Cisa CH 1

ISACA
TRUST IN, AND VALUE FROM, INFORMATION SYSTEMS

1
Copyright 2013 ISACA. All rights reserved.
2013 CISA Review Course

CHAPTER 1 THE PROCESS OF AUDITING INFORMATION SYSTEMS
2
About Me.
Bharat Raigangar
Director Corporate Service Advisory Inc
Offices in United States of America, UAE & India
Country Head of Corporate Security & Fraud Risk

Royal Bank of Scotland Middle East & Africa
President of ISACA UAE Chapter 2010 & 2011 Board Member from 2004 Board Member of Association of Certified Fraud Examiner Certification C-CISO, CRISC, CGEIT, CISM, CISA, CIA, CFE, CICA, CFAP, DBM, MBC
3
About My Organization
Corporate Governance
Information Governance & Control Business Process Re-Engineering
Corporate Risk Management Fraud Management Records Management Business Resilience Health & Safety Specialized Training M&A Risk Advisory General Advisory..
Domains
The Process of Auditing Information System (14%) Governance and Management of IT (14%) Info. System Acquisition, Development and Implementation (19%) Info. System operations, maintenance and support (23%) Protection of Information Asset (30%)
5
Course Agenda
Learning Objectives
Discuss Task and Knowledge Statements Discuss specific topics within the chapter Case studies Sample questions
6
Exam Relevance
Ensure that the CISA candidate
Has the knowledge necessary to provide audit services in accordance with IT audit standards to assist the organization with protecting and controlling information systems The content area in this chapter will represent approximately 14% of the CISA examination (approximately 28 questions).
7
The Process of Auditing Information Systems

Domain definition: Provide audit services in accordance with IT audit standards to assist the organization in protecting and controlling information systems.
8
Learning Objectives
Ensure that the CISA candidate has the knowledge necessary to provide audit services in accordance with IT audit standards to assist the organization with protecting and controlling information systems.
9
Topics

10
Management of the IS Audit Function ISACA IT Audit and Assurance Std & Guideline Risk Analysis Internal Controls Performing an IS Audit Control Self-Assessment (CSA) Evolving IS Audit Process Case Studies Q&A
Domain 1 Task Statements

There are five tasks within this domain that a CISA must know how to perform:
T1.1 Develop and implement a risk-based IT audit strategy in compliance with IT audit standards to ensure that key areas are included. T1.2 Plan specific audits to determine whether information systems are protected, controlled and provide value to the organization. T1.3 Conduct audits in accordance with IT audit standards to achieve planned audit objectives.
11
Domain 1 Task Statements

T1. 4 Report audit findings and make recommendations to key stakeholders to communicate results and effect change when necessary.
T1.5 Conduct follow-ups or prepare status reports to ensure appropriate actions have been taken by management in a timely manner.
12
Domain 1 Knowledge Statements

There are 10 knowledge statements within the process of auditing information systems domain: KS1.1 Knowledge of ISACA IT Audit and Assurance Standards, Guidelines, and Tools and Techniques; Code of Professional Ethics; and other applicable standards KS1.2 Knowledge of risk assessment concepts, tools and techniques in an audit context KS1.3 Knowledge of control objectives and controls related to information systems KS1.4 Knowledge of audit planning and audit project management techniques, including follow-up
13

KS1.5 Knowledge of fundamental business processes (e.g., purchasing, payroll, accounts payable, accounts receivable) including relevant IT KS1.6 Knowledge of applicable laws and regulations that affect the scope, evidence collection and preservation, and frequency of audits KS1.7 Knowledge of evidence collection techniques (e.g., observation, inquiry, inspection, interview, data analysis) used to gather, protect and preserve audit evidence
14

KS1.8 Knowledge of different sampling methodologies KS1.9 Knowledge of reporting and communication techniques (e.g., facilitation, negotiation, conflict resolution, audit report structure) KS1.10 Knowledge of audit quality assurance systems and frameworks
15
1.2.1 Organization of the IS Audit Function

Audit charter (or engagement letter)
Stating managements responsibility and objectives for, and delegation of authority to, the IS audit function
Outlining the overall authority, scope and responsibilities of the audit function
Approval of the audit charter Change in the audit charter

16
1.2.2 IS Audit Resource Management

Limited number of IS auditors Maintenance of their technical competence Assignment of audit staff
17
1.2.3 Audit Planning

Short-term planning Individual Audit Planning Long-term planning Things to consider
New control issues Changing technologies Changing business processes Enhanced evaluation techniques
Understanding of overall environment

Business practices and functions Information systems and technology
18
1.2.3 Audit Planning (cont.)
19
1.2.4 Effect of Laws and Regulations on IS Audit Planning

Regulatory requirements generally describe the:
Establishment Organization
Responsibilities
Correlation of the regulation to financial, operational and IS audit functions
20
1.2.4 Effect of Laws and Regulations on IS Audit Planning

(cont.)
Steps to determine compliance with external requirements:

Identify external requirements Document pertinent laws and regulations
Assess whether management and the IS function have considered the relevant external requirements
Review internal IS department documents that address adherence to applicable laws Determine adherence to established procedures
21
1.3.1 ISACA Code of Professional Ethics
The Associations Code of Professional Ethics provides guidance for the professional and personal conduct of members of ISACA and/or certification holders.
22
1.3.2 ISACA IS Audit and Assurance Standards Framework

Framework for the ISACA IS Auditing Standards:
Standards www.isaca.org/standards
Guidelines www.isaca.org/guidelines
Tools and Techniques
23
1.3.2 ISACA IS Audit and Assurance Standards Framework

(cont.)
Objectives of the ISACA IS Audit and Assurance Standards:

Inform management and other interested parties of the professions expectations concerning the work of audit practitioners Inform information system auditors of the minimum level of acceptable performance required to meet professional responsibilities set out in the ISACA Code of Professional Ethics
24
1.3.2 ISACA IS Audit and Assurance Standards Framework (cont.)

