Certified Information Systems Auditor Exam Prep: Understanding the Role of IT Governance

This chapter is from the book

CISA Exam Prep: Certified Information Systems Auditor

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This chapter is from the book

This chapter is from the book 

CISA Exam Prep: Certified Information Systems Auditor

Learn More Buy

Management Practices and Controls

Management is tasked with the guidance and control of the organization; they are the individuals who are responsible for the organization. Although companies heavily depend on technology, a large part of management's duties still deals with people. People are key to what can make a company successful. Therefore, a large portion of management's duties depends on its people skills, including interaction with employees and with those outside the traditional organizational boundaries. Outsourcing is an example of this. This might not be a phrase that some people like, but it's a fact of life that companies depend upon an array of components and services from around the world. As an example, consider Dell Computer. Dell might be based in Round Rock, Texas, yet its distribution hub is in Memphis, Tennessee; Dell assembles PCs in Malaysia, yet has customer support in India. Many other parts come from the far corners of the globe. The controls that a company places on its employees and contracts, and its agreements with business partners and suppliers, must be examined and reviewed. The next several sections focus on good management practices. Let's start by reviewing employee management.

Employee Management

Employee management deals with the policies and procedures that detail how people are hired, promoted, retained, and terminated. Employees can have a huge impact on the security of the company. Consumeraffairs.com has attributed more than 54% of instances of lost data or security breaches to employees, and only 34% to outside hackers. This should serve as a sad but true reminder that people are the weakest link in security. Insiders have greater access and opportunity for misuse than outsiders typically do. Whether it's malicious, accidental, or intentional, insiders pose a real threat to security. Although there is no way to predict future events, employee risks can be reduced by implementing and following good basic HR practices. The first of these is good hiring practices.

Everyone wants to get the right person for the job, but good HR practices require more than just matching a resume to an open position. Depending on the position to be filled, company officials need to perform due diligence in verifying that they have matched the right person to the right job. As an example, Kevin might be the best security expert around, but if it is discovered that he served a 10-year sentence for extortion and racketeering, his chances of being hired by an interested company will be slim. Some basic common controls should be used during the hiring practice:

• Background checks
• Educational checks
• Reference checks
• Confidentiality agreements
• Noncompete agreements
• Conflict-of-interest agreements

Hiring practices should be performed with due diligence. References can be checked, education verified, military records reviewed, and even drug tests performed, if necessary. When an employee is hired, he brings not only his skills, but also his background, history, attitude, and behavior. Many companies perform these searches in-house, and these can even be performed via the Internet. Figure 2.6 shows an example of one site offering such services.

Figure 2.6 ZABASearch, a background search site.

Once hired, employees should be provided with an employee handbook detailing employee code of conduct, acceptable use of company assets, and employee responsibilities to the company. Per ISACA, the handbook should address the following issues:

• Security practices, policies, and procedures
• Employee package of benefits
• Paid holiday and vacation policy
• Work schedule and overtime policy
• Moonlighting and outside employment
• Employee evaluations
• Disaster response and emergency procedures
• Disciplinary action process for noncompliance

Hiring is just the first step in good employee management. Auditors should verify that HR has a written, well-defined promotion policy. Employees should also know the process for promotion. These procedures should be defined and known by all employees so that this is seen as a fair, unbiased process. Closely related to promotion policy is performance evaluation. Assessments should occur on a predetermined schedule and should be based on known goals and results. A fair and objective process should be used. Pay raises and bonuses should be based strictly on performance.

Training is another area that falls under the responsibility of HR. Employees might not know proper policies and procedures if they are not informed and trained. Training increases effectiveness and efficiency. When a new process or technology is introduced in the organization, employees should be trained for proper operation. Training is also beneficial because it increases morale; it makes people feel better, so they strive to do a better job. Training categories include those for technical, personnel management, project management, and security needs.

