In modern market conditions, the internal control system plays a critical role in ensuring the effective functioning of trade organizations, as it serves as the basis for identifying and preventing various types of risks related to financial, operational and commercial spheres. In conditions of highly competitive activity, constant changes in consumer demand and increasing complexity of business processes, the availability of systematized control mechanisms makes it possible to increase the reliability of financial statements, ensure strict inventory accounting and reduce fraud and abuse within the company. Based on this, internal control becomes the most important tool for ensuring transparency and business responsibility.

This system is of particular importance in the field of inventory management and ensuring the safety of commodity values, which is a key aspect of trade. Effective inventory, inspection and accounting procedures allow timely identification of shortages or surpluses, which helps optimize warehouse operations and reduce losses. In addition, the implementation of an internal control system contributes to the standardization of business processes, increasing their reliability and repeatability, which is especially important when scaling retail chains and introducing new technologies.

Such a system is equally important to ensure that the company’s activities comply with regulatory requirements and corporate policies. This helps to reduce legal and reputational risks and improve relations with internal audit specialists and regulatory authorities. In the context of the constant tightening of regulatory requirements for business reporting and transparency, the presence of a well-developed internal control system is an important factor in compliance with legislation and the formation of sustainable competitive advantages.

These facts determine the relevance of the topic under consideration and emphasize the integral role of control in the strategic management of trade organizations. However, first of all, let us turn to its origins and the essence of this area of activity.

From the point of view of legislation and legal practice, the initial understanding of control was to verify the authenticity and reliability of various legal documents, accounting reports, financial data and other relevant information. This process served as a guarantee of compliance of the provided data with the established norms and requirements, as well as provided identification of possible errors or unacceptable violations. Over time, the importance of control has expanded beyond simple verification to become the most important tool for monitoring compliance with regulatory requirements, administrative decisions, and internal policies of organizations [6].

At the present stage, in the framework of management activities, control acts as a systematic and purposeful activity of managers and managers of the enterprise. Its main role is to ensure the effectiveness and stability of the organization’s functioning through constant monitoring of the implementation of plans, tasks set and decisions made. Control in this context acts as one of the key functions, being the final stage of the management cycle. It helps to generate feedback that allows you to identify deviations from goals, respond to emerging problems in a timely manner, and adjust the company’s strategic and operational actions.

In turn, internal control is a complex system of measures, strategies and rules aimed at ensuring the safety and security of an organization’s assets, as well as the formation of reliable and reliable accounting data. Its main function is to systematize control over all aspects of the company’s activities, from accounting to asset management. It is the most important management tool that allows the company to effectively achieve its strategic goals, optimize internal processes and minimize risks associated with financial and operational activities.

The development and implementation of the internal control system is currently the responsibility of the company’s management, which is fully responsible for its effectiveness and compliance with current requirements. At the same time, the structure of such a system is formed taking into account the scale of the organization, the specifics of its activities and the specifics of the industry in which it operates.

The elements of the internal control system may be:

–  control environment;

–  risk assessment process;

–  information system;

–  control actions;

–  monitoring of controls [11].

Various methods and tools are used to organize internal control, including routine inspections, documentation analysis, monitoring compliance with rules and standards, as well as developing procedures to detect and prevent fraud and errors.

As noted earlier, the objectives of internal control can be to increase the efficiency of the company’s activities, as well as to preserve assets, comply with legislation, identify areas of effective and inefficient resources, and determine the potential of the company. An example of defining these goals in practice within a retail chain, or rather the internal control of its separate divisions (each outlet), may be the following:

–  prevention of theft of stocks;

–  prevention of theft of funds;

–  prevention of fraud by staff;

–  compliance with the company’s internal regulations;

–  compliance with ethical standards and regulations when working with customers [11].

Thus, the objectives of internal control can be diverse and will depend on the tasks set by the company’s management. Therefore, several important classification features can be identified.:

–  the scale of this system;

–  information sources used;

–  the level of responsibility for the decisions taken;

–  the place occupied by this system in the framework of corporate governance as a whole;

–  the degree of frequency of control measures.

