RISK-ORIENTED APPROACH AT INITIAL FINANCIAL MONITORING STAGES

Abstract

Generalized: basic legislative rules, financial monitoring norms, and principles for domestic business entities; conceptual definitions of the Law of Ukraine 361-IX; organization and methodology of risk-oriented approach at the stages of initial financial monitoring and international practice of its implementation. Risks classification of based on financial transactions results to be monitored, their impact on business efficiency is disclosed. The need for thorough risks identification and verification based on transactions results with assets defined by law as "objects of financial monitoring", as well as documentary evidence of their prevention, detection, evaluation and minimization of the impact on business performance are substantiated. The international identifying practice of risks for individual financial transactions is given on the auditing example. For primary financial monitoring subjects (for example, audit firms) alternative approaches to internal risk management system regulation are proposed as an integral part for ensuring audit services quality.It is specified that the risk-oriented approach for audit firms that are initial financial monitoring subjects is based on risk assessment at two levels:1) risk profile assessment directly of the audit firm: identification and assessment of financial transactions risks for the firm, which may be subjectto financial monitoring in accordance with Law 361-IX; analysis of measuresto manage such risks in order to minimize them; 2) risk profile assessment of counterparties (suppliers, customers, and consumers of audit services): identification and assessment of business relationships initial risks (financial transactions without establishing business relationships) with customers; analysis of risk management measures existing to minimize them to an acceptable risk level for the audit firm.It is clarified that when providing audit services, risks management procedures results that are performed by the audit firm (both on its own financial transactions and transactions of audit clients), will supplement the auditor’s report, as a result – provide the audit opinion more justification convincing and reliability.