Training can range from lunchtime programs to learning programs, multiday events, or degree programs. Common training methods include the following:

• In-house training
• Classroom training
• Vendor training
• On-the-job training
• Apprenticeship programs
• Degree programs
• Continuing education programs

If all this talk of work and training has made you tired, don't worry—many employees feel the same way. Therefore, our next topic is vacations—and not just any kind of vacation, but required vacations. A required vacation is not something that is done for the health or benefit of the employee. Required vacations are for the company to ensure that someone else does the regular employee's job tasks for at least a week. This control helps verify that improper or illegal acts have not been occurring. It also makes it harder for an employee to hide any misuse. Required vacations are just one of the employee controls that can be used. Another control is rotation of assignment, which allows more than one person to perform a specific task. This not only helps ensure a backup if an employee is unavailable, but it also can reduce fraud or misuse by preventing an individual from having too much control over an area. One other closely related control worth mentioning is dual control. Dual control requires two individuals to provide input or approval before a transaction or activity can take place.

The final topic for this section is termination. HR must have approved, effective termination procedures in place to address the termination of employees. These procedures should include procedures for voluntary and involuntary separation. Checklists should be included to verify that the employee has returned all equipment that has been in his possession, including remote access tokens, keys, ID cards, cell phones, pagers, credit cards, laptops, and software. Termination might not be a joyful or happy event, but there needs to be a defined process on how to address or handle the situation properly. The applicable policy must cover issues such as employee escort, exit interviews, review of NDAs, and suspension of network access.

Review Break

Employee controls help protect the organization and build good security. Notice how each of the controls in Table 2.4 is used and what the primary attributes are.

Table 2.4. Employee Controls

Sourcing

Per ISACA, sourcing describes the means by which an organization obtains its information systems services. IS services can be provided in these ways:

• Internally—Insourced
• Externally—Outsourced
• Combination—Hybrid

Functions can also occur at a wide range of locations, such as inside and outside the company:

• On-site—Employees and contractors work at the company's facility.
• Off-site—Staff and contractors work at a remote location.
• Off-shore—Staff and contractors work at a separate geographic region.

Organizations should go through a source strategy to determine what information systems tasks must be done by employees. Third parties commonly provide these services:

• Data entry
• Application/web hosting
• Help desk
• Payroll processing
• Check processing
• Credit card processing

Key to this decision is determining whether a task is part of the organization's core competency, or proficiency that defines who the organization is. This is a fundamental set of skills or knowledge that gives the company a unique advantage. The company should analyze whether these tasks can be duplicated at another location and whether they can be performed for the same or less cost. Security should also play a role in the decision because some tasks take on a much greater risk if performed by others outside the organization. Any decision should pass a thorough business process review. As an example, does data entry report a large number of errors, is the help desk backlogged, or is application development more than three months behind schedule? Some of the most common outsourced tasks are data entry and processing. When a task is outsourced, a method for retaining accuracy should be done by implementing a key verification process. Key verification ensures that data entry was done correctly. For example, the company's data entry department might key in information just as the outsourcing partner does in India. After both data sets are entered, they are compared to verify that the information was entered correctly. Any keystroke that does not match flags an alert so that a data-entry supervisor can examine and verify it.

If the decision is made to outsource, management must be aware that it will lose some level of visibility when the process is no longer done in-house. Outsourcing partners face the same risks, threats, and vulnerabilities as the client; the only difference is they might not be as apparent. Because of this loss of control, every outsourcing agreement should contain a right-to-audit. Without a right-to-audit statement, the client would be forced to negotiate every type of audit or review of the outsourcing partner's operation. These negotiations can be time-consuming and very costly. Therefore, a right-to-audit clause is one of the most powerful mechanisms that a company can insist upon before an agreement is signed. Even if the outsourcing partner does not agree to a right-to-audit, it should at least provide the auditor with a copy of its statement of auditing standards 70 (SAS-70) report. An SAS-70 report verifies that the outsourcing partner has had its control objectives and activities examined by an independent accounting and auditing firm.

Another control that should be considered when outsourcing is a service level agreement (SLA). If the outsourcing provider will provide a time-sensitive process, an SLA is one way to obtain a guarantee of the level of service the outsourcing partner is agreeing to provide. The SLA should specify the uptime, response time, and maximum outage time to which they are agreeing. Choosing the right outsourcing partner is extremely important and should be done with the utmost care.

