AUTOMATION OF INTERNAL CONTROL SYSTEMS IN AZERBAIJAN BANKS:IMPROVING ACCOUNTING AND AUDIT IN DIGITAL BANKING

Abstract

This article analyzes the internal control system in commercial banks in the context of improving accounting and audit in digital banking, using the example of Azerbaijan. The essence and main objectives of internal control are explained, and its types and classification criteria (including classifications proposed by Reznikov and Adams) are described. The levels of internal control present in the Azerbaijani banking system (first, second, third) and their characteristics are examined. With reference to international experience, the application of Basel Committee principles and other international standards to internal control systems is assessed. The article provides an analysis of the state and effectiveness of internal control in Azerbaijani banks based on practical examples and statistical data. The key problems identified in internal control systems (weak control culture, delayed risk detection, flaws in segregation of duties, communication barriers, deficiencies in internal audit, etc.) and their solutions are discussed. The role of risk management as a subsystem of internal control is also highlighted, with approaches to managing operational, credit, market, and reputational risks in a digital banking environment presented. In conclusion, the strategic importance of an effective, technology-enabled internal control system for the sustainability and financial stability of banks in the digital era is affirmed.