S1 - Audit Charter
S2 - Independence S3 - Ethics and Standards
S4 - Competence
S5 - Planning S6 - Performance of Audit Work
S7 - Reporting
S8 - Follow-up Activities
25
1.3.2 ISACA IS Audit and Assurance Standards Framework (cont.)

S9 - Irregularities and illegal acts S10 - IT governance S11 - Use of risk assessment in audit planning S12 - Audit Materiality S13 - Using the Work of Other Experts S14 - Audit Evidence S15 - IT Controls S16 - E-commerce
26
1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)
S1 - Audit Charter
Purpose, responsibility, authority and accountability Approval
S2 Independence
27
Professional independence Organizational independence
S3 -Professional Ethics and Standards
Code of Professional Ethics Due professional care
S4 -Competence
Skills and knowledge Continuing professional education
28

Plan IS audit coverage Develop and document a risk-based audit approach Develop and document an audit plan Develop an audit program and procedures
S5 - Planning
S6 Performance of Audit Work

29
Supervision Evidence Documentation
S7 Reporting
Identify the organization, intended recipients and any restrictions State the scope, objectives, coverage and nature of audit work performed State the findings, conclusions and recommendations and limitations Justify the results reports Be signed, dated and distributed according to the audit charter
30
S8 - Follow-up Activities
Review previous conclusions and recommendations Review previous relevant findings Determine whether appropriate actions have been taken by management in a timely manner
31

Consider the risk of irregularities and illegal acts Maintain an attitude of professional skepticism Obtain an understanding of the organization and its environment Consider unusual or unexpected relationships Test the appropriateness of internal control Assess any misstatement
S9 Irregularities and Illegal Acts
32
S9 Irregularities and Illegal Acts

(continued)
Obtain written representations from management Have knowledge of any allegations of irregularities or illegal acts Communicate material irregularities or illegal acts Consider appropriate action in case of inability to continue performing the audit Document irregularity- or illegal act-related communications, planning, results, evaluations and conclusions
33
S10 - IT Governance
Review and assess the IS functions alignment with the organizations mission, vision, values, objectives and strategies Review the IS functions statement about the performance and assess its achievement Review and assess the effectiveness of IS resource and performance management processes
34
S10 - IT Governance
(continued)
Review and assess compliance with legal, environmental and information quality, and fiduciary and security requirements Use a risk-based approach to evaluate the IS function Review and assess the organizations control environment Review and assess the risks that may adversely affect the IS environment
35
S11 - Use of Risk Assessment in Audit
Planning Use a risk assessment technique in developing the overall IS audit plan Identify and assess relevant risks in planning individual reviews
36
S12 Audit
Materiality
The IS auditor should consider audit materiality and its relationship to audit risk The IS auditor should consider potential weakness or absence of controls when planning for an audit The IS auditor should consider the cumulative effect of minor control deficiencies or weaknesses The IS audit report should disclose ineffective controls or absence of controls
37
S13 - Using the Work of Other Experts
The IS auditor should consider using the work of other experts The IS auditor should be satisfied with the qualifications, competencies, etc., of other experts The IS auditor should assess, review and evaluate the work of other experts The IS auditor should determine if the work of other experts is adequate and complete The IS auditor should apply additional test procedures to gain sufficient and appropriate audit evidence The IS auditor should provide appropriate audit opinion
38

Includes procedures performed by the auditor and results of those procedures Includes source documents, records and corroborating information Includes findings and results of the audit work Demonstrates that the work was performed and complies with applicable laws, regulations and policies
S14 -Audit Evidence
39

The IS auditor should evaluate and monitor IT controls that are an integral part of the internal control environment of the organization.
S15 - IT Controls
S16 - Ecommerce
40
The IS Auditor should evaluate applicable controls and assess risk when reviewing e-commerce environments to ensure that ecommerce transactions are properly controlled.
1.3.3 ISACA IT Audit and Assurance Guidelines

G1 Using the Work of Other Auditors, effective 1 March 2008 G2 Audit Evidence Requirement, effective 1 May 2008 G3 Use of Computer Assisted Audit Techniques (CAATs), effective 1 March 2008 G4 Outsourcing of IS Activities to Other Organizations, effective 1 May 2008 G5 Audit Charter, effective 1 February 2008 G6 Materiality Concepts for Auditing Information Systems, effective 1 May 2008
G7 Due Professional Care, effective 1 March 2008

G8 Audit Documentation, effective 1 March 2008
41
1.3.3 ISACA IS Auditing Guidelines (cont.)

G9 Audit Considerations for Irregularities, effective 1 September 2008 G10 Audit Sampling, effective 1 August 2008 G11 Effect of Pervasive IS Controls, effective 1 August 2008 G12 Organizational Relationship and Independence, effective 1 August 2008 G13 Use of Risk Assessment in Audit Planning, effective 1 August 2008 G14 Application Systems Review, effective 1 December 2008 Withdrawn 14 Jan. 2013See Generic Applications Audit/Assurance Program
G15 Audit Planning, effective 1 May 2010 G16 Effect of Third Parties on an Organizations IT Controls, effective 1 March 2009 See Outsourced IT Environments Audit/Assurance Program
G17 Effect of Non-audit Role on the IS Auditors Independence, effective 1 May 2010
42

