INTERNAL AUDIT AS A TOOL FOR ENSURING TRANSPARENCY AND COMPLIANCE WITHIN THE UKRAINE FACILITY PROGRAM: CHALLENGES OF MARTIAL LAW

Abstract

The article provides a comprehensive study of the functional and methodological transformation of internal audit systems in the context of implementing the EUR 50 billion Ukraine Facility program. Amidst the ongoing war and Ukraine’s accelerated European integration, the internal audit function is undergoing a paradigm shift, evolving from a traditional retrospective verification mechanism into a proactive strategic tool designed to secure the trust of international donors and European institutions. Central to this study is the identification of the "control paradox" — the tension between the necessity to rapidly restore infrastructure and the obligation to adhere to the rigorous compliance and transparency procedures mandated by the EU. The primary objective of the research is the scientific substantiation of conceptual principles for transforming internal audit to ensure transparency and anti-corruption monitoring of investment projects within the Ukraine Facility under martial law. The methodological foundation relies on a systematic analysis of the EU’s three-tier control architecture and a comparative legal evaluation of Regulation (EU) 2024/792 in relation to Ukrainian legislation. The authors employ a risk-based approach utilizing the COSO framework, adapted to security threats, alongside data mining techniques to model efficient remote audit processes. The study identifies specific security, corruption, and operational risks of "wartime auditing," justifying a transition toward the Digital Assurance model. It is demonstrated that the integration of auditing with the DREAM ecosystem, combined with the deployment of Artificial Intelligence (AI) for fraud monitoring, bridges the methodological gap created by restricted physical access to objects. The research defines the auditor's role as a guarantor of the targeted use of funds through continuous remote monitoring. Further research is proposed to develop ethical standards for auditors in conflict zones and a legal framework for utilizing AI findings as an evidence base for European oversight bodies.