Ch2 2009 cisa

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control, security and assurance

Chapter 2IT Governance

2009 CISA Review Course

Course Agenda

• Learning Objectives• Discuss Task and Knowledge Statements• Discuss specific topics within the chapter • Case studies• Sample questions

Ensure that the CISA candidate… Understands and can provide assurance that the organization has

the structure, policies, accountability mechanisms and monitoring practices in place to achieve the requirements of corporate governance of IT.

The content area in this chapter will represent approximately 15% of the CISA examination (approximately 30 questions).

% of Total Exam Questions

Chapter 414%

Chapter 316%

Chapter 215%

Chapter 110%

Chapter 614%

Chapter 531%

Exam Relevance

• Evaluate the effectiveness of IT governance structure to ensure adequate board control over the decisions, directions and performance of IT, so it supports the organization's strategies and objectives

• Evaluate IT organizational structure and human resources (personnel) management to ensure that they support the organization's strategies and objectives

• Evaluate the IT strategy and process for their development, approval, implementation and maintenance to ensure that they support the organization's strategies and objectives

Chapter 2 Learning Objectives

Chapter 2 Learning Objectives (continued)

• Evaluate the organization's IT policies, standards, procedures and processes for their development, approval, implementation and maintenance to ensure that they support the IT strategy and comply with regulatory and legal requirements

• Evaluate management practices to ensure compliance with the organization's IT strategy, policies, standards and procedures

• Evaluate IT resource investment, use and allocation practices to ensure alignment with the organization's strategies and objectives

Chapter 2 Learning Objectives (continued)

• Evaluate IT contracting strategies and policies and contract management practices to ensure that they support the organization's strategies and objectives

• Evaluate risk management practices to ensure that the organization's IT-related risks are properly managed

• Evaluate monitoring and assurance practices to ensure that the board and executive management receive sufficient and timely information about IT performance

• Ethical corporate behavior by directors or others charged with governance in the creation and presentation of value for all stakeholders

• The distribution of rights and responsibilities among different participants in the corporation, such as board, managers, shareholders and other stakeholders

• Establishment of rules to manage and report on business risks

2.2 Corporate Governance

• Enterprises are governed by generally accepted good or best practices, the assurance of which is provided by certain controls. From these practices flows the organization’s direction, which indicates certain activities using the organization’s resources. The results of these activities are measured and reported on, providing input to the cyclical revision and maintenance of controls.

• IT is also governed by good or best practices that ensure that the organization’s information and related technology support its business objectives, its resources are used responsibly, and its risks are managed appropriately.

2.3 Monitoring and AssurancePractices for Board and Executive Management

2.3 Monitoring and AssurancePractices for Board and Executive

Management (continued)

• Effective enterprise governance focuses individual and group expertise and experience on specific areas where they can be most effective

• IT governance is concerned with two issues: that IT delivers value to the business and that IT risks are managed

• IT governance is the responsibility of the board of directors and executive management

Practice Question

2-1 IT governance ensures that an organization aligns its IT strategy with:

A. enterprise objectives.

B. IT objectives.

C. audit objectives.

D. control objectives.

2.3.1 Best Practices for IT Governance

IT governance has become significant due to:• Demands for better return from IT investments• Increases in IT expenditures• Regulatory requirements for IT controls• Selection of service providers and outsourcing• Complexity of network security• Adoptions of control frameworks• Benchmarking

2.3.1 Best Practices for IT Governance (continued)

Audit role in IT governance

• Audit plays a significant role in the successful implementation of IT governance within an organization

• Reporting on IT governance involves auditing at the highest level in the organization and may cross division, functional or departmental boundaries

2.3.1 Best Practices for IT Governance (continued)

• In accordance with the defined role of the IS auditor, the following aspects related to IT governance need to be assessed:– The IS function’s alignment with the organization’s mission,

vision, values, objectives and strategies– The IS function’s achievement of performance objectives

established by the business (effectiveness and efficiency)– Legal, environmental, information quality, and fiduciary and

security requirements– The control environment of the organization– The inherent risks within the IS environment

