“Иқтисодиёт ва инновацион технологиялар” илмий электрон журнали. № 3, май-июнь, 2017 йил
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Improvement internal audit plan of business entities in Uzbekistan
Turaev Abdurakhim Nortojiyevich,
Senior researcher of the Tashkent financial institute
E-mail:
Аннотация:
Мақолада ички аудит режасини тузиш тартиби, танланган
режани баҳолаш қоидалари ва унинг ўз вақтида амалга оширилиш йўллари очиб
берилган. Тадқиқот ишида ишлаб чиқилган таклифлар ички аудит режасининг
ўз вақтида тузилиши ва йил давомида назорат қилиш учун ички аудиторларга
кунлик оперцияларини амалга оширишда кўрсатма бўлиб ҳисобланади.
Аннотация:
В статье выбран в плане внутреннего аудита, план правила
и оценить возможности его своевременного выполнения. Предложения
разработанные в научно-исследовательской работе плана внутреннего аудита
своевременно контролировать структуру в течение года и повседневной
деятельности внутренних аудиторов.
Annotation:
The article selected in the internal audit plan, the rule plan and
assess the possibility of its timely implementation. Proposals developed in the
research work of the internal audit plan in a timely manner to control the structure
during the year and the daily activities of internal auditors.
Key words:
internal audit, internal audit plan, internal auditor, internal
auditor charter, internal audit service, elements of internal audit plan, business risk.
Introduction
The first law of the Republic of Uzbekistan “On auditing activity” was adopted
in 1992, and it was renewed in 2000[1]. National audit standards have been working
out since 2000 and their total number consists 21 standards. These legislative
documents are base for forming and developing of audit in the country. It was
necessary to organize and manage internal audit service according to improvement of
national entities. Took into account of those changes, Cabinet ministers of the
Republic of Uzbekistan adopted 215
th
resolution “Regulation about internal audit
service in entities” in 2006, October 16.[2] According to the regulation if national
entities possess assets more than 1 billion UZS
1
or 100000 times of minimal size of
monthly salary in stock-companies[3], they will compulsory organize internal audit
service. As from that resolution the number of internal audit service of business
entities has steadily been increased. The results of practice expose that internal audit
service is getting more significance in the activities of entities. It informs that internal
audit service became important element of entity economic mechanism.
However, there are a lot of matters which are expected to solve related to
internal audit service. One of them is making complete internal audit plan, because
the effectiveness of internal audit service depends on its adequate plan. According to
our scientific investigations, business risks and other important objects are not
1
UZS is national currency of Uzbekistan.
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sufficiently considered in the plan of internal audit. It causes to neglect influence of
those objects.
Literature review
Internal audit plan is complicate according to composition, structure and
contents. Separate entity required a particular internal audit plan. But commonly
internal audit plans coincide each other as well as particularly they overlap. That’s
way there are various opinions about it. According to “International Standards For
The Professional Practice Of Internal Auditing Standards” (2010 – Planning) are
defined that “The chief audit executive must establish a risk-based plans to determine
the priorities of the internal audit activity, consistent with the organization’s goals”
[3].
Standard on internal audit (SIA) 1 “Planning an internal audit” (in India) stated
“The internal audit plan should be based on the knowledge of the entity’s business.
While developing the internal audit plan, the internal auditor should have regard to
the objectives of the internal audit engagement as well as the time and resources
required for conducting the engagement. In addition, the internal audit plan should
also reflect the risk management strategy of the entity”[10].
Scholar of Vietnam Nguen Txi Vet Le emphasized “Internal audit plan
developed on the basis of results of assessment risks must be altered, adjusted with
conform to changed outer environment, business processes and risks which connected
with them. On the ground of assessed risks auditors define and implement further
audit procedure for concert assessed risks” [5. p 118].
Scientist of Russian N.A.Filevskaya defined “On the stage “Planning audit”
planned control carry out on the basis of the schedule of internal control for the year,
but unplanned initiates by head of internal audit service. Have been made tasks for
audit, plan and program to carry out audit on the basis of the selection priority criteria
and theirs activities (regulated in normative legal documents and standards)” with an
allowance for influence external and internal factors to a activity system of corporate
governance” [6. p 86] .