G18 IT Governance, effective 1 July 2002 Withdrawn 14 Jan. 2013 G19 Irregularities and Illegal ActsWithdrawn 1 September 2008 G20 Reporting, effective 16 September 2010 Enterprise Resource Planning (ERP)Systems Review, effective 16 September 2010 G21 Withdrawn 14 Jan. 2013See Security, Audit and Control Features SAP ERP, 3rd Edition Audit Programs and ICQs
G22
Business-to-consumer (B2C) E-commerce Review, effective 1 December 2008 Withdrawn 14 Jan. 2013See E-commerce and PKI Audit/Assurance Program
System Development Life Cycle (SDLC) Review, effective 1 August 2003 G23 Withdrawn 14 Jan. 2013See Systems Development and Project Management Audit/Assurance Program G24 Internet Banking, effective 1 August 2003 Withdrawn 14 Jan. 2013
43

G25 G26 G27 Review of Virtual Private Networks, effective 1 July 2004 Withdrawn 14 Jan. 2013See VPN Security Audit/Assurance Program Business Process Reengineering (BPR) Project Reviews, effective 1 July 2004 Withdrawn 14 Jan. 2013 Mobile Computing, effective 1 September 2004 Withdrawn 14 Jan. 2013See Mobile Computing Security Audit/Assurance Program
G28 Computer Forensics, effective 1 September 2004 Withdrawn 14 Jan. 2013 G29 Postimplementation Review, effective 1 January 2005 Withdrawn 14 Jan. 2013 See Systems Development and Project Management Audit/Assurance Program
G30 Competence, effective 1 June 2005

G31
Privacy, effective 1 June 2005 Withdrawn 14 Jan. 2013See PII Audit/Assurance Program
44

Business Continuity Plan Review From IT Perspective, effective 1 September 2005 G32 Withdrawn 14 Jan. 2013See Business Continuity Management Audit/Assurance Program G33 General Considerations on the Use of the Internet, effective 1 March 2006 Withdrawn 14 Jan. 2013See E-commerce and PKI Audit/Assurance Program
G34 Responsibility, Authority and Accountability, effective 1 March 2006 G35 Follow-up Activities, effective 1 March 2006 G36
Biometric Controls, effective 1 February 2007 Withdrawn 14 Jan. 2013See Biometrics Audit/Assurance Program
G37 Configuration Management, effective 1 November 2007 G38 Access Control, effective 1 February 2008 Withdrawn 14 Jan. 2013See Identity Management Audit/Assurance Program
45

G39 IT Organizations, effective 1 May 2008 Withdrawn 14 Jan. 2013
G40 Review of Security Management Practices, effective 1 December 2008 Withdrawn 14 Jan. 2013See See Security Incident Management Audit/Assurance Program Return on Security Investment (ROSI), effective 1 May 2010 Withdrawn 14 Jan. G41 2013
G42 Continuous Assurance, effective 1 May 2010
46
1.3.4 ISACA IS Audit and Assurance Tools and Techniques

Guidance and examples of possible processes an IS auditor might follow in an audit engagement.
IS auditors should apply their own professional judgment to the specific circumstances.
47
Standards Guidelines
1.3.5 Relationship Among Standards, Guidelines and Tools and Techniques
Must be followed by IS auditors

Provide assistance on how to implement the standards
Tools and Techniques

Provide examples for implementing the standards
48
1.3.6 Information Technology Assurance Framework (ITAF)

Section 1000 General Standards Section 1200 Performance Standards Section 1400 Reporting Standards Section 2000 General Guidelines Section 2200 Performance Guidelines Section 2400 Reporting Guidelines Section 3000 Tools and Techniques
49
1.4 Risk Analysis (cont.)

From the IS auditors perspective, risk analysis serves more than one purpose:
It assists the IS auditor in identifying risks and threats to an IT environment and IS systemrisks and threats that would need to be addressed by management and in identifying system specific internal controls. Depending on the level of risk, this assists the IS auditor in selecting certain areas to examine.
50

It helps the IS auditor in his/her evaluation of controls in audit planning. It assists the IS auditor in determining audit objectives. It supports risk-based audit decision making. Part of audit planning Helps identify risks and vulnerabilities
The IS auditor can determine the controls needed to mitigate those risks
51

IS auditors must be able to:
Be able to identify and differentiate risk types and the controls used to mitigate these risks Have knowledge of common business risks, related technology risks and relevant controls Be able to evaluate the risk assessment and management techniques used by business managers, and to make assessments of risk to help focus and plan audit work Have an understand that risk exists within the audit process
52

In analyzing the business risks arising from the use of IT, it is important for the IS auditor to have a clear understanding of:
The purpose and nature of business, the environment in which the business operates and related business risks The dependence on technology and related dependencies that process and deliver business information The business risks of using IT and related dependencies and how they impact the achievement of the business goals and objectives A good overview of the business processes and the impact of IT and related risks on the business process objectives
53
54
1.5 Internal Controls

Policies, procedures, practices and organizational structures implemented to reduce risks
Classification of internal controls
Preventive controls
Detective controls Corrective controls
55
1.5 Internal Controls (cont.)
56
1.5 Internal Controls (cont.)

Internal control system Internal accounting controls Operational controls
Administrative controls
57
1.5.1 IS Control Objectives

Internal control objectives apply to all areas, whether manual or automated. Therefore, conceptually, control objectives in an IS environment remain unchanged from those of a manual environment.
58
1.5.1 IS Control Objectives

Safeguarding assets Ensuring the integrity of general operating system environments Ensuring the integrity of sensitive and critical application system environments through:
Authorization of the input
Validation of the input Accuracy and completeness of processing of transactions All transactions are recorded accurately and entered into the system for the proper period Reliability of overall information processing activities Accuracy, completeness and security of the output
59
(cont.)
Database integrity
1.5.1 IS Control Objectives (cont.)

