Chapter 2:

Computer Operations

STRUCTURING THE IT FUNCTION

Centralized data processing (as opposed to DDP)

Database administrator Data processing manager/dept. Data control Data preparation/conversion Computer operations Data library
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STRUCTURING THE IT FUNCTION

Segregation of incompatible IT functions

Systems development & maintenance Participants

End users IS professionals Auditors Other stakeholders

STRUCTURING THE IT FUNCTION

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 Separating systems development from computer operations
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STRUCTURING THE IT FUNCTION

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

STRUCTURING THE IT FUNCTION

Segregation of incompatible IT functions

Alternative 1: segregate systems analysis from programming

Two types of control problems from this approach:

Inadequate documentation Is a chronic problem. Why? Not interesting Lack of documentation provides job security Assistance: Use of CASE tools Potential for fraud Example: Salami slicing, trap doors
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STRUCTURING THE IT FUNCTION

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
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STRUCTURING THE IT FUNCTION

Segregation of incompatible IT functions

Audit procedures: Obtain and review security policy Verify policy is communicated Review relevant documentation (org. chart, mission statement, key job descriptions) Review systems documentation and maintenance records (using a sample) Verify whether maintenance programmers are also original design programmers Observe segregation policies in practice Review operations room access log Review user rights and privileges
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Computing Models

Centralized Processing Client Server Processing

thin or fat clients 2 to n tiered using idle processing time replicated or divided
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Distributed Computing

Distributed Database Computing

STRUCTURING THE IT FUNCTION

The distributed model

Risks associated with DDP

Inefficient use of resources Mismanagement of resources by end users Hardware and software incompatibility Redundant tasks Destruction of audit trails Inadequate segregation of duties Hiring qualified professionals Increased potential for errors Programming errors and system failures Lack of standards
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STRUCTURING THE IT FUNCTION

The distributed model

Advantages of DDP

Cost reduction End user data entry vs. data control group Application complexity reduced Development and maintenance costs reduced Improved cost control responsibility IT critical to success then managers must control the technologies Improved user satisfaction Increased morale and productivity Backup flexibility Excess capacity for DRP
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STRUCTURING THE IT FUNCTION

Controlling the DDP environment

Audit objectives:
Conduct a risk assessment Verify the distributed IT units employ entity-wide standards of performance that promotes compatibility among hardware, operating software, applications, and data

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STRUCTURING THE IT FUNCTION

Controlling the DDP environment

Audit procedures:

Verify corporate policies and standards are communicated Review current organization chart, mission statement, key job descriptions to determine if any incompatible duties exist Verify compensating controls are in place where incompatible duties do exist Review systems documentation Verify access controls are properly established
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THE COMPUTER CENTER

Computer center controls

Physical location
Avoid human-made and natural hazards Example: Chicago Board of Trade Construction Ideally: single-story, underground utilities, windowless, use of filters If multi-storied building, use top floor (away from traffic flows, and potential flooding in a basement) Access Physical: Locked doors, cameras Manual: Access log of visitors
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THE COMPUTER CENTER

Computer center controls

Air conditioning
Especially mainframes Amount of heat even from a group of PCs

Fire suppression
Automatic: usually sprinklers Gas, such as halon, that will smother fire by removing oxygen can also kill anybody trapped there Sprinklers and certain chemicals can destroy the computers and equipment Manual methods

Power supply
Need for clean power, at a acceptable level Uninterrupted power supply
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THE COMPUTER CENTER

Computer center controls

Audit objectives
Verify physical security controls are reasonable Verify insurance coverage is adequate Verify operator documentation is adequate in case of failure

Audit procedures
Tests of physical construction Tests of fire detection Tests of access control Tests of backup power supply Tests for insurance coverage Tests of operator documentation controls
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PC SYSTEMS

Control environment for PCs

Controls Risk assessment Inherent weaknesses Weak access control Inadequate segregation of duties Multilevel password control multifaceted access control Risk of physical loss Laptops, etc. can walk off Risk of data loss Easy for multiple users to access data End user can steal, destroy, manipulate Inadequate backup procedures

Local backups on appropriate medium Dual hard drives on PC External/removable hard drive on PC

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PC SYSTEMS
Control environment for PCs

Risk associated with virus infection Policy of obtaining software Policy for use of anti-virus software Verify no unauthorized software on PCs

Risk of improper SDLC procedures Use of commercial software Formal software selection procedures

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PC SYSTEMS

PC systems audit

Audit objectives Verify controls are in place to protect data, programs, and computers from unauthorized access, manipulation, destruction, and theft Verify that adequate supervision and operating procedures exist to compensate for lack of segregation between the duties of users, programmers, and operators Verify that backup procedures are in place to prevent data and program loss due to system failures, errors Verify that systems selection and acquisition procedures produce applications that are high quality, and protected from unauthorized changes Verify the system is free from viruses and adequately protected to minimize the risk of becoming infected with a virus or similar object

