IT IT Auditing
Auditing & Assurance,
& Assurance, 2e, Hall2e, Hall & Singleton
& Singleton
CLASSES OF INPUT
CONTROLS
1) Source document controls
2) Data coding controls
3) Batch controls
4) Validation controls
5) Input error correction
6) Generalized data input
systems
IT Auditing & Assurance, 2e, Hall & Singleton
SOURCE DOCUMENT
CONTROLS
Controls in systems using physical source
documents
Source document fraud
To control for exposure, control procedures
are needed over source documents to
account for each one
Use pre-numbered source documents
Use source documents in sequence
Periodically audit source documents
IT Auditing & Assurance, 2e, Hall & Singleton
DATA CODING CONTROLS
Checks on data integrity during processing
Transcription errors
Addition errors, extra digits
Truncation errors, digit removed
Substitution errors, digit replaced
Transposition errors
Single transposition: adjacent digits transposed (reversed)
Multiple transposition: non-adjacent digits are transposed
Control = Check digits
Added to code when created (suffix, prefix,
embedded)
Sum of digits (ones): transcription errors only
Modulus 11: different weights per column: transposition and
transcription errors
Introduces storage and processing inefficiencies
IT Auditing & Assurance, 2e, Hall & Singleton
BATCH CONTROLS
Method for handling high volumes of
transaction data – esp. paper-fed IS
Controls of batch continues thru all phases of
system and all processes (i.e., not JUST an
input control)
1) All records in the batch are processed together
2) No records are processed more than once
3) An audit trail is maintained from input to output
Requires grouping of similar input transactions
IT Auditing & Assurance, 2e, Hall & Singleton
VALIDATION CONTROLS
Intended to detect errors in data
before processing
Most effective if performed close to
the source of the transaction
Some require referencing a master
file
IT Auditing & Assurance, 2e, Hall & Singleton
VALIDATION CONTROLS
Field Interrogation
Missing data checks
Numeric-alphabetic data checks
Zero-value checks
Limit checks
Range checks
Validity checks
Check digit
Record Interrogation
Reasonableness checks
Sign checks
Sequence checks
File Interrogation
Internal label checks (tape)
Version checks
Expiration date check
IT Auditing & Assurance, 2e, Hall & Singleton
INPUT ERROR CORRECTION
Batch – correct and resubmit
Controls to make sure errors dealt with
completely and accurately
1) Immediate Correction
2) Create an Error File
Reverse the effects of partially
processed, resubmit corrected records
Reinsert corrected records in
processing stage where error was
detected
3) Reject the Entire Batch
IT Auditing & Assurance, 2e, Hall & Singleton
GENERALIZED DATA INPUT
SYSTEMS (GDIS)
Centralized procedures to manage data input for all
transaction processing systems
Eliminates need to create redundant routines for
each new application
Advantages:
Improves control by having one common
system perform all data validation
Ensures each AIS application applies a
consistent standard of data validation
Improves systems development efficiency
IT Auditing & Assurance, 2e, Hall & Singleton
CLASSES OF PROCESSING
CONTROLS
1) Run-to-Run Controls
2) Operator Intervention
Controls
3) Audit Trail Controls
IT Auditing & Assurance, 2e, Hall & Singleton
RUN-TO-RUN (BATCH)
Use batch figures to monitor
the batch as it moves from
one process to another
1) Recalculate Control Totals
2) Check Transaction Codes
3) Sequence Checks
IT Auditing & Assurance, 2e, Hall & Singleton
OPERATOR INTERVENTION
When operator manually enters
controls into the system
Preference is to derive by logic
or provided by system
IT Auditing & Assurance, 2e, Hall & Singleton
AUDIT TRAIL CONTROLS
Every transaction becomes traceable from
input to output
Each processing step is documented
Preservation is key to auditability of AIS
Transaction logs
Log of automatic transactions
Listing of automatic transactions
Unique transaction identifiers [s/n]
Error listing
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
Ensure system output:
1) Not misplaced
2) Not misdirected
3) Not corrupted
4) Privacy policy not violated
Batch systems more susceptible to exposure,
require greater controls
Controlling Batch Systems Output
Many steps from printer to end user
Data control clerk check point
Unacceptable printing should be shredded
Cost/benefit basis for controls
Sensitivity of data drives levels of controls
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
Output spooling – risks:
Access the output file and change
critical data values
Access the file and change the
number of copies to be printed
Make a copy of the output file so
illegal output can be generated
Destroy the output file before printing
take place
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
Bursting
Supervision
Waste
Proper disposal of aborted copies
and carbon copies
Data control
Data control group – verify and log
Report distribution
Supervision
IT Auditing & Assurance, 2e, Hall & Singleton
OUTPUT CONTROLS
End user controls
End user detection
Report retention:
Statutory requirements (gov’t)
Number of copies in existence
Existence of softcopies (backups)
Destroyed in a manner consistent
with the sensitivity of its contents
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER
APPLICATION CONTROLS
1) Around the computer
1) Rarely appropriate
1) Through the computer
1) Supported by continuous
audit techniques
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER APPLICATION
AROUND THE COMPUTER
Ignore internal logic of application
Use functional characteristics
Flowcharts
Interview key personnel
Advantages:
Do not have to remove application from
operations to test it
Appropriately applied:
Simple applications
Relative low level of risk
IT Auditing & Assurance, 2e, Hall & Singleton
TESTING COMPUTER APPLICATION
CONTROLS THROUGH THE COMPUTER
Relies on in-depth understanding of the
internal logic of the application
Uses small volume of carefully crafted,
custom test transactions to verify specific
aspects of logic and controls
Allows auditors to conduct precise test with
known outcomes, which can be compared
objectively to actual results
IT Auditing & Assurance, 2e, Hall & Singleton
TOOLS AND TECHNIQUES
(CAATTs)
1) Test data method
2) Base case system evaluation
3) Tracing
4) Integrated Test Facility [ITF]
5) Parallel simulation
6) GAS
IT Auditing & Assurance, 2e, Hall & Singleton
TEST DATA
Used to establish the application processing
integrity
Uses a “test deck”
Valid data
Purposefully selected invalid data
Every possible:
Input error
Logical processes
Irregularity
Procedures:
1) Predetermined results and expectations
2) Run test deck
3) Compare
IT Auditing & Assurance, 2e, Hall & Singleton
TRACING
Test data technique that takes step-by-step
walk through application
1) The trace option must be enabled for the application
2) Specific data or types of transactions are created as
test data
3) Test data is “traced” through all processing steps of
the application, and a listing is produced of all lines of
code as executed (variables, results, etc.)