Ensuring appropriate identification and authentication of users of IS resources Ensuring the efficiency and effectiveness of operations Complying with requirements, policies and procedures, and applicable laws Developing business continuity and disaster recovery plans Developing an incident response plan Implementing effective change management procedures
60
1.5.2 COBIT 5
Governance of Enterprise IT IT Governance Management Control Risk IT Audit
COBIT1 COBIT2 COBIT3
(2009)
Evolution of scope
Val IT 2.0
(2008)
COBIT4.0/4.1
COBIT 5
1996
1998
2000
2005/7
2012
An business framework from ISACA, at www.isaca.org/cobit

61
Copyright 2013 ISACA. All rights reserved. 2012 ISACA All rights reserved.
1.5.2 COBIT 5 (cont.)

The five COBIT 5 principles are:
1. Meeting Stakeholder Needs 2. Covering the Enterprise End-to-end 3. Applying a Single Integrated Framework 4. Enabling a Holistic Approach 5. Separating Governance From Management
62
Meeting Stakeholder Needs

Stakeholder needs have to be transformed into an enterprises practical strategy. The COBIT 5 goals cascade translates stakeholder needs into specific, practical and customised goals within the context of the enterprise, IT-related goals and enabler goals.
63
Source: COBIT 5, figure 4. 2012 ISACA All rights reserved.
Covering the Enterprise End-to-end

Key components of a governance system
64
Applying a Single, Integrated Framework

There are many IT-related standards and best practices, each providing guidance on a subset of IT activities. COBIT 5 aligns with other relevant standards and frameworks at a high level, and thus can serve as the overarching framework for governance and management of enterprise IT.
65
Enabling a Holistic Approach
COBIT 5 Enabler Dimensions: All enablers have a set of common dimensions. This set of common dimensions: Provides a common, simple and structured way to deal with enablers Allows an entity to manage its complex interactions Facilitates successful outcomes of the enablers
Source: COBIT 5, figure 13. 2012 ISACA All rights reserved. Copyright 2013 ISACA. All rights reserved.
66
Separating Governance From Management

Governance ensures that stakeholders needs, conditions and options are evaluated to determine balanced, agreed-on enterprise objectives to be achieved; setting direction through prioritisation and decision making; and monitoring performance and compliance against agreed-on direction and objectives (EDM). Management plans, builds, runs and monitors activities in alignment with the direction set by the governance body to achieve the enterprise objectives (PBRM).
67
Separating Governance From Management (cont.)

COBIT 5 is not prescriptive, but it advocates that organisations implement governance and management processes such that the key areas are covered, as shown.
68
Source: COBIT 5, figure 15. 2012 ISACA All rights reserved. Copyright 2013 ISACA. All rights reserved.
1.5.3 General Controls

Apply to all areas of an organization and include policies and practices established by management to provide reasonable assurance that specific objectives will be achieved. Internal accounting controls directed at accounting operations
Operational controls concerned with the day-to-day operations
69
1.5.3 General Controls

(cont.)
Administrative controls concerned with operational efficiency and adherence to management policies Organizational logical security policies and procedures Overall policies for the design and use of documents and records Procedures and features to ensure authorized access to assets
Physical security policies for all data centers
70
1.5.4 IS Controls
Strategy and direction of the IT function General organization and management of the IT function Access to IT resources, including data and programs Systems development methodologies and change control Operations procedures Systems programming and technical support functions
71
1.5.4 IS Controls (cont.)

Quality assurance procedures
Physical access controls

Business continuity/disaster recovery planning Networks and communications Database administration Protection and detective mechanisms against internal and external attacks
72
1.6 Performing an IS Audit

Definition of auditing
Systematic process by which a competent, independent person objectively obtains and evaluates evidence regarding assertions about an economic entity or event for the purpose of forming an opinion about and reporting on the degree to which the assertion conforms to an identified set of standards.
Definition of IS auditing
Any audit that encompasses review and evaluation (wholly or partly) of automated information processing systems, related nonautomated processes and the interfaces between them.
73
1.6.1 Classification of Audits

74
Compliance audits Financial audits Operational audits Integrated audits Administrative audits IS audits Specialized audits Forensic audits
1.6.2 Audit Programs

Based on the scope and objective of the particular assignment IS auditors perspectives:
Security (confidentiality, integrity and availability)
Quality (effectiveness, efficiency) Fiduciary (compliance, reliability) Service and capacity
75

(cont.)
General audit procedures Understanding of the audit area/subject Risk assessment and general audit plan Detailed audit planning Preliminary review of audit area/subject Evaluating audit area/subject Verifying and evaluating controls Compliance testing Substantive testing Reporting (communicating results) Follow-up
76

(cont.)
Procedures for Testing and Evaluating IS Controls Use of generalized audit software to survey the contents of data files
Use of specialized software to assess the contents of operating system parameter files Flow-charting techniques for documenting automated applications and business process Use of audit reports available in operation systems Documentation review Observation
Walkthroughs
Reperformance of controls
77
1.6.3 Audit Methodology

A set of documented audit procedures designed to achieve planned audit objectives
Composed of:
Statement of scope
Statement of audit objectives

Statement of audit programs
Set up and approved by the audit management Communicated to all audit staff
78

(cont.)
Audit phases

79
Audit subject Audit objective Audit scope Preaudit planning Audit procedures and steps for data gathering Procedures for evaluating the test or review results Procedures for communication with management Audit report preparation

(cont.)
Audit Phases Identify Audit subject Define the audit objective Description
Identify the area to be audited. Identify the purpose of the audit. For example, an objective might be to determine whether program source code changes occur in a well-defined and controlled environment.
Define the audit scope
Identify the specific systems, function or unit of the organization to be included in the review. For example, in the previous program changes example, the scope statement might limit the review to a single application system or to a limited period of time.
Perform the pre-audit planning
Identify technical skills and resources needed. Identify the sources of information for test or review such as functional flow charts, policies, standards, procedures and prior audit work papers. Identify locations or facilities to be audited.
80

(cont.)
Audit Phase - Continued Audit procedures and steps for data gathering Description
Identify and select the audit approach to verify and test the controls. Identify a list of individuals to interview. Identify and obtain departmental policies, standards and guidelines for review. Develop audit tools and methodology to test and verify control. Organization-specific Organization-specific Identify follow-up review procedures. Identify procedures to evaluate/test operational efficiency and effectiveness. Identify procedures to test controls. Review and evaluate the soundness of documents, policies and procedures.
Procedures for evaluating the test or review results Procedures for communication with management Audit report preparation
81

(cont.)
What is documented in work papers (WPs)?