2.3.1 Best Practices for IT Governance (continued)

2.3.2 IT Strategy Committee

• The creation of an IT strategy committee is an industry best practice

• Committee should broaden its scope to include not only advice on strategy when assisting the board in its IT governance responsibilities, but also to focus on IT value, risks and performance

2.3.3 Standard IT Balanced Scorecard

• A process management evaluation technique that can be applied to the IT governance process in assessing IT functions and processes

• Method goes beyond the traditional financial evaluation• One of the most effective means to aid the IT strategy

committee and management in achieving IT and business alignment

• Focused activity with specific value drivers– Integrity of information– Continuity of services – Protection of information assets

• Integral part of IT governance• Importance of information security governance

2.3.4 Information Security Governance

Importance of information security governance• Information security (Infosec) covers all information

processes, physical and electronic, regardless of whether they involve people and technology or relationships with trading partners, customers and third parties.

• Infosec is concerned with all aspects of information and its protection at all points of its life cycle within the organization.

2.3.4 Information Security Governance (continued)

Effective information security can add significant value to an organization by:

• Providing greater reliance on interactions with trading partners

• Improving trust in customer relationships• Protecting the organization’s reputation• Enabling new and better ways to process

electronic transactions

2.3.4 Information Security Governance (continued)

Outcomes of security governance• Strategic alignment—align with business strategy

• Risk management—manage and execute appropriate measures to mitigate risks

• Value delivery—optimize security investments

• Performance measurement – measure, monitor and report on information security processes

• Resource management—utilize information security knowledge and infrastructure efficiently and effectively

• Process integration – integration of management assurance processes for security

2.3.4 Information Security Governance (continued)

Effective information security governance• To achieve effective information security governance,

management must establish and maintain a framework to guide the development and management of a comprehensive information security program that supports business objectives

• This framework provides the basis for the development of a cost-effective information security program that supports the organization’s business goals.

2.3.4 Information SecurityGovernance (continued)

Information security governance requires strategic direction and impetus from:

• Boards of directors / senior management• Executive management• Steering committees• Chief information security officers

2.3.4 Information SecurityGovernance (continued)

2.3.5 Enterprise Architecture

• Involves documenting an organization’s IT assets in a structured manner to facilitate understanding, management and planning for IT investments

• Often involves both a current state and optimized future state representation

Data Functional Network People Process Strategy

Scope

Enterprise Model

Systems Model

Technology Model

Detailed Representation

2.3.5 Enterprise Architecture (continued)

The Basic Zachman Framework

The Federal Enterprise Architecture (FEA) hierarchy:

• Performance• Business• Service component• Technical• Data

2.3.5 EnterpriseArchitecture (continued)

• From an IS standpoint, strategic planning relates to the long-term direction an organization wants to take in leveraging information technology for improving its business processes

• Effective IT strategic planning involves a consideration of the organization’s demand for IT and its IT supply capacity

2.4.1 Strategic Planning

2.4.1 Strategic Planning(continued)

• The IS auditor should pay attention to the importance of IT strategic planning

• Focus on the importance of a strategic planning process or planning framework

• Consider how the CIO or senior IT management are involved in the creation of the overall business strategy

Practice Question

2-2 Which of the following would be included in an IS strategic plan?

A. Specifications for planned hardware purchases

B. Analysis of future business objectives

C. Target dates for development projects

D. Annual budgetary targets for the IS department

Practice Question

2-3 Which of the following BEST describes an IT department’s strategic planning process?

A. The IT department will have either short-range or long-range plans depending on the organization’s broader plans and objectives.

B. The IT department’s strategic plan must be time- and project-oriented, but not so detailed as to address and help determine priorities to meet business needs.

C. Long-range planning for the IT department should recognize organizational goals, technological advances and regulatory requirements.

D. Short-range planning for the IT department does not need to be integrated into the short-range plans of the organization since technological advances will drive the IT department plans much quicker than organizational plans.