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FIGURE 2.8 Password Policy

Proper Dissemination Promote it, use it during employee training or orientation, and find ways to continue to raise awareness within the organization.
Proper Length: Use at least 8 characters. The more characters, the more difficult to guess or crack. Eight characters is an effective length to prevent guessing, if combined with below. Proper Strength: Use alphabet (letters), numbers (at least 1), and special characters (at least 1). The more non-alpha, the harder to guess or crack. Make them case sensitive and mix upper and lower case. A Strong password for any critical access or key user. Password CANNOT contain a real word in the content. Proper Access Levels or Complexity: Use multiple levels of access requiring multiple passwords. Use a password matrix of data to grant read-only, read/write, or no access per data field per user. Use biometrics {such as fingerprints, voice prints}. Use supplemental access devices, such as smart cards, or beeper passwords in conjunction with remote logins. Use user-defined procedures. Proper Timely Changes: At regular intervals, make employees change their passwords. Proper Protection: Prohibit the sharing of passwords or post-its with passwords located near ones computer. Proper Deletion: Require the immediate deletion of accounts for terminated employees, to prevent an employee from being able to perpetrate adverse activities.

SYSTEM-WIDE CONTROLS
E-mail risks

Spoofing Spamming Hoax virus warnings Flaming Malicious attachments (e.g., viruses) Phishing Pharming

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SYSTEM-WIDE CONTROLS
Malicious objects risk

Virus Worm Logic bomb Back door / trap door Trojan horse Potential control procedures Audit objective Audit procedures

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SYSTEM-WIDE CONTROLS
Controlling electronic audit trails

Keystroke monitoring (keystroke log) Event monitoring (key events log) Audit trail objectives
Detecting unauthorized access Reconstructing events Personal accountability

Implementing an audit trail Transaction logs

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SYSTEM-WIDE CONTROLS

Disaster recovery planning

Critical applications identified and ranked Create a disaster recovery team with responsibilities

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SYSTEM-WIDE CONTROLS

Disaster recovery planning

Site backup
Hot site Recovery Operations Center Cold site empty shell Mutual aid pact Internally provided backup Other options
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Disaster Recovery Plan

1.

Critical Applications Rank critical applications so an orderly and effective restoration of computer systems is possible.
Create Disaster Recovery Team Select team members, write job descriptions, describe recovery process in terms of who does what. 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.

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3.

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).
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. Application Software Backup Make sure copies of critical applications are available at the backup site 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. Supplies A modicum inventory of supplies should be at the backup site or be able to be delivered quickly. Documentation An adequate set of copies of user and system documentation. 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).

5.

6.

7.

8.

9. 10.

SYSTEM-WIDE CONTROLS

Disaster recovery planning

Audit objectives
Verify managements DRP is adequate

Audit procedures
Verify a second-site backup is adequate Review the critical application list for completeness Verify backups of application software are stored off-site Verify that critical data files are backed up and readily accessible to DRP team Verify resources of supplies, documents, and documentation are backed up and stored off-site Verify that members listed on the team roster are current employees and that they are aware of their responsibilities

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SYSTEM-WIDE CONTROLS
Fault tolerance

Definition 44% of IS down-time attributable to system failures! Controls Redundant systems or parts RAID UPS Multiprocessors Audit objective To ensure the organization is employing an appropriate level of fault tolerance Audit procedures Verify proper level of RAID devices Review procedures for recovery from system failure Verify boot disks are secured
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Client Server Systems

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Firewalls

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Proxy Servers

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Demilitarized Zone

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Chapter 2:
Computer Operations

Excerpts from An Introduction to Computer Auditing (online reading)

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Computer Auditing
Examples of Computer Abuse Unauthorized disclosure of confidential information Unavailability of key IT systems Unauthorized modification of IT systems Theft of IT hardware and software Theft of IT data files Use of IT resources for personal use
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Problems with Computer Auditing

Technology continually evolves IT can be a black box and attacks may not be apparent Auditors lack of IT skills Data can be difficult to access Computer logs and audit trails may be incomplete On-line real time systems can support frauds that occur rapidly without sufficient time to react Electronic evidence is volatile
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Systems Development

Use of project management Use of methodology such as SDLC, RAD Steering Committee Continuous monitoring of progress (milestones) Prototyping

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IT Application Controls

Input Controls: all data entered is authorized, complete, accurate, and entered only once Processing Controls: transactions are processed completely, accurately, and in a timely manner Output Controls: results are communicated to the authorized persons in a timely and efficient manner
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General Controls

Identification, prioritization and development of new systems and modification of existing systems Ongoing operations and maintenance Physical access Access rights and privileges Change management control Segregation of incompatible duties Contingency planning
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The basic principles of good project management are:

clearly defined management responsibility clear objectives and scope effective planning and control clear lines of accountability steering committee oversight milestones
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good project management (cont.)

end-user involvement methodology such as SDLC or RAD possible use of prototypes possible use of phased development

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Be sure to read the entire article!

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