Audit plans Audit programs
Audit activities
Audit tests Audit findings and incidents
82
1.6.4 Fraud Detection

Managements responsibility
Benefits of a well-designed internal control system

Deterring fraud at the first instance Detecting fraud in a timely manner
Fraud detection and disclosure
Auditors role in fraud prevention and detection
83
1.6.5 Risk-based Auditing
84
1.6.6 Audit Risk and Materiality

Audit risk categories Inherent risk Control risk
Detection risk
Overall audit risk
85
1.6.7 Risk Assessment and Treatment

Assessing security risks
Risk assessments should identify, quantify and prioritize risks against criteria for risk acceptance and objectives relevant to the organization Should be performed periodically to address changes in the environment, security requirements and when significant changes occur
86
1.6.7 Risk Assessment and Treatment (cont.)

Treating security risks
Each risk identified in a risk assessment needs to be treated Possible risk responses include:
-Risk mitigation
-Risk acceptance -Risk avoidance -Risk transfer/sharing
87
1.6.8 Risk Assessment Techniques

Enables management to effectively allocate limited audit resources Ensures that relevant information has been obtained from all levels of management
Establishes a basis for effectively managing the audit department

Provides a summary of how the individual audit subject is related to the overall organization as well as to the business plan
88
1.6.9 Audit Objectives

Specific goals of the audit
Compliance with legal and regulatory
requirements
Confidentiality Integrity Reliability
Availability
89
1.6.10 Compliance vs. Substantive Testing

Compliance test
Determines whether controls are in compliance with management policies and procedures Tests the integrity of actual processing
Substantive test
Correlation between the level of internal controls and
substantive testing required

Relationship between compliance and substantive tests
90
1.6.10 Compliance vs. Substantive Testing (cont.)
91
1.6.11 Evidence
It is a requirement that the auditors conclusions be based on sufficient, competent evidence:
Independence of the provider of the evidence Qualification of the individual providing the
information or evidence
Objectivity of the evidence
Timing of the evidence

92
1.6.11 Evidence (cont.)

Techniques for gathering evidence:

Review IS organization structures Review IS policies and procedures Review IS standards Review IS documentation Interview appropriate personnel
Observe processes and employee performance
93
1.6.12 Interviewing and Observing Personnel in Performance of Their Duties Actual functions Actual processes/procedures Security awareness Reporting relationships Observation drawbacks
94
1.6.13 Sampling
General approaches to audit sampling: Statistical sampling Non-statistical sampling
95
1.6.13 Sampling (cont.)

Attribute sampling
Stop-or-go sampling
Discovery sampling
Variable sampling
Stratified mean per unit Unstratified mean per unit
Difference estimation
96

Statistical sampling terms:
Confident coefficient Level of risk Precision Expected error rate
97

Statistical sampling terms (continued):
Sample mean Sample standard deviation Tolerable error rate Population standard deviation
98

Key steps in choosing a sample:
Determine the objectives of the test
Define the population to be sampled Determine the sampling method, such as attribute versus variable sampling Calculate the sample size Select the sample Evaluating the sample from an audit perspective
99
1.6.14 Using the Services of Other Auditors and Experts

Considerations when using services of other auditors and experts: Restrictions on outsourcing of audit/security services provided by laws and regulations Audit charter or contractual stipulations Impact on overall and specific IS audit objectives Impact on IS audit risk and professional liability Independence and objectivity of other auditors and experts
100
1.6.14 Using the Services of Other Auditors and Experts (cont.)

Considerations when using services of other auditors and experts:
Professional competence, qualifications and experience Scope of work proposed to be outsourced and approach
Supervisory and audit management controls

Method and modalities of communication of results of audit work Compliance with legal and regulatory stipulations Compliance with applicable professional standards
101
1.6.15 Computer-assisted Audit Techniques

CAATs enable IS auditors to gather information independently CAATs include:
Generalized audit software (GAS)
Utility software
Debugging and scanning software Test data
Application software tracing and mapping

Expert systems
102
1.6.15 Computer-assisted Audit Techniques (cont.)

Features of generalized audit software (GAS):

103
Mathematical computations Stratification Statistical analysis Sequence checking File access File reorganization Data selection Statistical functions Arithmetical functions
Functions supported by GAS:

Items to consider before utilizing CAATs:
Ease of use for existing and future audit staff Training requirements
Complexity of coding and maintenance

Flexibility of uses Installation requirements
Processing efficiencies
Confidentiality of data being processed
104

Documentation that should be retained: Online reports Commented program listings Flowcharts Sample reports Record and file layouts Field definitions Operating instructions Description of applicable source documents
105

CAATs as a continuous online audit approach:
Improves audit efficiency IS auditors must:
develop audit techniques for use with advanced computerized systems be involved in the creation of advanced systems make greater use of automated tools
106
1.6.16 Evaluation of Audit Strengths and Weaknesses

Assess evidence
Evaluate overall control structure
Evaluate control procedures

Assess control strengths and weaknesses
107
1.6.16 Evaluation of Audit Strengths and Weaknesses

(cont.)
Judging materiality of findings

Materiality is a key issue
Assessment requires judgment of the potential effect of the finding if corrective action is not taken
108
1.6.17 Communicating Audit Results

Exit interview
Correct facts Realistic recommendations
Implementation dates for agreed recommendations
Presentation techniques
Executive summary Visual presentation
109
1.6.17 Communicating Audit Results (cont.)

