Identification of factors influencing internal audit in the framework of the three lines of defence model

Journal Title: Економіка. Фінанси. Право - Year 2018, Vol 12, Issue

Abstract

Introduction. In the modern practice of management the most popular methods of risks reducing are based on the effective internal audit system development and implementation, functioning of which depends on many factors. Therefore, the purpose of the article is to study the nature of factors influencing organization and performance of internal audit functions, taking into account requirements and needs of all management units within the framework of the Three Lines of Defence model. Results. The article deals with structural-logical model of the COSO cube instruments using in the Three Lines of Defence model. It has been determined that the first line of defence – operational management – is provided by the managers of the lower and middle levels, performing routine risk management and control functions, developing and implementing on the ground risk management measures, identifying risky operations and identifying the causes of risks, coordinating internal communications with stakeholders. The functional responsibilities of the second line of defence – risk management – are determined as internal monitoring and supervision of various risks through the adoption and implementation of management decisions aimed at reducing the probability of adverse result occurrence and minimization of possible losses in the economic activity process. It is proved that internal audit unit activities are based on a risk-oriented approach and provide information to senior management of the company to provide assurance about corporate governance effectiveness, process of assessment and risk management, internal control and the first and second lines of defence activities effectiveness. The article systematizes the factors influencing on enterprise’s control environment. Conclusion. It is proved that consideration of external factors in implementing the Three Lines of Defence model into company’s practical activities allows focusing of management personnel attention on elements of the business model that are the subject of external environment significant influence and choosing adequate control tools for leveling of their negative influence or enhancing positive effect. It is substantiated that in order to take into account internal factors influencing internal audit system it is necessary to specify of accounting methodology issues, internal audit objects condition, and its subjects professional and ethical peculiarities.

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  • EP ID EP531765
  • DOI -
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How To Cite

(2018). Identification of factors influencing internal audit in the framework of the three lines of defence model. Економіка. Фінанси. Право, 12(), 32-37. https://europub.co.uk/articles/-A-531765