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Internal Audit         

Internal audit is a system established by the economic agent for its participants (founders) and regulated by internal documents designed to conduct audit over compliance with business accounting procedures and obtainment of other information (including its formation rationality), fulfillment of adopted programs and plans, conformity with stated objectives and effectiveness, preservation of assets, observance of laws and regulations in executing operations.

The audit functions are performed by inspectors, audit commissions, internal auditors or internal audit teams appointed in the order established according to the juridical person business legal structure.

СThe internal audit service is established based upon a special instruction in the parent organization which determines the purposes, tasks, structure and strength of the service, rights and responsibilities of its personnel, appointment of its head, periodicity of audits and checks, result consideration procedures.

The principal distinction between an external audit and an internal one lies in the assignment of different targets oriented in the former case to property owners and protection of their interests and in the latter one to the company leadership composed in some instances of hired managers.

Also present are distinctions in the functions of an audit commission (auditor) and an internal audit service activity. The principal audit tasks are verification of compliance with legislative requirements in executing economic and financial operations by the organization, their relevance, property presence and movements and liabilities, use of material and manpower resources in accordance with approved norms, standards, and estimations. Specifically, such a determination of the audit purpose is given in the Russian Federation Finance Ministry Order No 42N dated 04/14/2000 which approved the Instruction on auditing conducted by the given ministry auditing bodies.

Most general aspects of internal audit necessity consist in the following:

• Allowing the board of directors or an executive body to establish an effective control over the organization independent divisions.
• Purpose-oriented audits and analysis executed by internal auditors educe production reserves and most perspective development trends.
• Internal auditors alongside with auditing often perform advisory functions in relation to officials, financial and economic, business accounting and other services in the parent organization, its subsidiaries and daughter companies.

Of paramount importance is internal audit provided the company has geographically widely separated subsidiary or sister companies in which the local management makes independent decisions. And the central management needs precise information about their activity to exercise control and assessment of decisions adopted as a whole.

Thus, the organization management bodies use internal auditor services as additional resources assisting them in implementing company administration functions.

Effective internal audit in recent years has become in the eyes of investors one of substantial symbols of company adherence to a proper management level.