Financial control and audit are the most important means of ensuring the legitimacy of the state and its structures in general, organizations and citizens in particular. They involve checking the appropriateness of the distribution and use of funds. Let us further consider in detail what constitutes a financial control system, what verification methods exist, who is authorized to conduct audit activities.
Purpose and tasks
The purpose of financial control is to verify the compliance of operations with cash. The main tasks should be highlighted:
- Verification of the fulfillment of obligations to territorial self-government bodies and the state by citizens and organizations.
- Supervision of compliance with the rules for the implementation of monetary transactions, settlements and storage of funds.
- Verification of the correct use of financial resources by municipal and state enterprises that are under their operational management or economic management.
- Prevention and elimination of violations of the rules.
- Identification of domestic production reserves.
The implementation of these tasks ensures the strengthening of discipline, which, in turn, acts as one of the parties to the rule of law. Financial control is an effective tool with which to verify compliance with the rule of law in the course of activities of entities. It allows you to evaluate the effectiveness and validity of actions, their compliance with the interests of the state.
Types of financial control
The classification is formed according to various criteria. Subsequent, current and preliminary checks are distinguished depending on the execution time. In the latter case, the procedure is carried out prior to operations related to the formation, distribution and use of funds. This type of verification is of great importance in preventing discipline violations. Current financial control is carried out in the course of transactions. Subsequent verification is carried out after the actions taken. In this case, the state of discipline is assessed, violations are established, methods of prevention are identified and measures are taken to eliminate them. There are also initiative and mandatory checks. The latter is carried out either in accordance with the requirements of the law, or on the basis of a decision of the competent authorities. Depending on the authorities that initiate the procedure, the following types of financial control exist:
- Presidential.
- Representative bodies of local administration or state power.
- Public.
- Independent.
- On-farm and departmental.
- Executive bodies of general competence.
Departmental financial control is carried out by the appropriate authority and is aimed at checking the activities of entities included in their system. It is similar to the procedure in the structure of religious or public organizations. Some similarities also have internal financial control.
Additionally
The forms of budget control of finances are defined in Art. 265 BC. These include:
- Preliminary verification carried out during the discussion of the draft plan of items of expenses and income.
- Current revision. It is carried out when considering certain issues related to budget execution.
- Subsequent verification. It is carried out when reviewing and approving reporting documentation on budget execution.
State audit
Such fiscal control is carried out by legislative, executive (including specially created) federal authorities. Of particular importance in this area is the Decree of the head of state governing measures to ensure such verification. The document says that the procedure is aimed at monitoring the implementation of the federal financial plan and plans of extra-budgetary funds, organization of money circulation. During it, the state of the state debt, reserves of the country, the use of credit resources are checked. Along with this, supervision over the provision of benefits and advantages in the sphere of monetary circulation is being conducted.
Subjects
The legislation establishes a distinction between the functions and powers of structures that perform financial and economic control. These subjects are determined by norms. The implementation of financial control is entrusted to:
- Accounts Chamber of the Russian Federation.
- Central Bank
- Ministry of Finance.
- Federal Service for Supervision and Monitoring.
- Control and audit structures of executive bodies.
- Customs service.
- Other authorized authorities.
State control of finance can also be performed by representative authorities.
In-structural verification
Such financial control is carried out in:
- Committees.
- Ministries.
- Religious / public organizations and other entities included in the departmental structure.
In this case, the financial control is entrusted to the heads of the respective associations, specially created audit divisions, usually reporting directly to the head of the ministry, committee or other, of the above entity. The service of the ATS structure carries out audits of the activities of structural units of ministries using public funds at least once a year. An unscheduled check is carried out on the basis of instructions from senior managers, decisions of the judicial investigative authorities, as well as in the case of a change in the command structure or liquidation of the unit. The duration of the audit is no more than 40 days. Extension of this period is allowed with the permission of the manager who initiated the audit. Such financial control is performed for:
- Identification of cases of shortages and theft of money and material assets, other violations of discipline in the field of monetary circulation.
- Development of proposals to eliminate the causes and circumstances of the commission of unlawful actions.