Uzbek Professor N.Karimov gives the following opinion “It should emphasize
in process of making internal audit plan to assess auditors risk and to properly
determine material tasks in order to realize at the result of appointed risk directly
affect to the effectiveness of audit activity”. Scholar affirmed that “In the auditing
process auditor confirmed not only accuracy of financial statement as well as auditor
should take into account all situations which are necessary to substantiate important
matters”. Those opinions unveils some important specific directions of internal audit
plan But, there are not exactly view about internal auditor plan and business risk of
activity, theirs’ relations. [7. p 26].
Uzbek scholar K.Akhmadjonov suggested to separate internal audit plan two
parts according to organization works and audit implementation. Here in preparing
internal audit plan, that is 1) make annually working plan for organizational works
and directions; to examine branches, subsidiaries, affiliates; make annually schedule;
make workforce schedule; to appoint staff; to form budget steps. 2) audit of objects;
allocation of tasks for auditors; suggestions for make program [8].
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Professors of Uzbekistan B.A.Khasanov, Z.A.Aliboyev, M.SH.Zokirova stated
“Audit internal plan are confirmed by head of internal audit department or specialist
who appointed for auditing. Made all alterations in it should confirmed in time. But
authors did not tell about composition as well as to consider business risk auditing
and its importance in a internal audit plan” [9. p 43].
It is prescribed to realize of internal audit by means of conducts control
according to plan confirmed by supervisor board of the entity in each year, but not
given proper direction on make internal audit plan in the “Regulation about internal
audit service in entities” [2].
At the result of our scientific investigation we agree and support first, second
and third above mentioned opinions. Reason for this conclusion is business risk
considered as integral part of the internal audit plan. Other opinions not took account
the essential basis of the matter.
Briefly apply in practice risk-based plan of internal audit service of entities in
national economy is requirement of the period. It is expedient to use existing
experiences in this sphere of Great Britain, German, French and India to the national
economy.
Objectives of the internal auditing are determined as the following:
-to extend sphere and number of matters according to priorities in internal audit
activity;
- to enter the all material objects on the risky-based basis in internal audit plan;
- to control and study implementation of made plan indicators and access them;
- to prepare internal audit report for management;
Internal audit activity services should be designed to eliminate arisen
shortcomings and introduce into new ideas for practice;
Ultimately enhance the quality and increase efficiency of internal audit service.
Research methodology
Use methods comparison, grouping, ratio calculation and other methods in the
research work. Developed in research work scientific offers and practical
recommendations of the research can be used for the improvement of plan internal
audit in the business entities.
Analysis of the results
To make internal audit risky-based plan based on following principles:
Table 1
Main principles
Complexly
Overall objects should include internal audit plan if object important or
influenced to results of entity.
Systematic
Auditing is the process that its continuous should be uninterruptedly,
repeatedly and succession.
Risky-based
It is means that each objects entered in internal business plan had been
taken into accounting according to uncertainty, factors affected to
reasonably changes them and so on.
Verifiability in a given
period
To carry control and verify of confirmed business plan objects should be
possible in a given period
Harmless
Internal auditing process according to confirmed plan dose not impede
normal activity of the entity
Expenses for internal audit
Expenses for accomplishing internal audit plan not to be more the results
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value which bring by it.
Efficiencies
The results value of internal audit will be more than expenses that spent
for accomplished it and should bring uncountable benefits.
Usefulness
The results internal audit service on implementation of confirmed plan
should be used without any suspicions by external auditors and other
users.
Former principle means internal audit plan should include every object which
has material impact to results of entities. Observance of concern laws and bylaw,
movement and changes of assets, equity, liability, expenses, incomes, cash flows,
correctness of business plans, budgets, estimations, managerial decision, business
risk, and so many others are examples for our opinion. None of the matter should
omit in the internal audit plan.
Systematic principle consider each objects to be in a certain order which
previous objects subordinate to next one, subsequent event should appear in affect of
prior event or events, auditing process routings and its continuous should be
uninterruptedly and succession.
