for mipa2 nd may 2014 is audit dr. mitil chokshi chokshi & chokshi chartered accountants

For MIPA 2nd May 2014

IS AUDITDR. MITIL CHOKSHI

CHOKSHI & CHOKSHICHARTERED ACCOUNTANTS

For MIPA 2nd May 2014

Contents

Introduction

Guidelines

Need for controls

Internal Control Framework

Security Threats

Information Systems Risks

IS Audit Process

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Introduction“The process of collecting and evaluating evidence to determine

whether:

•Computer system safeguards assets•Maintains data integrity, confidentiality and availability •Allows organizational goals to be achieved •Determines the efficient use of resources”

Gain understanding of the organisation

Understand Risks and evaluate Controls

Test Controls

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GuidelinesISACA Guidelines

• IS Auditing Standards• IS Auditing Guidelines• IS Auditing Procedures• COBIT (Control objectives for information and related

technology)

ISO 27001

Guidelines by Institute of Internal Auditors

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GuidelinesCOSO’s Internal Control – Integrated Framework (the COSO Framework) published by the Committee of Sponsoring Organisations of the Treadway Commission

COCO (Criteria of Control) Framework published by the Canadian Institute of Chartered Accountants

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COSO Framework

Monitoring Applied to the Internal Control Process

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Need for ControlsThe Organization must protect itself from:

• Corruption of Data and Database.

• Poor decision making due to poor quality of MIS.

• Losses due to abuse of controls.

• Loss of hardware, software and personnel.

• Maintenance of Privacy .

• Malicious Internet Content.

• Authentication and Privilege attacks

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For MIPA 2nd May 2014

Security Threats

USB devices

Removable media

Internal attack

Network monitoring

Laptop theft

Storage theft

Hardware loss Unprotected Endpoints

Insecure network points

Insecure server rooms

Attacks on physical systems

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Security Threats

Disgruntled Employees

Password High Privileged Accounts

Privilege Creep

Authentication and Privilege Attacks

Inappropriate Password Policies

Weak Passwords

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Security ThreatsDenial of Service

Natural Disasters

Targeted DOS Single Point of failure

Power cuts Connection downtime

Bandwidth Exhaustion

Vulnerable Servers

Excess reliance on one person

Lack of documentation

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Security ThreatsMalicious Internet Content

Social Engineering

Phishing

Drive – by downloads

Malware Web Application

Attacks

Viruses Trojans Worms

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Security ThreatsExample: Phishing

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Security ThreatsExample: Drive-by downloads

Unintended Software

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Security ThreatsExample: Virus Scan

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Security ThreatsExample: Trojan Horse

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Security ThreatsExample: Spoofing

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Security ThreatsExample: Spoofing

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For MIPA 2nd May 2014

Cash receiptsapplication

controls

Salesapplication

controls

Payrollapplication

controls

Other cycleapplication

controls

GENERAL CONTROLS

Risk of unauthorized changeto application software Risk of system crash

Risk of unauthorizedmaster file update

Risk of unauthorizedprocessing

Relationship Between General and Application Controls

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Information Systems RisksAccess controls :

• Non-detection of Compromised passwords.

• Unauthorized users can access systems.

• Inappropriate access allowing recognised users greater access

than necessary.

• Unauthorized changes to data in master files.

• Unauthorized changes to systems or programs.

• Denial to access systems, DBMS’s and servers in the event of a

system interruption or disaster.

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Controls to Mitigate Risks arising from unauthorized Accesses :

• Authentication (identification) controls need to be strong.

• Roles and privileges should be granted on need-to-know basis only to authorized users.

• Job scheduling procedures and stored procedures need to be

secure.

• An alternate method to identify and register users needs to be tested and made available when needed.

Information Systems Risks

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Input Controls

• Unauthorized data received for computer processing.

• Loss of data or duplication of data.

• Automated segregation of duties and access rights.

• Automated authorization approval

• Incorrect output due to wrong input (GIGO)

Information Systems Risks

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Mitigating Risks arising from Input Controls:

• Review access rights that set and amend configurable approval and authorization limits.

• Accesses with super user rights.

• Maker Checker Controls

• Range check

• Completeness check

• Duplicate check

Information Systems Risks

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Process Controls

• Wrong Validation of data

• Risks arising out of Editing

Procedures

• Incorrect processing of data

• Absence of Data File Control

Procedures

Information Systems Risks

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• Parity checking

• Transaction logs

• Version Usage

• File updating and

maintenance authorization

• Sequence check

• Reasonableness check

• Table lookups

• Existence check

• Key verification

• Logical Relationship check

• Limit check

Mitigating Risks arising from Process Controls:

Information Systems Risks

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Output Controls

• Non-integrity of output

• Untimely distribution of output

• Availability of output to unauthorized users

• Data processing results are unreliable

Information Systems Risks

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Mitigating Risks arising from Output Controls:

Microsoft Office Word Document

Checklist for mitigating Risk

Information Systems Risks

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For MIPA 2nd May 2014

Statistics

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Issues Involved

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Preliminary Steps - Understanding of the Organisational Structure to identify CIO,

CISO, etc.

