Today’s Lecture Covers

Chapter 5 - Controls over Computer Operations and IS Support – Integrity

Chapter 7 – application controls

Dsheehy@grantthornton.ca

Integrity

System processing is complete, accurate, timely and authorized

Need to Align Comp. Op’n Services with Business Requirements

7 minimum control standards to ensure that defined user requirements are met. Operations and support to be defined in a formal

service agreement procedures to monitor operations and services delivery

performance (use of charge-out systems for IT costs - need to decide on fair allocation)

mgt processes should assess effectiveness and efficiency of service delivery

Alligning Comp. Op’n Services with Business Requirements

7 minimum control standards (cont’d) procedures should identify and resolved

promptly to minimize impact (anticipate user requirements and get appropriate resources in advance)

configuration mgt and planning procedures should be established. Important to have hardware and software monitoring and approval process.

Alligning Comp. Op’n Services with Business Requirements

the final 2 of 7 Operations change mgt process should ensure the

integrity of operations formal procedures should govern software version

usage and control strategy

Control over Integrity and Availability

ensure complete, accurate and authorized processing of information

ensure continuity of processing services in light of minor processing errors or minor destruction of records

formal stds and procedures for all significant computer operations

application environment is properly controlled

offsite-back up is used

Control over Integrity and Availability

operation service schedules used and monitored

physical and/or logical control over output

procedures to provide integrity of files in off-line storage

Control Over System Software

config mgt procedures used acquisition and implementation policies

used change mgt procedures should be used protection from viruses

Control over Info Transmission

procedures to protect in bound information and outbound information

network design should incorporate information integrity, confidentiality and availability requirements for transmissions

network implementation and config mgt needs to be controlled

Control over Data Mgt

roles and responsibilities for data mgt needed

database design and implementation needs to address security, integrity and control requirements

also incorporate reliability and availability requirements

Control over End-Using Computing

procedures to ensure that end-users conform with organizational strategy

stds for development, acquisition, documentation and operation of applications procedures.

Effective support and training

monitoring end-using computing

General vs Application Controls• general implemented consist. across all appl.• application are built into specific programs• distinction often arbitrary- general are usually

reviewed once for audit as a whole• application must be considered for each

significant application• if general are uniformly strong and operate

effectively obtain such assur. wrt each app.• if not, does not mean each appl. affected... need to

consider app by app.

Hardware - such as parity checks, character checks

Input and output controls - at source dep’t and data control

Programmed controls (software)

Application Controls

Effective Design

designed with regard to business requiredesigned with regard to business risk analysisonly rely upon after taking general controls into considerationlook for integrity/accuracyuse structured programming techniquesuse training

Types of Transactions

• each have different sensitivity and risk of errors• master file changes - updated only periodically• normal business applications• error correction transactions

Master File Changes

• completeness, accuracy, and data authorization critical

• error would occur every time• make sure using current masters• important to guard against fraud

Normal Transactions

• second largest concern as most transactions• necessary to control effectively• Need to include controls over regular

transactions and reports

Error Correction Transactions

• watch bypass potential• errors often put aside and ignored• all should be logged with clear responsibility

for correction• ideally put back through regular processing

Preventive Controls over Processing

• data entry as close to source of transact as possible to ensure familiarity

• structure operating procedures so that business activity not complete till transaction processing

• eliminate human component as much as possible

• authorize transactions before data entry

• use access control software

Preventive Controls over Processing (cont’d)

• use 3 levels access - physical access to terminal, access control over use of terminal and then authorization in software

• scrutinize manually prepared input • use computer to edit transactions - use edit progs

to check for items such as missing data, format, self checking digit, limits & logical relation checks

• use key verification & interactive systems• use formatted input screens

Preventive Controls over Processing (cont’d)

• use appropriately designed input forms• single source transaction data - input once • document application control procedures -

manuals etc.• training and supervision• adequate working conditions

Detective Controls

• Use suspense records for impending transactions

• Monitor & investigate lack of regular activity (see if transactions omitted)

• verify records by examining assets etc.• prepare budgets/investigate variances• number transactions - check sequence• group and count source documents and

count # transactions processed

Detective Controls (cont’d)

• use control totals to check completeness• reconcile changes in recorded assets and

liabilities to transactions processed• If practical, establish procedures for verification

by users• design programmed reasonableness tests• match processing results to source documents

in detail• check computations

Detective Controls (cont’d)

• use summary and exception reports• use double entry recording to balance

transactions• agree summary records to detailed records• require user approval of results• require error tracking and analysis - develop

stats

Master File Controls

• authorize all changes before input

• record changes to semi-permanent listings, reconcile changes

• print out for review by knowledgeable users for errors

• use control totals

• application progs should internally label master files

Errors and Exception Controls

• use error and exception reports - ensure follow- up

• user error logs and define correction procedures and responsibilities

• resubmit errors into NORMAL processing cycle - do not bypass

Management & Audit Trails

• file each record in planned sequence to facilitate retrieval

• provide unique id for each record• retain source copy for transactions• provide methods of tracing data backwards and

forwards through IS• document retention procedures

Management & Audit Trails (cont’d)

• use logs• periodically copy and save permanent records

that are overwritten by changes• provide software capability to scrutinize &

analyse data

Advanced System Characteristics

• absence independent evidence• no visible audit trails• lack of auth evidence• heavy I/C reliance• need to understand transaction flow• test controls to be relied upon• audit hardware/software