Based on these features, the internal control system may have a fairly individual structure that adapts to the operating conditions of any company, and the activities carried out within it will be carried out by all departments in one way or another. At the same time, it is important to note that an internal control system that is disordered from an organizational point of view without a single informative space for solving tasks, which is inconsistent with the natural structure of the organization, and therefore not focused on real indicators of its development, cannot be of high quality and effective.

The subject of internal control is an official or a group of persons (division) performing certain control functions. They are responsible for the results of the entire system and act as the center of responsibility. In turn, almost all areas of work will be targeted. Within the framework of trade organizations, this includes the purchase and sale of goods, tax calculations, the formation and accounting of financial results [10].

The internal control system is based on direct and feedback communication between the subject and the object. Direct communication is based on accounting and analytical support, which allows to obtain the results of control actions used to develop management decisions. The reverse shows the effectiveness of the control performed, the degree of its impact on the object, thus implementing it in the control loop.

Based on feedback, organizations optimize their areas of operation and develop options for improving their activities. It is the relationship between the subject and the object that allows us to consider internal control as an interconnected system.

The efficiency, stability, and continuity of these control processes are determined by the unity and optimal level of centralization of the company’s organizational structure. When creating or modernizing it, it is necessary to take into account such factors as the external environment, the size of the company, strategic goals and objectives, the degree of digitalization of financial and economic activities, the level of competence of personnel, etc. The complexity of the company’s internal control system also depends on the choice of organizational structure. At the same time, depending on the content of the cycles of this system, two main groups of responsibility centers and their specific functions are distinguished:

–  local – they work in specific areas of internal control;

–  coordination – ensures the integrity and orderliness of the internal control system [2].

The effective distribution of control areas between different responsibility centers makes it advisable to apply internal control techniques and algorithms, select and combine them taking into account the specifics of specific facilities.

At the same time, the organizational structure of the company, which includes several such centers, allows for the implementation of control effects simultaneously in several areas of activity. At the same time, it must flexibly respond to the needs of the company in modernizing such a system, while maintaining an orderly and efficient distribution of functions among the subjects. The interrelationships and interactions between them and the objects of control will guarantee the success of such transformations.

However, as part of the consideration of the stated topic, the focus is on the formation and implementation of an internal control system in trade organizations. At the current stage of economic development, they play a key role in ensuring the effective functioning of commodity-money relations and are a link between producers and consumers, contributing to the distribution of goods and services, which helps optimize the allocation of resources and meet demand in the market.

The importance of trade organizations is increasing in the context of global changes and dynamically developing markets, as they contribute to the development of innovative forms of interaction with consumers, such as e-commerce, omnichannel strategies and the integration of data processing technologies [1]. In addition, they play an important role in the formation and maintenance of market competition, stimulating the improvement of the quality of goods and services, the introduction of innovative solutions and improving the efficiency of business processes.

Ultimately, it is trade organizations that are the most important factor in sustainable economic growth, innovative development and improving the quality of life of the population.

In accordance with GOST R 51303-2023 «Trade. Terms and definitions» (entered into force on 01.10.2023) a trading organization is understood to mean an organization of various organizational and legal forms that carries out trading activities, including the necessary funds and employees with the distribution of responsibilities, powers and relationships. In turn, a trading company is a property complex used to sell goods and/or provide trading services [5].

Its financial position is the most important indicator of stability and efficiency. It reflects all aspects of the organization’s trading and financial activities, including the level of solvency and the availability of liquid (current) assets that can be quickly converted into cash at any time. High liquidity provides the company with the ability to quickly respond to financial obligations and external challenges, which is especially important in a dynamic market.

The goal of most trading organizations is to increase the efficiency of using their assets, in particular, to increase the turnover of liquid funds. Rapid inventory sales and efficient working capital management contribute to increased profitability. However, such a strategy is accompanied by an increase in business risks – situations in which an organization may face loss of liquidity, financial losses or other negative consequences.