- Understanding of the System Architecture.

- Understanding components of the systems (number of servers, routers, users, desk users, on/offsite users)

- Reviewing the IS Security Policy

- Performing systems walk - throughs.

- Assessment of the risks and understanding of the related controls.

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IS Audit Process

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ProceduresInterviews.

- Interviews are a useful audit tool to gather information about internal system controls and risks.

- Employees involved in the day - to - day operations of a functional area possess the best knowledge of that area.

- They are in a position to identify the weak internal system controls and risks.

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ProceduresPreparation of Checklist & Questionnaire

- A detailed checklist should be prepared after having an understanding of the architecture of the system.

- Checklist should be comprehensive.

Sample Checklist

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For MIPA 2nd May 2014

Access Controls testing- Procedures

• Verifying access rights allotted vis-à-vis organizational policy for need to know

• Implementation of Password controls

• Process of review of logs of super users, database administrator

• Logs of active users vis-à-vis HR records for exit, leave, etc.

• License control processes

• Virus control procedures

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Vulnerability testing through internal resources

• Internal Security Vulnerability Assessment (ISVA) is a comprehensive analysis of all of the workstations and servers on your network.

• The ISVA detects and identifies Trojan horses, hacker tools, DDoS (Distributed Denial-of-Service) agents, and spyware through code analysis and signature matching, in much the same way as anti-virus.

• It also identifies specific vulnerabilities such as configuration problems in FTP servers, exploits in Microsoft IIS or problems in NT security policy configuration.

Access controls testing- Procedures

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Vulnerability testing through external resources

• One of the most common vulnerability assessment activities for companies of all sizes is an external penetration testing scan, typically targeting internet-facing websites.

• Once you set yourself outside of the company, you immediately are given an untrusted status. The systems and resources available to you externally are usually very limited.

Access controls testing- Procedures

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VIDEO CLIP

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Input Controls -Procedures

• Verification by entering invalid data

• Verification by entering incomplete data

• Testing Arithmetic Accuracy

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Processing Controls -Procedures

Integrated Test Facility (ITF) Approach

Parallel Simulation

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• A dummy ITF center is created for the auditors.

• Creation of transactions to test the controls.

• Creation of Working papers showing expected results from manually

processed information.

• Running of Auditor transactions with actual transactions.

• Comparing of ITF results to working papers.

Integrated Test Facility (ITF) Approach

Processing Controls -Procedures

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• Processing of real client data on an audit program similar to the client’s program.

• Comparison of results of processing with the results of the processing

done by the client’s program.

Parallel Simulation

Processing Controls -Procedures

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Computer Operations AuditorsActual

Transactions

ActualTransactions

ComputerApplication

System

ComputerApplication

System

Auditor’sSimulation

Program

Auditor’sSimulation

Program

Actual ClientReport

Actual ClientReport Auditor

SimulationReport

Auditor Simulation

Report

Auditor Compares

Parallel Simulation- Flowchart

Processing Controls -Procedures

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For MIPA 2nd May 2014

Application Controls -Procedures

Black box testing

• Method of software testing

• Examines the functionality of an application (e.g. what the software does) without peering into its internal structures or workings.

• Can be applied to virtually every level of software testing: unit, integration, system and acceptance.

• Typically comprises most if not all higher level testing, but can also dominate unit testing as well.

Black Box Testing

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Application Controls -Procedures

White-box testing

• Also known as clear box testing, glass box testing, transparent box testing, and structural testing.

• Method of testing software that tests internal structures or workings of an application, as opposed to its functionality (i.e. black-box testing).

• Internal perspective of the system, as well as programming skills, are used to design test cases.

• The tester chooses inputs to exercise paths through the code and determine the appropriate outputs.

White Box Testing

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Output Controls -Procedures• Checking whether output contain key control information

necessary to validate the accuracy and completeness of the information contained in the report such as last document reference period, etc.?

• If the data has to be transferred from one process to another process, verify if no manual intervention is possible and no unauthorized modification to data can be made.

• Verify physical controls over hardcopy printouts.

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For MIPA 2nd May 2014

Format

Format of IS Audit Report

Microsoft Office Word 97 - 2003 Document

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