Risk-based internal control of key business processes as a mechanism of economic agent's sustainable development

Abstract

Subject. The article discusses theoretical and practical principles of internal control from the building stage to maintaining its effectiveness at a high level. Objectives. The aim is to examine various interpretations of internal control and internal control procedure concepts, detect difficulties of economic entities in developing, implementing, and managing the internal control, offer a model, enabling to systematize these processes through focusing on risk management of key business processes and harmonization of internal control procedures. Methods. The study rests on general methods of research, like logical analysis, generalization, grouping, and modeling. Statutory instruments in the sphere of financial and fiscal accounting and works by domestic authors serve as a theoretical framework for the study. Results. I analyze the internal control, considering the industry affiliation of economic actors. The interpretation of internal control concept is supplemented by a new element, i.e. ‘identification of key business processes’. The paper presents a matrix of internal control management, which is intended to mitigate risks inherent in key business processes. Conclusions. The said matrix may be used by any economic entity as a theoretical and methodological basis for building internal controls. The offered model and matrix enable to cover risk areas and mitigate significant risks, ensure the accuracy of financial reporting, and, as a result, sustainable development of economic entity.