- Taking measures to recover damages from the perpetrators and so on.
Institutional internal financial control
It is carried out in accordance with the provisions of the Federal Law No. 119. The financial control and audit of organizations is the activity of independent services and individuals. During such audits, it is checked:
- Financial statements.
- Payment and settlement documentation.
- Tax return.
- Fulfillment of other financial obligations and requirements of an economic entity.
Activity specifics
Authorities entitled to do so have the right to carry out such checks. Certified persons wishing to carry out this activity on their own can start work after the state registration procedure as an entrepreneur, obtain a license and enter information in the state register of companies. Permitting documents are issued:
- Central Bank (for bank audits).
- Department of Insurance Supervision (to check insurance companies).
- Ministry of Finance (for audits of investment funds, stock exchanges and general audits).
Types of Independent Procedures
Independent control of the finances of an enterprise can be proactive and mandatory. The first is carried out directly by decision of the subject himself. Mandatory financial control of institutions is carried out on behalf of:
- Investigator.
- The body of inquiry.
- Ships.
Federal Law No. 119 regulates in detail the issues related to payment for the activities of the auditor, the responsibility of the subject for evading mandatory inspections, and the procedure for certifying a company for the right to conduct control activities.
Quality check
The financial control system operates in accordance with stringent legal requirements. The quality of the independent audit performed can be checked by the authority authorized to issue licenses, at the request of the audited entity itself, at the proposal or initiative of the prosecutor. If errors are detected during financial control that lead to losses for a subject or state, the following may be recovered from the contractor:
- The total amount of losses incurred.
- The cost of rechecking.
- Penalty for violations deducted to the budget.
The collection is carried out in court.
Independent Verification: Implementation Features
Audit in practice is divided into several stages:
- Customer Needs Assessment.
- Formation of groups of performers and definition of tasks.
- Inspection Planning.
- Assessment of internal control.
- Risk identification.
- Implementation of general and essential procedures.
- Preparation of a summary report.
- Closing meeting.
- Analysis of the results.
Customer needs
This stage is considered preparatory. As part of it, the performer must identify the needs and needs of the subject, find the best ways to meet them. For the effective implementation of this stage, interviews are conducted with employees, the head himself. It is advisable to involve relevant employees (tax workers, consultants, etc.) in the implementation of the first stage. Their experience with previous customers, as well as their skills will maximize the satisfaction of customer needs.
Planning
It is held as part of the first meeting of the group. At it, each employee involved in the work provides the information collected in the first stage. Planning involves the development of an audit strategy. It should match the identified needs of the client. In addition, the strategy should take into account the likelihood of risk and the economic aspects of the work. The first meeting should be attended by the customer’s employees, project executives. At the end of the meeting, the dates, schedule, results of the audit should be established, other issues of importance in the work are considered.
Valuation of the company's own audit funds
As part of the audit activity, performers should have an idea of the significant control procedures that the client uses in their company. These include, among other things, the process of closing financial statements. The contractor should determine those procedures that affect the material items of the reporting. At this stage, the preparation or updating of documentation is carried out, including descriptions, analysis forms for all procedures.
Risk probability
An obligatory measure in the performance of the audit is the assessment of the effectiveness of the controls found in the material procedures of the company's own audit. The contractor also selectively evaluates methods that are comprehensive in nature. This is necessary to determine their degree of reliability and accuracy, reduce the amount of audit work.
General and essential procedures
The implementation of the remaining actions is aimed at further reducing audit risk to an optimal level. They are made on the basis of the results of general and spot checks of the previous stages, in accordance with the developed strategy. Within the framework of general and essential procedures, detailed data research and analysis can be performed when the primary information is rated as reliable.
Consolidated report
When compiling it, the possibilities and risks of the subject are analyzed, the audit results are summarized. For this:
- Substantive issues identified during the audit are discussed and resolved.
- The audit risks established during the planning and assessment of the state of controls in the company are regulated.
- Additions are described that need to be included in customer reporting.
- A general analytical check of the accounting documentation is carried out.
- The conclusion is formulated.