Audit report structure and contents An introduction to the report Audit findings presented in separate sections The IS auditors overall conclusion and opinion The IS auditors reservations with respect to the audit Detailed audit findings and recommendations A variety of findings
110
1.6.18 Management Implementation of Recommendations

Auditing is an ongoing process
Timing of follow-up
111
1.6.19 Audit Documentation

Audit documentation includes:
Planning and preparation of the audit scope and objectives Description on the scoped audit area Audit program Audit steps performed and evidence gathered Other experts used Audit findings, conclusions and recommendations
112
1.7 Control SelfAssessment

A management technique
A methodology
In practice, a series of tools

Can be implemented by various methods
113
1.7 Control SelfAssessment (cont.)
114
1.7.1 Objectives of CSA

Leverage the internal audit function by shifting some control monitoring responsibilities to functional areas Enhancement of audit responsibilities, not a replacement Educate management about control design and monitoring Empowerment of workers to assess the control environment
115
1.7.2 Benefits of CSA

Early detection of risks More effective and improved internal controls Increased employee awareness of organizational objectives Highly motivated employees Improved audit rating process Reduction in control cost Assurance provided to stakeholders and customers
116
1.7.3 Disadvantages of CSA

Could be mistaken as an audit function replacement
May be regarded as an additional workload
Failure to act on improvement suggestions could damage employee morale

Lack of motivation may limit effectiveness in the detection of weak controls
117
1.7.4 Auditor Role in CSA
Internal control professionals
Assessment facilitators
118
1.7.5 Technology Drivers for CSA

Combination of hardware and software Use of an electronic meeting system
Computer-supported decision aids

Group decision making is an essential component
119
1.7.6 Traditional vs. CSA Approach

Traditional Approach
Assigns duties/supervises staff Policy/rule driven Limited employee participation Narrow stakeholder focus
CSA Approach
Empowered/accountable employees
Continuous improvement/learning curve Extensive employee participation and training Broad stakeholder focus
120
1.8.1 Integrated Auditing

Process whereby appropriate audit disciplines are combined to assess key internal controls over an operation, process or entity. Focuses on risk to the organization (for an internal auditor) Focuses on the risk of providing an incorrect or misleading audit opinion (for an external auditor)
121
1.8.1 Integrated Auditing

(cont.)
Process involves:
Identification of risks faced by organization and of relevant key controls

Review and understanding of the design of key controls
Testing that key controls are supported by the IT system

Testing that management controls operate effectively A combined report or opinion on control risks, design and weaknesses
122
1.8.2 Continuous Auditing

Distinctive character
Short time lapse between the facts to be audited and the collection of evidence and audit reporting
Drivers
Better monitoring of financial issues Allows real-time transactions to benefit from realtime monitoring Prevents financial fiascoes and audit scandals Uses software to determine proper financial controls
123
1.8.2 Continuous Auditing (cont.)

Continuous auditing vs. continuous monitoring
Continuous monitoring
Provided by IS management tools Based on automated procedures to meet fiduciary responsibilities
Continuous auditing
Audit-driven Completed using automated audit procedures
124

Application of continuous auditing due to:
New information technology developments Increased processing capabilities Standards Artificial intelligence tools
125

Prerequisites: A high degree of automation An automated and reliable information-producing process Alarm triggers to report control failures Implementation of automated audit tools Quickly informing IS auditors of anomalies/errors Timely issuance of automated audit reports Technically proficient IS auditors Availability of reliable sources of evidence Adherence to materiality guidelines Change of IS auditors mindset Evaluation of cost factors
126

IT techniques in a continuous auditing environment:

127
Transaction logging Query tools Statistics and data analysis (CAAT) Database management systems (DBMS) Data warehouses, data marts and data mining Intelligent agents Embedded audit modules (EAM) Neural network technology Standards such as Extensible Business Reporting Language

Advantages
Instant capture of internal control problems Reduction of intrinsic audit inefficiencies
Disadvantages
Difficulty in implementation High cost Elimination of auditors personal judgment and evaluation
128
1.9.1 Case Study A Scenario

The IS auditor has been asked to perform preliminary work that will assess the readiness of the organization for a review to measure compliance with new regulatory requirements. These requirements are designed to ensure that management is taking an active role in setting up and maintaining a wellcontrolled environment and, accordingly, will assess managements review and testing of the general IT control environment. Areas to be assessed include logical and physical security, change management, production control and network management, IT governance, and end-user computing. The IS auditor has been given six months to perform this preliminary work, so sufficient time should be available. It should be noted that in previous years, repeated problems have been identified in the areas of logical security and change management, so these areas will most likely require some degree of remediation.
129
1.9.1 Case Study A Scenario (continued)

Logical security deficiencies noted included the sharing of administrator accounts and failure to enforce adequate controls over passwords. Change management deficiencies included improper segregation of incompatible duties and failure to document all changes. Additionally, the process for deploying operating system updates to servers was found to be only partially effective. In anticipation of the work to be performed by the IS auditor, the chief information officer (CIO) requested direct reports to develop narratives and process flows describing the major activities for which IT is responsible. These were completed, approved by the various process owners and the CIO, and then forwarded to the IS auditor for examination.
130
Case Study A Question

1. What should the IS auditor do FIRST?
A.
B. C.
Perform an IT risk assessment.

Perform a survey audit of logical access controls. Revise the audit plan to focus on risk-based auditing.
D.
Begin testing controls that the IS auditor feels are most critical.
Correct Ans: A
131
Case Study A Question