Other principles possess necessity value that to be base for internal audit plan
which conform to modern requirements of economic activities of entities.
Business risk of entities may be adverse events which have negative
subsequences or releasable positive possibilities in certain condition, environment
and period. They are considered in the broad sense and described with various and
definite indicators. Types of business risks can be different in a case. That’s why
auditor should examine all existing types of business risks and their efficiencies
Auditor assesses determined and applied business risk which selected. Selected
business risk should be realized and its indicators successfully implemented. It means
all actual effective indicators for certain reporting period should be equal or more
than selected business risk indicators and other considered business risks.
Business risk are reflected in a business plan, various budgets, estimates,
management decisions, projects, alterations and amendments influenced to activities.
Internal auditor examines all above mentioned objects which concern business risk
objects and assesses them.
For instance:
Table 2
Assessment correctness of selected business plan
(at the end of the reporting period)
Suggested
business
plan
variants
Selected
business
plan
Advantages
Level of
Realized
(Full,
More than
half, half,
partial)
Justification
Effectiveness
(minimum, average,
more average,
maximum)
A
-
B
B
More than
other business
plans
Fully
Realized
Justified
Maximum
C
-
Sours: Made by author.
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Internal auditor assessed correctness of business plan at the end of the period
(annually, semiannually. It is managers discretion). In this case auditor used common
and condensed evaluation (Table 2). Substantial alterations and amendments have
been made to correct a business plan are checked. It helps to know the affects of
proper changes (Table 3).
Table 3
Assessment made alterations and amendments to selected business plan
Constant
Variable
How many
substantial
alterations have
been done (within
year)
How many
substantial
amendments
have been
done (within
year)
The affects of
alterations and
amendments to
route of business
plan
Effectiveness
(effectiveness remain in
planned level,
effectiveness increased
than planned)
No
Yes
7
11
Positively.
There is not sharply
change in route and
quite manageable.
Effectively
(effectiveness increased
than planned)
It is known the management decision is important in the entity activity. The
correct special decision can change tradition activities to positive sides or overcome
arisen serious obstacles. To assess decision effect internal auditor considers the
results in until decision made (It would be expedient to consider the last years results
and not altered current business plan.) and the results of a period after taken decision.
Differences of both periods shows and characterize effects of made decision. This
approaching content is a specialists at what level understood and took into
consideration of the existing risk or obstacles which in a certain matter and their
competent to affect them.
Besides them internal auditor gives own opinion on the most substantial
activities of business plan. For example, targeted main financial activities (Table 4).
Table 4
Assessment of implementation targeted main financial effectives of selected
business plan (
Annually
)
Titles
Plan
Actual
Deviation
(+;-)
1. Sale, thousand so’m
1000000,0
1200000,0
+200000,0
2. Cost of Goods sold
(700000,0)
(740000,0)
(+40000,0)
3. Gross profit
300000,0
460000,0
+140000,0
And other indicators
In table 3 have been reflected implementation of targeted main financial
activities. Deviations shows the plight. In this case risky-based planned indicators
have successfully been implemented. Actual indicators more than planned. It means
the specialists of entity precisely understood and took into account them in preparing
business plan at the beginning of the year and made alterations and amendments on
business plan were relevant. That’s way the selected business plan have fully been
implemented in time. We emphasize that all main substantial activities of the
business plan would be consider as a table 5.
Internal auditor should conducts control in specific interval (Monthly,
quarterly) on implementation of business plan of entity. For example:
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Table 5
Assessment of implementation of selected business plan “A” (
Monthly
)
Titles
Plan
Actual
Deviation
(+;-)
1. Sale, thousand so’m
87000,0
109000,0
+22000,0
2. Cost of Goods sold
62000,0
75000,0
(+13000,0)
3. Gross profit
25000,0
34000,0
+9000,0
And other indicators
By means of monthly control internal auditor compile all necessary
information about implementations of business plan and hands them to managers or
authorities. The up-to-date report made by internal auditors contains the actual
condition of activity in a respectively month. The operational control has certain
character. On the cursory the operational control seems very simple, like easy action.