Closing meeting
It, as well as preliminary, is carried out with the participation of the relevant employees of the customer’s company. The following issues are discussed and analyzed during the meeting:
- Accounting reporting projects.
- A letter to the leader.
- Problems identified during the verification process and methods for solving them.
- Taxation Issues.
- Other unsolved problems (if any).
By the time the meeting ends, the staff present must come to a common understanding of all the issues discussed. At the same time, at the meeting, a finally approved list of correctional entries with the calculations and accompanying explanations and other necessary comments should be presented. It is advisable to have a closing meeting before the conclusion is approved.
Work results
Upon completion of the audit, the activities of the performers included in the group should be analyzed. Their work is evaluated in terms of the effectiveness of administering the developed project and performing the audit. If deficiencies in the activity are found, it is advisable to sort them out at a general meeting.
Supervision of banking and credit organizations
Financial control by these entities is carried out in the process of lending, investing, settlements. Banking supervision is necessary to ensure the efficient use of loan funds. It focuses on strengthening financial discipline.
Verification role in the overall payment structure
Financial and economic control acts as one of the most important links in the payment system. Due to its implementation, the correctness, completeness and timeliness of revenue generation, accuracy and reasonableness of costs are ensured. The effectiveness of the audit is considered a prerequisite for a successful social and economic policy, stable functioning of the administrative apparatus. The audit is also aimed at identifying inconsistencies in the activities of organizations with existing legislative requirements. Financial control of the enterprise is carried out in relation to all its activities as a whole, its individual structural units. The audit primarily affects the work of accounting. The audit is also mandatory for the financial and other economic services of the company. This allows you to timely identify violations, bring the perpetrators to justice.
Accounts Chamber
She acts as the leading audit body in the country. In accordance with the BC, the powers of the Accounts Chamber are established. In particular, it controls the implementation of the financial plan, the state of off-budget funds, external and internal debt, and the procedure for providing tax benefits.
Ministry of Finance
According to government decree No. 329 of June 30, 2004, the Ministry of Finance acts as a federal executive body that implements the functions of developing state policy and normative regulation in the areas of:
- Banking, foreign exchange, insurance, tax, budget activities.
- Accounting and accounting.
- Audit activities.
- Processing, production and handling of precious metals and stones.
- Customs payments and determining the value of transported vehicles and goods.
- Investing in the funded part of the pension.
- Holding and organizing lotteries.
- Release and turnover of printing.
- Civil Service Financing.
- Counteraction to the legalization of criminal proceeds and the maintenance of terrorism.
The Ministry of Finance coordinates and supervises the activities of the Federal Tax Service, the Insurance and Budget Supervision and Monitoring Services. The Ministry conducts verification of the implementation of regulations on issues related to the calculation and collection of payments, determination of the cost of transported vehicles and goods by the Customs Service. In its activities, the Ministry of Finance is guided by the provisions of the Constitution, sectoral federal laws, acts of the president and government, and international agreements. The work of the ministry is carried out in collaboration with other executive bodies of the federal and regional, municipal levels, public organizations and other associations.
Other entities
Representative bodies in the course of financial control may receive from the executive structures all the materials required for the approval of financial plans and the audit of their implementation. The Federal Treasury carries out current and preliminary verification of operations with funds of recipients and managers (including main ones). The latter audit the use of receipts by the recipients. The main managers are authorized to carry out control in subordinate municipal and state organizations, including budget ones.
Methods
Financial control can be carried out in various ways. The main ones include:
- Revisions.
- Analysis.
- Verification.
- Survey
- Observation, etc.
The most common method is audit. It involves checking the primary documentation, in accordance with which financial and other operations were performed. The audit also relates to warehouse and accounting data. As part of this procedure, inventories are performed. Revision can be complex (frontal) and selective. As a result of the event, an act is drawn up in which the verification data is entered. Based on this document, measures are taken to eliminate violations (if they were identified). Observation is focused on familiarization with the state of the economic activity of the subject. As part of the survey, techniques such as questioning and questioning can be used. Such verification is carried out on site. The analysis is carried out expenditure, reporting and balance sheet documents. All these methods are aimed at identifying inconsistencies with the requirements of the law and violations of discipline.