2. When testing program change management, how should the sample be selected?
A. B. C. D. Change management documents should be selected at random and examined for appropriateness. Changes to production code should be sampled and traced to appropriate authorizing documentation. Change management documents should be selected based on system criticality and examined for appropriateness. Changes to production code should be sampled and traced back to system-produced logs indicating the date and time of the change.
Correct Ans: B
132
1.9.2 Case Study B Scenario

An IS auditor is planning to review the security of a financial application for a large company with several locations worldwide. The application system is made up of a web interface, a business logic layer and a database layer. The application is accessed locally through a LAN and remotely through the Internet via a virtual private network (VPN) connection.
133
Case Study B Question

1. The MOST appropriate type of CAATs tool the auditor should use to test security configuration settings for the entire application system is:
A. B. C. D. generalized audit software. test data. utility software. expert system.
Correct Ans: C
134

2. Given that the application is accessed through the Internet, how should the auditor determine whether to perform a detailed review of the firewall rules and virtual private network (VPN) configuration settings?
A. B. C. D. Documented risk analysis Availability of technical expertise Approach used in previous audit IS auditing guidelines and best practices
Correct Ans: A
135

3.
During the review, if the auditor detects that the transaction authorization control objective cannot be met due to a lack of clearly defined roles and privileges in the application, the auditor should FIRST:
A. B. C. D. review the authorization on a sample of transactions. immediately report this finding to upper management. request that auditee management review the appropriateness of access rights for all users. use a generalized audit software to check the integrity of the database.
Correct Ans: A
136
1.9.3 Case Study C Scenario

An IS auditor has been appointed to carry out IS audits in an entity for a period of 2 years. After accepting the appointment, the IS auditor noted that:
The entity has an audit charter that detailed, among other things, the scope and responsibilities of the IS audit function and specifies the audit committee as the overseeing body for audit activity. The entity is planning a major increase in IT investment, mainly on account of implementation of a new ERP application, integrating business processes across units dispersed geographically. The ERP implementation is expected to become operational within the next 90 days. The servers supporting the business applications are hosted offsite by a third-party service provider.
137
1.9.3 Case Study C Scenario (continued)

The entity has a new incumbent as chief information security officer (CISO), who reports to the chief financial officer (CFO). The entity is subject to regulatory compliance requirements that require its management to certify the effectiveness of the internal control system as it relates to financial reporting. The entity has been recording growth at double the industry average consistently over the last two years. However, the entity has seen increased employee turnover as well.
138
Case Study C Question

1. The FIRST priority of the IS auditor in year 1 should be to study the:
A. B. previous IS audit reports and plan the audit schedule. audit charter and plan the audit schedule.
C.
D.
impact of the new incumbent as CISO.

impact of the implementation of a new ERP on the IT environment and plan the audit schedule.
Correct Ans: D
139
Case Study C Question

2. How should the IS auditor evaluate backup and batch processing within computer operations?
A. B. C. D. Plan and carry out an independent review of computer operations. Rely on the service auditors report of the service provider. Study the contract between the entity and the service provider. Compare the service delivery report to the service level agreement.
Correct Ans: D
140
Practice Question
1-1 Which of the following establishes the overall authority to perform an IS audit? A. The audit scope, with goals and objectives B. A request from management to perform an audit C. The approved audit charter D. The approved audit schedule
Correct Ans: C
141
Practice Question
1-2 In performing a risk-based audit, which risk assessment is completed initially by the IS auditor?
A. B. C. D. Detection risk assessment Control risk assessment Inherent risk assessment Fraud risk assessment
142
Practice Question
1-3 While developing a risk-based audit program, on which of the following would the IS auditor MOST likely focus?
A. B. C. D. Business processes Critical IT applications Operational controls Business strategies
143
Practice Question
1-4 Which of the following types of audit risk assumes an absence of compensating controls in the area being reviewed?
A. B. C. D. Control risk Detection risk Inherent risk Sampling risk
144
Practice Question
1-5 An IS auditor performing a review of an applications controls finds a weakness in system software that could materially impact the application. The IS auditor should:
A. B. C. D. disregard these control weaknesses, as a system software review is beyond the scope of this review. conduct a detailed system software review and report the control weaknesses. include in the report a statement that the audit was limited to a review of the applications controls. review the system software controls as relevant and recommend a detailed system software review.
145
Practice Question
1-6 Which of the following is the MOST important reason why an audit planning process should be reviewed at periodic intervals?
A. B. C. D. To plan for deployment of available audit resources To consider changes to the risk environment To provide inputs for documentation of the audit charter To identify the applicable IS audit standards
146
Practice Question
1-7 Which of the following is MOST effective for implementing a control self-assessment (CSA) within business units?
A. B. C. D. Informal peer reviews Facilitated workshops Process flow narratives Data flow diagrams
147
Practice Question
1-8 The FIRST step in planning an audit is to:
A.
B. C.
define audit deliverables.