Business risks are understood as the possibility of an organization losing liquidity, which may occur due to internal errors or external factors such as market changes, currency fluctuations, or the insolvency of partners. Such risks require constant monitoring and mitigation through an internal control system.

Internal control in trade organizations is designed to ensure timely assessment and minimization of risks. Its main task is to develop and implement procedures that prevent possible negative consequences and ensure the reliability of financial transactions. It is especially important to pay attention to the accounting and organization of processes related to the movement and distribution of goods, since these aspects directly affect the financial condition of the company.

The most important areas of internal control within a trade organization are:

–  monitoring the process of receipt of goods: tracking delivery dates, checking the conformity of the name and quantity, quality control;

–  monitoring the fulfillment of contractual obligations: timely execution of orders, proper documentation and calculations;

–  inventory management – accounting for their level, monitoring compliance with deadlines, timely replenishment and write-off;

–  financial control over the transfer of funds – checking the receipt of payments from customers and the timeliness of payments to suppliers, as well as the correctness of accounting for cash flows [8].

Thus, the audit of inventories and sales of goods is of key importance within the framework of internal control in a trade organization. Let’s look at this issue in more detail.

Inventories are goods purchased by an organization and intended for further sale. At the same time, the company, as a rule, does not make significant changes to their physical form, i.e., it purchases finished products from a supplier. Inventories are created in accordance with the volume of sales of goods, and their size should be sufficient to ensure uninterrupted trade and a wide choice of products by customers.

Inventory audit refers to conducting an independent inventory (i.e., without the participation of employees of the inspected enterprise) and monitoring business processes related to their storage and warehouse management. The task of the controlling person is to confirm that, firstly, the relevant procedures are being carried out without violations, and secondly, that the goods listed in the accounting system are actually available in the trading company and in the warehouse. Based on the results of the inspections, the auditor makes recommendations on optimizing the storage process and preventing shortages.

Such control is necessary not only to identify the facts of theft, but also to detect flaws in business technologies that reduce income. The main loss areas in retail chains are shortages and various kinds of fraud. In most cases, internal auditors are responsible for preventing product shortages, and the employee of the outlet is directly responsible for the shortage. They check compliance with the procedure for reflecting the inventory results, and selectively participate in the procedures themselves.

As noted earlier, an inventory audit involves carrying out different types of inventories:

–  regular full–time work is carried out by the staff of the trading company with the participation of the auditor;

–  independent full – performed by employees of the organization who are not involved in the work of the audited trading company, with the participation of an auditor – it makes sense to carry out only if absolutely necessary, for example, if there are good reasons to believe that theft has taken place in a particular outlet;

–  independent sampling, which is carried out by an auditor [7].

In the case of an independent sample inventory, the sample includes:

–  goods that were supposed to be taken out of the store, but remained in stock for unknown reasons.;

–  the most expensive products;

–  goods located in a protected area (for example, near a cashier or a security guard);

–  minimum quantity of goods;

–  returned items;

–  goods for which shortages (surpluses) were detected during the previous inspection.

Before conducting an independent inventory, it is recommended to interview the director and employees of the inspected trading company regarding the implementation of regulations for the movement and storage of goods, regular inventory by employees. Based on the results of the survey, it is possible to identify specific problems that the auditor will focus on in the inventory review process.

Let’s take a closer look at the inventory stages.

Stage 1 – preparatory work. It involves the preparation of an inventory order, inventory inventories of goods, and the formation of a list of employees for conducting control procedures. The order is a written assignment specifying the content, scope, procedure and timing of the inventory of the inspected object, as well as the personal composition of the inventory commission. Therefore, when compiling it, it is necessary to clearly identify the dates and objects of the inventory, as well as its causes and members of the commission. This document must be registered in the control log for completed activities. Before carrying out an inventory, it is necessary to obtain from the accountant data on stocks in a particular trading company on a certain date for each item.