2.4.2 Steering Committee

• An organization’s senior management should appoint a planning or steering committee to oversee the IS function and its activities

• A high-level steering committee for information technology is an important factor in ensuring that the IS department is in harmony with the corporate mission and objectives

2.5.1 Policies

• High-level documents• Represent the corporate philosophy of an organization• Must be clear and concise to be effective

2.5.1 Policies (continued)

• Management should review all policies carefully• Policies need to be updated to reflect new technology

and significant changes in business processes• Policies formulated must enable achievement of

business objectives and implementation of IS controls

Information security policies • Communicate a coherent security standard to users,

management and technical staff• Must balance the level of control with the level of

productivity• Provide management the direction and support for

information security in accordance with business requirements, relevant laws and regulations

2.5.1 Policies (continued)

Information security policy document• Definition of information security• Statement of management intent• Framework for setting control objectives• Brief explanation of security policies• Definition of responsibilities• References to documentation

2.5.1 Policies (continued)

2.5.1 Policies (continued)

Policy groups to be addressed• High-level information security policy• Data classification policy• Acceptable usage policy• End user computing policy• Access control policies

2.5.1 Policies (continued)

Review of the information security policydocument• Should be reviewed at planned intervals or when

significant changes occur to ensure its continuing suitability, adequacy and effectiveness

• Should have an owner who has approved management responsibility for the development, review and evaluation of the security policy

• Review should include assessing opportunities for improvement to the organization’s information security policy

2.5.2 Procedures

Procedures are detailed documents that:• Define and document implementation policies

• Must be derived from the parent policy• Must implement the spirit (intent) of the policy statement• Must be written in a clear and concise manner

The process of identifying vulnerabilities and threats to the information resources used by an organization in achieving business objectives

2.6 Risk Management

2.6.1 Developing a Risk Management Program

To develop a risk management program:• Establish the purpose of the risk management program• Assign responsibility for the risk management plan

• Identification and classification of information resources or assets that need protection

• Assess threats and vulnerabilities and the likelihood of their occurrence

• Once the elements of risk have been established they are combined to form an overall view of risk

2.6.2 Risk Management Process

• Evaluate existing controls or design new controls to reduce the vulnerabilities to an acceptable level of risk

• Residual risk

2.6.2 Risk Management Process (continued)

IT risk management needs to operate at multiple levels including:• Operational—Risks that could compromise the

effectiveness of IT systems and supporting infrastructure

• Project—Risk management needs to focus on the ability to understand and manage project complexity

• Strategic—The risk focus shifts to considerations such as how well the IT capability is aligned with the business strategy

2.6.2 Risk Management Process (continued)

2.6.3 Risk Analysis Methods

• Qualitative • Semiquantitative• Quantitative

– Probability and expectancy– Annual loss expectancy method

Management and IS auditors should keep inmind certain considerations:• Risk management should be applied to IT functions throughout the

company• Senior management responsibility• Quantitative RM is preferred over qualitative approaches• Quantitative RM always faces the challenge of estimating risks• Quantitative RM provides more objective assumptions• The real complexity or the apparent sophistication of the methods or

packages used should not be a substitute for commonsense or professional diligence

• Special care should be given to very high impact events, even if the probability of occurrence over time is very low.

2.6.3 Risk Analysis Methods (continued)

2.7.1 Personnel Management

• Hiring• Employee handbook• Promotion policies• Training• Scheduling and time reporting• Employee performance evaluations• Required vacations• Termination policies

• Sourcing practices relate to the way an organization obtains the IS function required to support the business

• Organizations can perform all IS functions in-house or outsource all functions across the globe

• Sourcing strategy should consider each IS function and determine which approach allows the IS function to meet the organization’s goals

2.7.2 Sourcing Practices

2.7.2 Sourcing Practices (continued)

Outsourcing practices and strategies• Contractual agreements under which an organization

hands over control of part or all of the functions of the IS department to an external party

