix, in which the value of the combinations of risk factors on the key indicator is defined for each of the nine quadrants by which the scenario of the auditor’s actions is being developed in case of risk.

The matrix of risk factor (internal and external) management has been developed, the use of which allows the head of the IAS (internal auditors) to determine the most appropriate method and way for the enterprise to mitigate negative risks with the help of the functional model of the response method selection risk, depending on the estimated possible outcomes.

Conclusion. The proposed approach to develop a system of indicators (key performance indicators) allows planning of the internal audit with the use of the correlation matrix of materiality and risk, and risk factor (internal and external) management of internal audit. This approach enables managers IAS under the condition of the automation of internal audit to carry out an efficient system of monitoring of the most important key indicators and risk factors in order to timely respond to negative risks and project development solutions aimed at their leveling.

Keywords: Internal Audit; Risk Management; Risk Factors; Key Performance Indicators; Balanced Indicators; Risk Matrix

JEL Classіfіcatіon: D80; D81; D89; M21

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Received 28.10.2014