Internal Controls Over Information Systems
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Understanding how Internal Controls over Information systems support Internal Controls over Financial Reporting.

Understanding how Internal Controls over Information systems support Internal Controls over Financial Reporting.

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Internal Controls Over Information Systems Presentation Transcript

  • 1. Internal Controls Over Information Systems
  • 2. Information Technology
  • 3. Internal Controls OverInformation Systems• Objective – Understand how Internal Controls over Information systems support Internal Controls over Financial Reporting (ICFR)
  • 4. Agenda• Internal Controls• Segregation of Duties• System Development Lifecycle (SDLC)• Change Management• Security  Application/Platform  Logical Security  Physical Security
  • 5. Agenda• Security (continued)  Environmental Controls  Monitoring  Backup  Disaster Recovery• Third Parties/Cloud Computing• Prioritization• Summary
  • 6. Internal Controls OverInformation Systems
  • 7. Internal Controls• Internal controls are established as mechanism to achieve desired business objectives• Counter risks & threats, both external & internal, to business environment• Ensure business requirements of quality, cost & delivery are met• Resources are effectively & efficiently used
  • 8. Internal Controls• Confidentiality, integrity, availability (CIA) & reliability of information are met, as well as comply with statutory & regulatory requirements• Our focus will be on the last one, (CIA), as it relates to information systems & financial reporting  Confidentiality  Integrity  Availability
  • 9. Internal Controls• Internal controls over financial reporting (ICFR)  Focus is on financial data• Internal controls over information systems  Information System controls typically apply to whole organization – Best Practices  Financial Audit - Focus is on financial applications
  • 10. Information System Controls• Segregation of duties• System development lifecycle (SDLC)• Security  Logical  Physical  Environmental  Monitoring  Back up  Disaster recovery• Third parties/cloud computing
  • 11. Segregation of Duties• Checks & balances• Organizational structure  Who can submit invoices for payment?  Who can authorize?  Who reconciles bank statement?• Very important especially for  Small organizations  Downsized organizations
  • 12. Segregation of Duties• Information systems  What access do information systems personnel have?  Are their logs tracking activity?  Is someone reviewing logs?• Controlled with logical security  Typically by role
  • 13. System Development Life Cycle(SDLC)
  • 14. System Development Life Cycle(SDLC) • Assess needs • Design specifications/Vendor Selection • Develop/test software • Implement systems – training, documentation • Support operations (maintenance) • Evaluate performance (monitor)
  • 15. Change Management• Change management  Subset of SDLC  Quarterly, annual upgrades  Should be formal process  Integrated testing  Training  Sign off  Documentation  Includes configuration & upgrades for firewalls, routers & VPN
  • 16. Security
  • 17. Application/Platform Security• Risk & vulnerability will vary based on:  Applications and platforms being used  Location of systems: Onsite vs. hosted  Access to source code
  • 18. Logical Security • Computer access  Access to only what they need to do their job System/network level Application level • Password management Are they complex? Do they have to be changed? Is there policy about not sharing, writing them down, etc. • Wireless – Secured, Segmented
  • 19. Logical SecurityAccess management• New hires• Job changes• Terminations  Timely• Access audits  Employees  Third parties
  • 20. Physical Security• Building  Proximity cards Access based on role Terminations Lost cards Access audits  Cameras  Who monitors?  Data retention
  • 21. Physical Security • Data center  Similar to building controls  What about vendors? • Work areas  Can computers be stolen?  Can data be stolen?  Can malicious software be uploaded? • Mobile devices
  • 22. Environmental Controls • Generator • UPS • Sensors  Heat  Moisture • Are they tested? • Is there routine maintenance?
  • 23. Monitoring• User access – failed login attempts• Unauthorized access attempts through firewalls, routers & VPN• System usage – thresholds• Is someone monitoring, reporting & remediating?• Is a problem & incident system in place?
  • 24. Backup• What’s backed up?• How often?• How long are they saved?• Where are they stored?• How do they get there?• Who has access to them?• Are they tested periodically?• Redundancy – to supplement backups
  • 25. Disaster Recovery• Disaster recovery plan  What’s the plan? Criticality matrix  Do key people know about plan?  Can key people get to plan?  Does it include an alternate location?  Periodic testing
  • 26. Third Parties• When you outsource services, you increase risk• They need to have same or better controls as your organization• New vendors  Did anyone look at risk?  Did anyone decide if it was acceptable?
  • 27. Third Parties• Current Vendors  Vendor Inventory – Assess risk• How do you know controls are in place?  Selection process  SSAE16 (previously SAS70)  Inspections  Performance reports
  • 28. Third Party• Cloud computing  Do you know who they are?  Additional risks to consider• Third-party access  VPN  Encrypted or password protected files
  • 29. Others Control Areas• Strategic Plan• IT Strategy – strategic plan that includes risk management• Organizational infrastructure  Adequate number of trained personnel to support systems. Can they do their jobs without causing errors that impact financial data?  Current policies & procedures to prevent errors or disclosures
  • 30. Prioritization• How can we do all these things with our shrinking budgets?• Pick highest areas of risk & address first  Probability & impact analysis• Implement solutions based on size & complexity of your organization
  • 31. Summary Confidentiality – INTEGRITY – Availability Information System Controls C I A Segregation of Duties Y Y Y SDLC & Change Management Y Y Y Logical Security Y Y Y Physical Security Y Y Y Environmental Controls Y Monitoring Y Y Y Back Up Y Y Y Disaster Recovery Y Y Y Third Parties Y Y Y Internal Controls Over Financial Reporting Y
  • 32. SummaryInternal Controls over Information Systems  Ongoing process  Continually changing  Monitoring is key  Review periodically
  • 33. Contact Information Jeffrey Paulette BKD IT Risk Services 417.865.8701 jpaulette@bkd.comwww.bkd.com/services/it-risk-services/