• Becoming increasingly important in many organizations• The IS auditor must be aware of the various forms

outsourcing can take as well as the associated risks

2.7.2 Sourcing Practices (continued)

Possible advantages:• Commercial outsourcing companies likely to devote more

time and focus more efficiently on a given project than in-house staff

• Outsourcing vendors likely to have more experience with a wider array of problems, issues and techniques

Possible disadvantages:• Costs exceeding customer expectations• Loss of internal IS experience• Loss of control over IS• Vendor failure

2.7.2 Sourcing Practices (continued)

Risks can be reduced by:• Establishing measurable, partnership-enacted shared goals and

rewards• Using multiple suppliers or withholding a piece of business as an

incentive• Performing periodic competitive reviews and benchmarking/bench

trending• Implementing short-term contracts• Forming a cross-functional contract management team• Including contractual provisions to consider as many contingencies

as can reasonably be foreseen

2.7.2 Sourcing Practices (continued)

Globalization practices and strategies• Requires management to actively oversee the remote or offshore

locations• The IS auditor can assist an organization in moving IS functions

offsite or offshore by ensuring that IS management considers the following:

– Legal, regulatory and tax issues

– Continuity of operations

– Personnel

– Telecommunication issues

– Cross-border and cross-cultural issues

2.7.2 Sourcing Practices (continued)

Governance in outsourcing• Mechanism that allows organizations to transfer the

delivery of services to third parties• Accountability remains with the management of the

client organization• Transparency and ownership of the decision-making

process must reside within the purview of the client

2.7.2 Sourcing Practices (continued)

Third-party service delivery management• Every organization using the services of third parties

should have a service delivery management system in place to implement and maintain the appropriate level of information security and service delivery in line with third-party service delivery agreements

• The organization should check the implementation of agreements, monitor compliance with the agreements and manage changes to ensure that the services delivered meet all requirements agreed to with the third party.

What is change management?

• Managing IT changes for the organization– Identify and apply technology improvements at the

infrastructure and application level

2.7.3 OrganizationalChange Management

• Software development, maintenance and implementation

• Acquisition of hardware and software

• Day-to-day operations

• Service management

• Security

• Human resource management

• General administration

2.7.5 Quality Management

Practice Question

2-4 The MOST important responsibility of a data security officer in an organization is:

A. recommending and monitoring data security policies.

B. promoting security awareness within the organization.

C. establishing procedures for IT security policies.

D. administering physical and logical access controls.

Practice Question

2-5 Which of the following is MOST likely to be performed by the security administrator?

A. Approving the security policy

B. Testing application software

C. Ensuring data integrity

D. Maintaining access rules

2.7.7 Performance Optimization

• Process driven by performance indicators• Optimization refers to the process of improving the

productivity of information systems to the highest level possible without unnecessary, additional investment in the IT infrastructure

2.7.7 Performance Optimization (continued)

Five ways to use performance measures:• Measure products/services• Manage products/services• Assure accountability• Make budget decisions• Optimize performance

Practice Question

2-6 An IS auditor should ensure that IT governance performance measures:

A. evaluate the activities of IT oversight committees.

B. provide strategic IT drivers.

C. adhere to regulatory reporting standards and definitions.

D. evaluate the IT department.

2.8 IS Organizational Structure and

Responsibilities

• Systems development manager

• Help desk

• End user

• End user support manager

2.8.1 IS Roles and Responsibilities

2.8.1 IS Roles and Responsibilities (continued)

• Data management• Quality assurance manager• Vendor and outsourcer management• Operations manager

• Control group

• Media management

• Data entry

• Systems administration

2.8.1 IS Roles and Responsibilities (continued)

• Security administration• Quality assurance• Database administration

2.8.1 IS Roles and Responsibilities (continued)

• Systems analyst• Security architect• Applications development and maintenance• Infrastructure development and maintenance• Network management

2.8.1 IS Roles and Responsibilities (continued)

• Avoids possibility of errors or misappropriations• Discourages fraudulent acts• Limits access to data

2.8.2 Segregation of Duties Within IS

2.8.2 Segregation of DutiesWithin IS (continued)

Practice Question

2-7 Which of the following tasks may be performed by the same person in a well-controlled information processing computer center?

