The Conceptual Significance of Internal Audit in the Armed Forces of Ukraine

Abstract

Due to the corruption scandal in February 2023, related to the procurement by the Ministry of Defense of Ukraine of food services for military personnel, the issue of internal control of the sphere of public finances was brought up to date, which makes it necessary to find ways and develop measures to increase its effectiveness and efficiency in the Armed Forces of Ukraine. The article aims to outline the conceptual directions of the functioning of internal audit in the Armed Forces of Ukraine, based on the need for its rethinking and further reform. The analysis of the results of the internal audit in the system of the Ministry of Defense of Ukraine for the period 2018-2021 was carried out. It was revealed that in 2020-2021 there was a sharp increase in the volume of violations that led to losses and damages (with a reduction in the number of conducted audits); on the other hand, the indicators of prevented losses and damages significantly decreased. Although the current regulatory framework for internal audit in the Armed Forces of Ukraine is quite developed, the vision and strategy for developing internal audit in this area of public administration need updating. A comprehensive vision of internal audit in ensuring the proper functioning and financing of the Armed Forces of Ukraine will create a basis for further identifying the vectors of reform in this area to stakeholder requests. Four key components that determine the functional value of internal audit for the proper functioning of the Armed Forces of Ukraine were revealed: strategic (strategy for the development of internal audit ), resource (proper allocation and use of resources), diagnostic (detection and prevention of fraud and abuse), and communication component (effective communication between various units of the defence department). In order to assess the effectiveness of defence spending, it is necessary to carry out an internal audit of the Armed Forces of Ukraine because a high-quality internal audit environment will increase the transparency of financial resource management processes and will give confidence to the main stakeholders who act as donors that their aid is used effectively for its intended purpose.