Excellent means of debugging a faculty
program
IT Auditing & Assurance, 2e, Hall & Singleton
TEST DATA: ADVANTAGES AND
DISADVANTAGES
Advantages of test data
1) They employ white box approach, thus providing explicit
evidence
2) Can be employed with minimal disruption to operations
3) They require minimal computer expertise on the part of
the auditors
Disadvantages of test data
1) Auditors must rely on IS personnel to obtain a copy of
the application for testing
2) Audit evidence is not entirely independent
3) Provides static picture of application integrity
4) Relatively high cost to implement, auditing inefficiency
IT Auditing & Assurance, 2e, Hall & Singleton
Continuous Auditing
Embedded Audit Module
Real and test transactions
Tagged transactions
Audit hooks
IT Auditing & Assurance, 2e, Hall & Singleton
INTEGRATED TEST FACILITY
ITF is an automated technique that allows auditors to
test logic and controls during normal operations
Set up a dummy entity within the application system
1) Set up a dummy entity within the application system
2) System able to discriminate between ITF audit module
transactions and routine transactions
3) Auditor analyzes ITF results against expected results
IT Auditing & Assurance, 2e, Hall & Singleton
PARALLEL SIMULATION
Auditor writes or obtains a copy of the program that
simulates key features or processes to be reviewed /
tested
1) Auditor gains a thorough understanding of the
application under review
2) Auditor identifies those processes and controls critical
to the application
3) Auditor creates the simulation using program or
Generalized Audit Software (GAS)
4) Auditor runs the simulated program using selected data
and files
5) Auditor evaluates results and reconciles differences
6) Out of date approach
IT Auditing & Assurance, 2e, Hall & Singleton
Email and IM
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Sedona ConferenceWG1 Best
Practices for E Doc Retention and
Production
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Sedona ESI Framework
Sedona Conference - White papers on keyword
searches and electronic stored information (ESI)
Keyword list can cut costs substantially
Most searches turn up small percent of relevant
documents and miss many critical documents
Risks for both under and over inclusive terms
Sedona framework provides higher quality and
lower costs
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Keyword Search and
E-Discovery
E-discovery and document review expensive
Cost associated with heavy reliance on human
review
Search solutions were not built with e-discovery
in mind
Majority of companies do not have an effective
retention or archiving plan for electronic
documents
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ESI Retention Policy
Must comply with SOX and be scrutinized by legal
Categorize documents by type and retention
period
Use different archival methods
Software can provide for efficient retrieval
Train employees to policy
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E-Mail Retention Policy
Federal Rules of Civil Procedure, industry
regulations and internal policies all influence which
emails should be archived.
Safe harbor in eDiscovery rests in an organization
adhering to its policies and procedures that guide
the destruction of its email data.
Not all e-mails are the same: Set archive categories
by nature of email.
Adopt a policy and do not vary from it.
Redacted E-mail and Privacy
Deleted information may be recoverable from
electronic documents
Policy should be specific as to what information
must be deleted before issuing to a third party
Covered by federal laws and regs
Software available to filter and delete
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Cost of Poor Retention Policy
The judge could …
instruct the jury to infer that the record(s) destroyed
contained information unfavorable to your company.
order your company to pay cost of restoring any
archival media on which a lost record is stored plus
reasonable litigation expenses incurred by your
opponent in filing a motion for discovery and
production of the record.
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Beware the
Unmanaged IM and Email
Recipients may retain IM
IM immune to firewalls
IM may be offensive to employees
Track IM usage
Enable content filtering and blocking
Log and audit conversations
Do not allow encrypted IM
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IT Auditing & Assurance, 2e, Hall & Singleton
IT Auditing & Assurance, 2e, Hall & Singleton