Stage 2 – in-kind verification. At this stage, inventory is being carried out both in the trading floor of the enterprise and in the warehouse. The internal auditor determines the sequence in choosing the product range. It is worth answering that thanks to modern technologies, it is possible to carry out inventory much faster, for example, when using a data collection terminal (TSD). Upon completion of the recalculation of goods, an inventory will be automatically generated based on data from the terminal, which must be compiled in two copies – one is stored in the accounting department, the second is given to the financially responsible person. This document is signed by all members of the commission, as well as financially responsible persons.

Stage 3 – comparison of inventory data with accounting data. At this stage, discrepancies in accounting with actual balances are identified. The head of the organization, together with the employees who conducted the inventory, determines the causes of discrepancies, and, if necessary, the movement of inventory items for the period since the previous inventory is checked. Collation statements are used to reflect the results of an inventory of fixed assets, intangible assets, inventory items, finished goods and other tangible assets for which deviations from accounting data have been identified. Since the turnover in a large trade organization is quite large, when planning the volume of inventory, it is necessary to take into account deviations that will be written off as expenses of the company in the future. It is calculated as a percentage of the total turnover of a particular outlet.

Stage 4 – preparation of documents on the results of the inventory. At this stage, the accounting data is adjusted to the inventory results. Identified discrepancies (surpluses or shortages) should be registered as income or expense. At the same time, the accountant enters all the final figures into the inventory results sheet in columns: surpluses, shortages, damaged goods, records the reassortment, distributes the natural loss amounts, the amount to be written off from the perpetrators and the amount in excess of the natural loss rates. The document is signed by all participants in the process. If there is a clear picture of the deviations, the head issues an order approving the inventory results, on the basis of which it is possible to recover damages from the perpetrators and make appropriate entries in the accounting registers. Persons guilty of incorrect accounting of property are brought to administrative responsibility, financially responsible persons are brought to financial responsibility in accordance with an individual or collective agreement on financial responsibility. The inventory process is documented [9].

The verification of purchases and supplies of goods deserves special attention within the framework of the internal control of a trade organization.

Revenues from product sales are the main source of profit generation for enterprises, therefore, the result of sales management has a significant impact on their financial activities. In this regard, the main task of the department responsible for procurement is to ensure the timely receipt of goods in the required quantity, quality and timing.

The control of the purchase of goods is aimed at solving the following tasks:

–  ensuring the legality of procurement operations based on compliance with legal requirements regarding the economic content of the transaction and its execution;

–  implementation of the procurement plan in all existing conditions, as well as timely changes to it, analysis of conditions and factors caused by the deviation of actual indicators from the planned ones;

–  selection of suppliers with optimal purchase conditions (price, quality, delivery time);

–  compliance with the terms of contracts with suppliers, both on the part of the organization and on the part of the supplier, the application of established penalties;

–  control of accounts payable – compliance with the accounting procedure for settlements with suppliers and the terms of repayment of accounts payable;

–  ensuring the accuracy of accounting for the receipt of goods to the organization, the input value-added tax on the received goods;

–  ensuring that management can obtain complete and accurate information on the status of the procurement plan, operational information on the receipt and availability of goods using management and accounting data;

–  compliance with the principles and methods of internal control;

–   provision of entrance conditions for the acceptance of goods to the warehouse [4].

Each formal control procedure is developed in accordance with certain procurement conditions. Its development boils down to defining and documenting the relationships between the elements of the organizational control model at different stages of the procurement process, namely:

–  development of the structure of the department responsible for procurement;

–  formation of the document flow of this department;

–  justification and description of the procurement plan;

–  formation of a supplier selection system;

–  selection of inventory management method for each supplier;

–  formation and placement of orders;

–  accounting for incoming goods and accounting for settlements with suppliers;

–  monitoring the implementation of the procurement plan and analyzing the work with suppliers.