finalize the audit scope and audit objectives gain an understanding of the businesss objectives.
D.
develop the audit approach or audit strategy.
148
Practice Question
1-9 The approach an IS auditor should use to plan IS audit coverage should be based on:
A. B. risk. materiality.
C.
D.
professional skepticism.
Sufficiency of audit evidence.
149
Practice Question
1-10 A company performs a daily backup of critical data and software files and stores the backup tapes at an offsite location. The backup tapes are used to restore the files in case of a disruption. This is a:
A. B. C. D. preventive control. management control. corrective control. detective control.
150
Practice 11
1, In a risk-based audit approach, the IS auditor must consider the inherent risk as well as considering:
A. how to eliminate the risk through the application of controls. B. the balance of loss potential vs. the cost to implement controls. C. whether the risk is material, regardless of managements tolerance for risk. D. whether the residual risk is higher than the insurance coverage purchased.
B Determining the correct balance between the loss potential and the cost to implement controls is a very important part of an effective risk mitigation strategy. The best internal control is one where the benefit of implementing the control at least matches the cost. Eliminating risk is very difficult to achieve and often impossible to attain. Hence, the IS auditor should not recommend that risk be eliminated since this is not likely to be cost-effective for the organization. Whether the risk is material is not the correct answer since the risk tolerance of management determines what is material. Insurance coverage is not necessarily the only control to consider for mitigating residual
151
Practice 12
12. Which of the following sampling methods is MOST useful when testing for compliance?
A. Attribute sampling B. Variable sampling C. Stratified mean per unit D. Difference estimation
A Attribute sampling is the primary sampling method used for compliance testing. Attribute sampling is a sampling model that is used to estimate the rate of occurrence of a specific quality (attribute) in a population and is used in compliance testing to confirm whether the quality exists. The other choices are used in substantive testing, which involves testing of details or quantity.
152
Practice 13
13. Which of the following is the MOST critical step to perform when planning an IS audit?
A. Review findings from prior audits. B. Develop plans to conduct a physical security review of the data center facility. C. Review IS security policies and procedures. D. Perform a risk assessment.
D Of all the steps listed, performing a risk assessment is the most critical. Risk assessment is required by ISACA IT Audit and Assurance Standard S11 (Use of Risk Assessment in Audit Planning). In addition to the standards requirement, if a risk assessment is not performed, then high-risk areas of the auditee systems or operations may not be identified for evaluation. Detection risk (the risk that a material error is not detected by the IS auditor) is increased for the IS auditor if a risk assessment is not conducted. The review of findings from prior audits is a necessary part of the engagement, but this step is not as critical as conducting a risk assessment. A physical security review of the data center facility is important, but not as critical as performing a risk assessment. Reviewing IS security policies and procedures would normally be conducted during fieldwork, not planning.
153
Practice 14
14. While planning an audit, an assessment of risk should be made to provide: A. reasonable assurance that the audit will cover material items. B. definite assurance that material items will be covered during the audit work. C. reasonable assurance that all items will be covered by the audit. D. sufficient assurance that all items will be covered during the audit work. A The ISACA IS Auditing Guideline G15 on planning the IS audit states, An assessment of risk should be made to provide reasonable assurance that material items will be adequately covered during the audit work. This assessment should identify areas with a relatively high risk of the existence of material problems. Definite assurance that material items will be covered during the audit work is an impractical proposition. Reasonable assurance that all items will be covered during the audit work is not the correct answer, as material items need to be covered, not all items.
154
Practice 15
15. After reviewing the disaster recovery plan (DRP) of an organization, an IS auditor requests a meeting with company management to discuss the findings. Which of the following BEST describes the main goal of this meeting?
A. Obtaining management approval of the corrective actions B. Confirming factual accuracy of the findings C. Assisting management in the implementation of corrective actions D. Clarifying the scope and limitations of the audit
B The goal of the meeting is to confirm the factual accuracy of the audit findings and present an opportunity for management to agree on corrective action. Management approval of the corrective actions is not required since this is not the role of the auditor. Implementation of corrective actions should be done after the factual accuracy of findings has been established, but the work of implementing corrective action is not typically assigned to the IS auditor since this would impair the auditors independence. Clarifying the scope and limitations of the audit should be done during the entrance meeting, not during the exit meeting.
155
Conclusion
Chapter 1 Quick Reference Review

Page 29 of CISA Review Manual 2013
156

Cisa CH 1

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Cisa CH 1

Transféré par

Droits d'auteur :

Formats disponibles

ISACA

TRUST IN, AND VALUE FROM, INFORMATION SYSTEMS

2013 CISA Review Course

Country Head of Corporate Security & Fraud Risk

Copyright 2013 ISACA. All rights reserved.

The Process of Auditing Information Systems

Domain 1 Task Statements

Domain 1 Task Statements

Domain 1 Knowledge Statements

Domain 1 Knowledge Statements

Domain 1 Knowledge Statements

1.2.1 Organization of the IS Audit Function

Approval of the audit charter Change in the audit charter

1.2.2 IS Audit Resource Management

1.2.3 Audit Planning

Understanding of overall environment

1.2.3 Audit Planning (cont.)

1.2.4 Effect of Laws and Regulations on IS Audit Planning

1.2.4 Effect of Laws and Regulations on IS Audit Planning

Steps to determine compliance with external requirements:

1.3.1 ISACA Code of Professional Ethics

1.3.2 ISACA IS Audit and Assurance Standards Framework

1.3.2 ISACA IS Audit and Assurance Standards Framework

Objectives of the ISACA IS Audit and Assurance Standards:

1.3.2 ISACA IS Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IS Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

Purpose, responsibility, authority and accountability Approval

Professional independence Organizational independence

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S3 -Professional Ethics and Standards

Code of Professional Ethics Due professional care

Skills and knowledge Continuing professional education

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S6 Performance of Audit Work

Supervision Evidence Documentation

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S9 Irregularities and Illegal Acts

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S9 Irregularities and Illegal Acts

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S11 - Use of Risk Assessment in Audit

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S13 - Using the Work of Other Experts

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

S14 -Audit Evidence

1.3.2 ISACA IT Audit and Assurance Standards Framework (cont.)

1.3.3 ISACA IT Audit and Assurance Guidelines

G7 Due Professional Care, effective 1 March 2008

1.3.3 ISACA IS Auditing Guidelines (cont.)

1.3.3 ISACA IS Auditing Guidelines (cont.)

1.3.3 ISACA IS Auditing Guidelines (cont.)

G30 Competence, effective 1 June 2005

1.3.3 ISACA IS Auditing Guidelines (cont.)

1.3.3 ISACA IS Auditing Guidelines (cont.)

G42 Continuous Assurance, effective 1 May 2010

1.3.4 ISACA IS Audit and Assurance Tools and Techniques

1.3.5 Relationship Among Standards, Guidelines and Tools and Techniques