Computer Controls and Security

8-1Anup Kumar Saha

Computer Controls and Security

8-2Anup Kumar Saha

Learning Objectives

1. Identify and explain the four principles of systems reliability and the three criteria used to evaluate whether the principles have been achieved.

2. Identify and explain the controls that apply to more than one principle of reliability.

3. Identify and explain the controls that help explain that a system is available to users when needed.

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Learning Objectives4. Identify and explain the security controls

that prevent unauthorized access to information, software, and other system resources.

5. Identify and explain the controls that help ensure that a system can be properly maintained, while still providing for system availability, security, and integrity.

6. Identify and explain the integrity controls that help ensure that system processing is complete, accurate, timely, and authorized.

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Introduction

During his fifth month at Northwest Industries, Jason Scott is assigned to audit Seattle Paper Products (SPP).

Jason’s task is to review randomly selected payable transactions, track down all supporting documents, and verify that all transactions have been properly authorized.

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Introduction Jason is satisfied that many of the

transactions are valid and accurate. However, some transactions involve the

purchase of services from Pacific Electric.

These transactions were processed on the basis of vendor invoices approved by management.

Five of these invoices bear the initials “JLC.”

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Introduction JLC is Jack Carlton, the general

supervisor. Carlton denies initialing the invoices,

and claims he has never heard of Pacific Electric.

What questions does Jason have?Is Carlton telling the truth?If Carlton is not telling the truth, what

is he up to?

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Introduction

If Pacific Electric is a fictitious company, how could SPP’s control systems allow its invoices to be processed and approved for payment?

This chapter discusses the many different types of controls that companies use to ensure the integrity of their AIS.

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Learning Objective 1

Identify the four principles of systems reliability and the three criteria used to evaluate whether or not the principles have been achieved.

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The Four Principles of a Reliable System

1. Availability of the system when needed.

2. Security of the system against unauthorized physical and logical access.

3. Maintainability of the system as required without affecting its availability, security, and integrity.

4. Integrity of the system to ensure that processing is complete, accurate, timely, and authorized.

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The Criteria Used To Evaluate Reliability Principles

For each of the four principles of reliability, three criteria are used to evaluate whether or not the principle has been achieved.1. The entity has defined, documented, and

communicated performance objectives, policies, and standards that achieve each of the four principles.

2. The entity uses procedures, people, software, data, and infrastructure to achieve each principle in accordance with established policies and standards.

3. The entity monitors the system and takes action to achieve compliance with the objectives, policies, and standards for each principle.

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Identify and explain the controls that apply to more than one principle of reliability.

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Controls Related to More Than One Reliability Principle

Strategic Planning & Budgeting Developing a Systems Reliability Plan Documentation

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Controls Related to More Than One Reliability Principle Documentation may be classified into three

basic categories: Administrative documentation: Describes the

standards and procedures for data processing.

Systems documentation: Describes each application system and its key processing functions.

Operating documentation: Describes what is needed to run a program.

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Identify and explain the controls that help explain that a system is available to users when needed.

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Availability Availability

Minimizing Systems Downtime• Preventive maintenance

• UPS• Fault tolerance

• Disaster Recovery Plan• Minimize the extent of disruption, damage,

and loss• Temporarily establish an alternative means of

processing information• Resume normal operations as soon as

possible

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Availability Disaster Recovery, continued• Train and familiarize personnel with emergency

operations• Priorities for the recovery process• Insurance• Backup data and program files

• Electronic vaulting• Grandfather-father-son concept• Rollback procedures

• Specific assignments• Backup computer and telecommunication facilities• Periodic testing and revision• Complete documentation

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Identify and explain the security controls that prevent unauthorized access to information, software, and other system resources.

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Developing a Security Plan

Developing and continuously updating a comprehensive security plan is one of the most important controls a company can identify.What questions need to be asked?Who needs access to what information? When do they need it?On which systems does the information

reside?

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Segregation of Duties Withinthe Systems Function In a highly integrated AIS, procedures that

used to be performed by separate individuals are combined.

Any person who has unrestricted access to the computer, its programs, and live data could have the opportunity to both perpetrate and conceal fraud.

To combat this threat, organizations must implement compensating control procedures.

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Segregation of Duties Withinthe Systems Function Authority and responsibility must be clearly divided

among the following functions:

1. Systems administration2. Network management3. Security management4. Change management5. Users6. Systems analysis7. Programming8. Computer operations9. Information system library10. Data control

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Segregation of Duties Withinthe Systems Function

It is important that different people perform these functions.

Allowing a person to perform two or more of them exposes the company to the possibility of fraud.

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Physical Access Controls How can physical access security be achieved?

– Place computer equipment in locked rooms and restrict access to authorized personnel

– Have only one or two entrances to the computer room– Require proper employee ID– Require that visitors sign a log– Use a security alarm system– Restrict access to private secured telephone lines and

terminals or PCs.– Install locks on PCs.– Restrict access of off-line programs, data and equipment– Locate hardware and other critical system components

away from hazardous materials.– Install fire and smoke detectors and fire extinguishers

that don not damage computer equipment

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Logical Access Controls

Users should be allowed access only to the data they are authorized to use and then only to perform specific authorized functions.

What are some logical access controls?– passwords– physical possession identification– biometric identification– compatibility tests

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Protection of PCs and Client/Server Networks

Many of the policies and procedures for mainframe control are applicable to PCs and networks.

The following controls are also important: Train users in PC-related control concepts. Restrict access by using locks and keys on

PCs. Establish policies and procedures.