The organizational structure of the department responsible for procurement is based on the optimal distribution of responsibility and authority among employees and is one of the factors forming the control environment. As a rule, in small organizations, one employee combines the functions of selecting a supplier, concluding contracts, drawing up orders and accounting for the receipt of goods. This contradicts the basic principle of control — the division of responsibilities and creates conditions for abuse, concealment of mistakes, makes it difficult to identify them.

For large trading organizations, the biggest risk associated with the delivery of goods is non-fulfillment of supplier obligations and non-receipt of goods. In order to avoid serious consequences in the event of such a risk, it is necessary to calculate the quantity of goods in the warehouse, thanks to which the company will not feel an acute shortage in the trading floors.

To calculate the optimal size of an order for the purchase of goods, the Wilson formula is used:

Q = √ (2DS/H) ,                                                          (1)

where Q is the optimal order size.;

D – annual demand for the product;

S – the cost of placing an order (for example, to find a supplier, paperwork);

H is the cost of storing a unit of goods per year (including warehouse and insurance costs).

However, this method has a number of negative aspects, such as:

–  the model can only be applied to a specific article.;

–  only the constant level of demand is taken into account;

–  the time interval between deliveries is constant;

–  purchase prices are constant, etc.

The procurement process can directly affect the overall profit of the company. Thus, when choosing suppliers, the cost of purchases for the nearest period is determined. His choice may depend on the availability of the necessary goods, the level of quality, as well as the price component. At the same time, verification requires the availability of licenses, certificates and other documents confirming the quality of products from the supplier. It is also necessary to clarify the terms of payment, as well as whether there are conditions for deferred payments, discounts, and shipping costs. Based on such information, the degree of reliability of the supplier is determined.

Along with this, it should be noted that excess stocks lead to losses due to deterioration and obsolescence of material assets, increased storage costs, and a decrease in the market value of material resources purchased with excess inventory.

Procurement department employees should regularly monitor their performance indicators using a variety of reports, accounting systems, and reconciliation of actual indicators with planned ones.

At the next level, control is carried out by the head of the department, who must first of all:

–  check the compliance of inventory turnover with regulations, the volume of shortages, surpluses and illiquid types of goods, as well as carry out procedures and control measures to prevent them, using indicators such as:

• sales volumes of goods;
• revenue, inventory turnover, etc.;
• the proportion of unsatisfied customer demand and illiquid goods;
• the efficiency and workload of the procurement department staff and the effectiveness of their motivation;

–  monitor contractual activities, monitor suppliers, meet directly with their representatives, and work to systematically improve the terms of interaction.;

–  monitor compliance with pricing strategies and techniques [3].

To increase the effectiveness of the internal control system in a trade organization, it is advisable to implement a set of measures aimed at strengthening the identification and prevention of financial and operational risks.

First of all, it is necessary to review and optimize the internal accounting procedures for commodity transactions, increasing the level of automation of accounting and inventory control using modern software. Process automation reduces the likelihood of errors and ensures timely delivery of analytical information to management.

Additionally, a system of regular audits should be developed and implemented, conducted both by independent services and by external experts. Such events contribute to a more objective assessment of compliance with established rules and the identification of potential violations at an early stage.

An important aspect is also the training of personnel in the rules of internal control and ethics of business interaction, which reduces the likelihood of abuse and contributes to the formation of a corporate culture of compliance with regulatory requirements.

Finally, it is advisable to implement an analytical monitoring system for key performance indicators, which will allow timely detection of deviations from regulatory values and take corrective actions. Within the framework of this system, it is possible to use indicators for inventory turnover, the level of shortages, as well as the level of sales of accounts receivable and payables.

To summarize, it should be noted that the internal control system is an integral component of the effective functioning of a modern trade organization. It ensures the sustainability of business processes and increases their manageability. In a dynamically changing market environment and increasing requirements for transparency of financial reporting, the integration of the internal control system facilitates the early detection and prevention of various types of risks, including financial, operational and reputational. This approach ensures compliance with regulatory requirements, internal policies of the organization and ethical standards, which in turn reduces the likelihood of fraud, abuse and errors on the part of employees.