Change Management and Quality Improvement Techniques

As funny as it sounds, change is continuous today and occurs at a much faster rate than ever before. Processes, procedures, and technology all motivate the change process. As a CISA, you will be tasked with ensuring that all changes are documented, accounted for, and controlled. Companies should have a well-structured process for change requests (CRs). The following steps are a generic overview of the change management process:

1. Request a change.
2. Approve the request.
3. Document the proposed change.
4. Test the proposed change.
5. Implement the change.

CRs are typically examined by a subject matter expert (SME) before being implemented. CRs must also be assessed to ensure that no change poses a risk for the organization. If an application or code is being examined for a potential change, other issues must be addressed, including how the new code will move from the coding to a production environment and how the code will be tested, as well as an examination of user training. Change management ensures that proper governance and control are maintained.

Quality Management

Quality management is an ongoing effort to provide IS services that meet or exceed customer expectations. It's a philosophy to improve quality and strive for continuous improvement. The auditor should be knowledgeable in these areas:

• Hardware and software requisitioning
• Software development
• Information systems operations
• Human resources management
• Security

Why are so many quality-management controls and change-management methods needed? Most companies move data among multiple business groups, divisions, and IT systems. Auditors must verify the controls and attest to their accuracy. ISO 9001 is one quality-management standard that is receiving widespread support and attention. ISO 9001 describes how production processes are to be managed and reviewed. This is not a standard of quality; it covers how well a system or process is documented. Companies that want to obtain 9001 certification must perform a gap analysis to determine what areas need improvement. The ISO 9001 is actually six documents that specify the following:

• Control of documents
• Control of records
• Control of nonconforming product
• Corrective action
• Preventive action
• Internal audits

Being ISO certified means that the organization has the capability to provide products that meet specific requirements; this includes the process for continual improvement. Being ISO certified can also have a direct bearing on an IS audit because it places strong controls on documented procedures. Another ISO document that the auditor should be aware of is ISO 17799, which is considered a code of practice for information security. ISO 17799 is written for individuals who are responsible for initiating, implementing, or maintaining information security management systems. Its goal is to help protect confidentiality, integrity, and availability. ISO 17799 provides best-practice guidance on information security management and is divided into 12 main sections:

• Risk assessment and treatment
• Security policy
• Organization of information security
• Asset management
• Human resources security
• Physical and environmental security
• Communications and operations management
• Access control
• Information systems acquisition, development, and maintenance
• Information security incident management
• Business continuity management
• Compliance

Another means of quality management is the software capability maturity model (CMM), designed for software developers to improve the software-development process. The CMM enables software developers to progress from an anything-goes type of development to a highly structured, repeatable process. As software developers grow and mature, their productivity will increase and the quality of their software products will become more robust. The CMM has five maturity levels, described in Table 2.5.

Table 2.5. Capability Maturity Model

Control Objectives for Information and Related Technology (CobiT) is a control framework that can be utilized to better control processes. It is considered a system of best practices. CobiT was created by the Information Systems Audit and Control Association (ISACA) and the IT Governance Institute (ITGI) in 1992. Although auditors can use CobiT, it is also useful for IT users and managers to help design controls and optimize processes. CobiT is designed around 34 key processes, which address the following:

• Performance concerns
• IT control profiling
• Awareness
• Benchmarking

Another process-improvement method includes enterprise resource planning (ERP). The goal of this method is to integrate all of an organization's processes into a single integrated system. There are many advantages of building a unified system that can service the needs of people in finance, human resources, manufacturing, and the warehouse. Traditionally, each of those departments would have its own computer system. These unique systems would be optimized for the specific ways in which each department operates. ERP combines them all into a single integrated software program that runs off a unified database. This allows each department to more easily share information and communicate with each other. Enterprise resource planning is seen as a replacement to business process reengineering, a management approach that attempted to improve the efficiency of the underlying processes. Business process reengineering was done in the following steps:

1. Envision
2. Initiate
3. Diagnose
4. Redesign
5. Reconstruct
6. Evaluate

Business process reengineering lost favor because it was closely associated with downsizing.

A final control worth mentioning is the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which was designed to improve the quality of financial reporting. COSO was started in 1985 to review the causes of fraudulent financial reporting.