A. Security administration and change management

B. Computer operations and system development

C. System development and change management

D. System development and systems maintenance

Practice Question

2-8 Which of the following is the MOST critical control over database administration?

A. Approval of DBA activities

B. Segregation of duties

C. Review of access logs and activities

D. Review of the use of database tools

2.8.3 Segregation of Duties Controls

Control measures to enforce segregation of duties include:

• Transaction authorization• Custody of assets• Access to data

– Authorization forms

– User authorization tables

2.8.3 Segregation of DutiesControls (continued)

Compensating controls for lack of segregation of duties include:

• Audit trails• Reconciliation• Exception reporting• Transaction logs• Supervisory reviews• Independent reviews

Practice Question

2-9 When a complete segregation of duties cannot be achieved in an online system environment, which of the following functions should be separated from the others?

A. Origination

B. Authorization

C. Recording

D. Correction

Practice Question

2-10 In a small organization, where segregation of duties is not practical, an employee performs the function of computer operator and application programmer. Which of the following controls should an IS auditor recommend?

A. Automated logging of changes to development libraries

B. Additional staff to provide segregation of duties

C. Procedures that verify that only approved program changes are implemented

D. Access controls to prevent the operator from making program modifications

2.9 Auditing IT GovernanceStructure and Implementation

Indicators of potential problems include:• Unfavorable end-user attitudes• Excessive costs• Budget overruns• Late projects• High staff turnover• Inexperienced staff• Frequent hardware/software errors

2.9.1 Reviewing Documentation

The following documents should be reviewed:• IT strategies, plans and budgets• Security policy documentation• Organization/functional charts• Job descriptions• Steering committee reports• System development and program change procedures• Operations procedures• Human resource manuals• Quality assurance procedures

2.9.2 Reviewing Contractual Commitments

There are various phases to computer hardware,

software and IS service contracts, including:• Development of contract requirements and service levels• Contract bidding process• Contract selection process• Contract acceptance• Contract maintenance• Contract compliance

Case Study A Scenario

An IS auditor has been asked to review the draft of an outsourcing contract and SLA and recommend any changes or point out any concerns prior to these being submitted to senior management for final approval. The agreement includes outsourcing support of Windows and UNIX server administration and network management to a third party.

Servers will be relocated to the outsourcer’s facility that is located in another country, and connectivity will be established using the Internet. Operating system software will be upgraded on a semiannual basis, but it will not be escrowed. All requests for addition or deletion of user accounts will be processed within three business days.

Case Study A Scenario(continued)

Intrusion detection software will be continuously monitored by the outsourcer and the customer notified by e-mail if any anomalies are detected. New employees hired within the last three years were subject to background checks. Prior to that, there was no policy in place.

A right to audit clause is in place, but 24-hour notice is required prior to an onsite visit. If the outsourcer is found to be in violation of any of the terms or conditions of the contract, it will have 10 business days to correct the deficiency. The outsourcer does not have an IS auditor, but it is audited by a regional public accounting firm.

Case Study A Question

1. Which of the following should be of MOST concern to the IS auditor?

A. User account changes are processed within three business days.

B. Twenty-four hour notice is required prior to an onsite visit.

C. The outsourcer does not have an IS audit function.

D. Software escrow is not included in the contract.

Case Study A Question

2. Which of the following would be the MOST significant issue to address if the servers contain personally identifiable customer information that is regularly accessed and updated by end users?

A. The country in which the outsourcer is based prohibits the use of strong encryption for transmitted data.

B. The outsourcer limits its liability if it took reasonable steps to protect the customer data.

C. The outsourcer did not perform background checks for employees hired over three years ago.

D. System software is only upgraded once every six months.

Conclusion

• Chapter 2 Quick Reference Review– Pages 127-128 of CISA Review Manual 2009

• Additional Case Studies– Case Study B – page 130 of CISA Review Manual

2009– Case Study C – page 131 of CISA Review Manual

2009– Case Study D – page 132 of CISA Review Manual

2009