IT Auditing, Hall, 3e

 IT Governance: subset of corporate

governance that focuses on the management
and assessment of strategic IT resources

Hall, 3e 1
 Three IT governance issues addressed by SOX
and the COSO internal control framework:
◦ Organizational structure of the IT function
◦ Computer center operations
◦ Disaster recovery planning

Hall, 3e 2
 Centralized data processing
Organizational chart]
Database administrator
Data processing manager/dept.
Data control
Data preparation/conversion
Computer operations
Data library

Hall, 3e
3
 Segregation of incompatible IT functions
Systems development & maintenance
Participants
End users
IS professionals
Auditors
Other stakeholders

Hall, 3e
4
 Segregation of incompatible IT functions
Objectives:
Segregate transaction authorization from
transaction processing
Segregate record keeping from asset custody
Divide transaction processing steps among
individuals to force collusion to perpetrate fraud

Hall, 3e
5
 Segregation of incompatible IT functions
Separating systems development from
computer operations

Hall, 3e
6
 Segregation of incompatible IT functions
Separating DBA from other functions
DBA is responsible for several critical tasks:
 Database security
 Creating database schema and
user views
 Assigning database access authority to users
 Monitoring database usage
 Planning for future changes

Hall, 3e
7
 Segregation of incompatible IT functions
 Alternative 1: segregate systems analysis from
programming
types of control problems from this
approach?

Hall, 3e 8
 Segregation of incompatible IT functions
 Alternative 2: segregate systems
development from maintenance

Hall, 3e
9
 Segregation of incompatible IT functions
 Segregate data library from operations
 Physical security of off-line data files
 Implications of modern systems on use of data
library:
 Real-time/online vs. batch processing
 Volume of tape files is insufficient to justify full-time
librarian
 Alternative: rotate on ad hoc basis
 Custody of on site data backups
 Custody of original commercial software and licenses

Hall, 3e
10
 Segregation of incompatible IT functions
 Audit objectives

Hall, 3e
11
 Segregation of incompatible IT functions
 Audit procedures:

Hall, 3e
12
 Distributed Data Processing (DDP)
involves reorganizing the central IT
function into small IT units that are
placed under the control of end users

Hall, 3e
13
 Inefficient use of resources
 Destruction of audit trails
 Inadequate segregation of duties
 Hiring qualified professionals
 Lack of standards

Hall, 3e
14
 Cost reduction
 Improved cost control responsibility
 Improved user satisfaction
 Backup flexibility

Hall, 3e
15
 Need for careful analysis
 Implement a corporate IT function
 Central systems development
 Acquisition, testing, and implementation of
commercial software and hardware
 User services
 Help desk: technical support, FAQs, chat room, etc.
 Standard-setting body
 Personnel review
 IT staff

Hall, 3e
16
 Verify that the structure of the IT function is
such that individuals in incompatible areas
are segregated
 Verify that formal relationships needs to exist
between incompatible tasks

Hall, 3e
17
 Review the corporate policy on computer
security
 Review documentation to determine if
individuals or groups are performing
incompatible functions
 Review systems documentation and
maintenance records

Hall, 3e
18
 Physical location
 Construction
 Access
 Air conditioning
 Fire suppression
 Power supply

Hall, 3e
19
 physical security IC protects the
computer center from physical
exposures
 insurance coverage compensates the
organization for damage to the
computer center
 operator documentation addresses
routine operations as well as system
failures

Hall, 3e
20
 Review insurance coverage on hardware,
software, and physical facility
 Review operator documentation, run
manuals, for completeness and accuracy
 Verify that operational details of a system’s
internal logic are not in the operator’s
documentation

Hall, 3e
21
 Disaster recovery plans (DRP)
identify:
 Audit objective – verify that DRP is
adequate and feasible for dealing
with disasters

Hall, 3e 22
 Disaster Recovery Plan
1. Critical Applications – Rank critical applications so an orderly and effective restoration of
computer systems is possible.
2. Create Disaster Recovery Team – Select team members, write job descriptions, describe
recovery process in terms of who does what.
3. Site Backup – a backup site facility including appropriate furniture, housing, computers, and
telecommunications. Another valid option is a mutual aid pact where a similar business or
branch of same company swap availability when needed.
4. Hardware Backup – Some vendors provide computers with their site – known as a hot site
or Recovery Operations Center. Some do not provide hardware – known as a cold site. When
not available, make sure plan accommodates compatible hardware (e.g., ability to lease
computers).
5. System Software Backup – Some hot sites provide the operating system. If not included in
the site plan, make sure copies are available at the backup site.
6. Application Software Backup – Make sure copies of critical applications are available at the
backup site
7. Data Backup – One key strategy in backups is to store copies of data backups away from
the business campus, preferably several miles away or at the backup site. Another key is to
test the restore function of data backups before a crisis.
8. Supplies – A modicum inventory of supplies should be at the backup site or be able to be
delivered quickly.
9. Documentation – An adequate set of copies of user and system documentation.
10. TEST! – The most important element of an effective Disaster Recovery Plan is to test it
before a crisis occurs, and to test it periodically (e.g., once a year).
Hall, 3e 23
 Major IC concerns:
◦ second-site backups
◦ critical applications and databases
 including supplies and documentation
◦ back-up and off-site storage
procedures
◦ disaster recovery team
◦ testing the DRP regularly

Hall, 3e 24
 Empty shell
 Recovery operations center
 Internally provided backup

Hall, 3e 25
 Evaluate adequacy of second-site
backup arrangements
 Review list of critical applications for
completeness and currency
 Verify that procedures are in place
for storing off-site copies of
applications and data
◦ Check currency back-ups and copies

Hall, 3e 26
 Verify that documentation, supplies,
etc., are stored off-site
 Verify that the disaster recovery
team knows its responsibilities
◦ Check frequency of testing the DRP

Hall, 3e 27
Hall, 3e 28
Hall, 3e 29
 Management retains SOX responsibilities
 SAS No. 70 report or audit of vendor will
be required

Hall, 3e 30