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Protection of PCs and Client/Server Networks

Portable PCs should not be stored in cars. Keep sensitive data in the most secure environment

possible. Install software that automatically shuts down a

terminal after its been idle for a certain amount of time.

Back up hard disks regularly. Encrypt or password protect files. Build protective walls around operating systems. Ensure that PCs are booted up within a secure

system. Use multilevel password controls to limit employee

access to incompatible data. Use specialists to detect holes in the network.

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Internet and e-Commerce Controls

Why caution should be exercised when conducting business on the Internet.– the large and global base of people

that depend on the Internet– the variability in quality, compatibility,

completeness, and stability of network products and services

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Internet and e-Commerce Controls

– access of messages by others– security flaws in Web sites– attraction of hackers to the Internet

What controls can be used to secure Internet activity?– passwords– encryption technology– routing verification procedures

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Internet and e-Commerce Controls Another control is installing a firewall,

hardware and software that control communications between a company’s internal network (trusted network) and an external network. The firewall is a barrier between the

networks that does not allow information to flow into and out of the trusted network.

Electronic envelopes can protect e-mail messages

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Identify and explain the controls that help ensure that a system can be properly maintained, while still providing for system availability, security, and integrity.

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Maintainability

Two categories of controls help ensure the maintainability of a system:Project development and acquisition

controlsChange management controls

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Project Development and Acquisition Controls

Project development and acquisition controls include:Strategic Master PlanProject ControlsData Processing ScheduleSystem Performance MeasurementsPostimplementation Review

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Change Management Controls Change management controls include: Periodically review all systems for needed

changes Require all requests to be submitted in

standardized format Log and review requests form authorized

users for changes and additions to systems Assess the impact of requested changes on

system reliability objectives, policies and standards

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Change Management Controls, continued

Categorize and rank all changes using established priorities

Implement procedures to handle urgent matters

Communicate all changes to management Require IT management to review, monitor,

and approve all changes to software, hardware and personnel responsibilities

Assign specific responsibilities to those involved in the change and monitor their work.

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Change Management Controls, continued

Control system access rights to avoid unauthorized systems and data access

Make sure all changes go through the appropriate steps

Test all changes Make sure there is a plan for backing our of

any changes in the event they don’t work properly

Implement a quality assurance function Update all documentation and procedures

when change is implemented

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Identify and explain the integrity controls that help ensure that system processing is complete, accurate, timely, and authorized.

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Integrity

A company designs general controls to ensure that its overall computer system is stable and well managed.

Application controls prevent, detect and correct errors in transactions as they flow through the various stages of a specific data processing program.

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Integrity: Source Data Controls

Companies must establish control procedures to ensure that all source documents are authorized, accurate , complete and properly accounted for, and entered into the system or sent ot their intended destination in a timely manner.

Source data controls include:

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Integrity: Source Data Controls Forms design Prenumbered forms sequence test Turnaround documents Cancellation and storage of documents Authorization and segregation of duties Visual scanning Check digit verification Key verification

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Integrity:Input Validation Routines

Input validation routines are programs the check the integrity of input data. They include:

Limit check

Range check

Reasonableness test

Redundant data check

Sequence check

Field check

Sign check

Validity check

Capacity check

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Integrity: On-line Data Entry Controls

The goal of on-line data entry control is to ensure the integrity of transaction data entered from on-line terminals and PCs by minimizing errors and omissions.

They include:

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Integrity: On-line Data Entry Controls Field, limit, range, reasonableness, sign, validity,

redundant data checks User ID numbers Compatibility tests Automatic entry of transaction data, where possible Prompting Preformatting Completeness check Closed-lop verification Transaction log Error messages Retain data for legal purposes

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Integrity: Data Processing and Storage Controls

Controls to help preserve the integrity of data processing and stored data:

Policies and procedures Data control function Reconciliation procedure External data reconciliation Exception reporting

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Integrity: Data Processing and Storage Controls, continued

Data currency checks Default values Data matching File labels Write protection mechanisms Database protection mechanisms Data conversion controls Data security

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Output Controls

The data control functions should review all output for reasonableness and proper format and should reconcile corresponding output and input control totals.

Data control is also responsible for distributing computer output to the appropriate user departments.

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Output Controls

Users are responsible for carefully reviewing the completeness and accuracy of all computer output that they receive.

A shredder can be used to destroy highly confidential data.

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Data Transmission Controls

To reduce the risk of data transmission failures, companies should monitor the network.

How can data transmission errors be minimized?– using data encryption (cryptography)– implementing routing verification

procedures– adding parity– using message acknowledgment

techniques

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Data Transmission Controls take on added importance in organizations that utilize electronic data interchange (EDI) or electronic funds transfer (EFT).

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In these types of environments, sound internal control is achieved using the following control procedures:1 Physical access to network facilities should be

strictly controlled.2 Electronic identification should be required for all

authorized network terminals.3 Strict logical access control procedures are

essential, with passwords and dial-in phone numbers changed on a regular basis.

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Control procedures, continued4 Encryption should be used to secure

stored data as well as data being transmitted.

5 Details of all transactions should be recorded in a log that is periodically reviewed.

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Case Conclusion

Were Jason and his supervisor able to identify the source of the fictitious invoices? No.

They asked the police to identify the owner of the Pacific Electric bank account. What did the police discover? Patricia Simpson, a data entry clerk at SPP, was the owner of the account.

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End

Documents

Computer Controls and Security