But, indeed there are various specific works which requires special interference by
specialist in the field of proper system. For example, cost of products or commercial
expenses unexpectedly increased of the given period. In this case internal auditor
should professionally examine the matters and should find the reasons. For this aim
internal auditor must know cost accounting or periodic expenses as accountants or
better them. In briefly internal auditor not only conducts controls but professionally
examines all objects which may be subject to audit. In short internal auditor should
consider every substantial objects in business plan on the risky-based principle. For
this way internal auditor(s) have to develop well-grounded internal audit plan.
Table 6
Internal audit plan (Pattern)
№
Titles
Periods
Internal auditor
Required hours
Estimation of
internal audit
1
2
3
4
5
6
1.
Available economic potential of
the entity and its market
opportunities
At the beginning and
end of the reporting
year
84 (42, 42)
Salary
2.
Business plans A, B, C.
At the beginning and
end of the reporting
year
3.
Selected business plan B for
realize
At the end of the
every month and
annually
4.
PPE
At the end of the each
six month
5.
Inventory
At the end of the each
quarter
6.
Labor
At the end of the each
quarter
7.
Products volume
At the end of the each
month
8.
Cost of products
At the end of the each
month
9.
Overhead expenses
At the end of the each
quarter
9
Profit of sale and profitability
At the end of the each
month
10.
Periodic expenses
At the end of the each
quarter
11.
Financial activity (expenses and
income)
At the end every six
months
12.
Tax and other compulsory
allocations
At the end of the each
month
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13.
Inventory assets
Due to until ninth
months
14.
Financial statement
At the end of the each
quarter
15.
Financial state and ratios
At the end of the each
quarter
16.
Effectiveness of corporate
governs of stock companies
(economic entities)
At the end of the each
quarter
17
Assess to internal control
system
At the end of the each
quarter
18
Annually internal audit report
At the end of the year
Eventually internal auditors prepare report. It is expedient if a separately
section would be opened in the report and called “Assessments of business risky”.
Briefly review about implementation of business plans and made substantial
alterations or amendments. It would assessment to managers and proper specialists.
Conclusion
It is very necessary to use international reasonable experience to the national
economy. For instance, internal audit services in entities.
All proper international experiences should be adjusted with accordance to
national economy requirements and its developing. Internal audit services and its
mechanisms have been accommodating to the national entities condition for short
periods. Especially, complexly and systematic conduct control and audit over the
risky-based business plan as well as assesses it is very essential information for
owners about management system in entities.
That’s way the assessment should be reflected in internal audit report in a
separate section. This approach is to take into account in prepare internal audit plan.
We think if above mentioned procedures implemented in activity of entities of the
national economy then influence and efficiency of internal audit service would be
reasonable increased
References
1. The law “On auditing activity” of the Republic of Uzbekistan. 26 may 2000
year.
2. Cabinet ministers of the Republic of Uzbekistan adopted 215
th
resolution
“Regulation about internal audit service in entities”. 16 October 2006 year.
3. The Law of the Republic of Uzbekistan “About defense the rights of
stockholders and joint-stock companies”. 6 may 2014 year.
4. “International Standards For The Professional Practice of Internal Auditing
Standards”.
5. Nguen Txi Vet Le. Developing methodological provision of internal audit in
commercial organization on the basis of standardization. Specialty on 08.00.12 –
Accounting, statistics. Candidate’s thesis. Samara, 2016. - 278 p.
6. Filevskaya Natalya Aleksandrova. Internal audit in the system of corporate
governance. Candidate’s thesis. Samara, 2015. - 232 p.
7. N.F.Karimov. Organization internal audit in commercial banks and problems
developing methodology of it. Author’s abstract. Tashkent. BFA. 2007. - 26 p.
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8. K.B.Akhmadjanov. Developing methodology of entities internal audit in
condition of modernization of economy. Doctorial thesis.Tashkent. BFA. 2016. - 169
p.
9. B.A.Khasanov, Z.A.Aliboyev, M.SH.Zokirova. Bases of automation of
internal audit. Tashkent. “Fan” publishers. 2003. - 162p.
10.www.https://global.theiia.org/standardsguidance/mandatoryguidance/Pags/
Standards.aspx.
