Information Systems Audit Chapter 1

A framework designed to help organizations improve their internal control processes. It emphasizes a 5-component approach, including the "Information and Communication" component that focuses on information systems.

A type of audit that verifies an organization's financial records and statements, often involving IS Audit as part of a broader process.

An audit that assesses the effectiveness and efficiency of an organization's information systems operations.

A type of audit that verifies that information technology is chosen, configured, and implemented appropriately.

A detailed examination of the management controls within an organization's information technology (IT) infrastructure and business applications. It evaluates evidence to determine if the information systems are safeguarding assets and maintaining data integrity.

IT assets, such as hardware, software, and confidential information, should be protected from illicit access, use, disclosure, alteration, destruction, and/or theft to prevent loss to the organization.

Ensuring the accuracy and consistency of data throughout its lifecycle. This includes the maintenance and assurance of data integrity.

A trail that establishes the origin and processing of every financial transaction, ensuring that each transaction can be traced back to its source.

A record of every event that happens within a computer system, including user actions, application changes, and operating system activities.

Audit trails help businesses detect unauthorized access, errors, and fraud by tracking changes and activities within a system.

Audit trails are essential for verifying and validating financial transactions, software updates, and business processes.

An audit trail should be able to trace a transaction from its origin to its completion and back again, ensuring all steps are documented.

If an audit trail is poorly designed or not activated, auditors cannot trace transactions, making traditional audit testing impossible.

Modern information systems often include built-in audit trails, giving users the option to activate, deactivate, or customize features.

The use of computers has led to a lack of traditional, physical audit trails. This makes it easier to manipulate information without detection.

Inadequate internal controls and poorly-designed information systems can lead to a higher risk of data manipulation and unauthorized access.

Errors detected during information system auditing can easily escalate to materiality levels during planning.

Consistent processing allows for consistency and simplicity in correcting errors. This means that all erroneous transactions can be corrected simultaneously with an update to business rules and constraints or a backend correction of the data.

The ability to easily access data and programs in IS auditing can be beneficial but also presents risks.

Employees expect instant access to relevant information in an information system to improve customer service. Ready access to data empowers employees to resolve customer issues quickly and effectively.

Employees who feel connected to their organization and have access to the information they need are more engaged and can act as valuable brand ambassadors.

Employees expect immediate access to information, but information silos, restricted permissions, and lack of centralized content can impede this expectation.

Providing employees with access to data can create competitive advantages for businesses by improving customer service, building trust, reducing costs, and increasing productivity.

The Edelman Trust Barometer reports that regular company employees have significant credibility, highlighting the importance of employee engagement and trust.

The procedures used to capture, process, and correct information from initiation to reporting. This includes both manual and IT systems.

The records that support a transaction's journey. This includes both physical and electronic records and can trace a transaction from inception to the financial statements.

Includes the specific accounts used to initiate, record, and report transactions in the financial statements. This is where transactions ultimately land.

The system used to capture and process information about events and conditions, such as depreciation, that are significant to the financial statements.

A system that is designed to maintain accountability for assets, liabilities, and equity.

Procedures for resolving incorrect processing of transactions, often involving automated suspense files and timely correction.

Procedures for overseeing and documenting overrides or bypasses of internal controls.

The process of incorporating information from transaction processing into the general ledger. This involves transferring accumulated transactions from a subsidiary ledger.

Digital security incidents, such as data breaches, are becoming more frequent and impactful as organizations increasingly rely on digital technologies and collect, process, and share vast amounts of data.

Data breaches are more likely to occur when personal data is easily accessible and shared. They can harm individuals through privacy violations and lead to significant financial losses for businesses.

Data breaches, especially large-scale breaches involving millions of records, are becoming more common. This is due to the increasing collection, processing, and sharing of personal data.

Organizations that experience data breaches may face legal consequences, financial penalties, reputational damage, and loss of customer trust.

The motivation behind digital security incidents can vary widely, from financial gain and intellectual property theft to political agendas and disruption.

Digital security incidents can have a significant economic impact, causing financial losses, decreased competitiveness, and damage to reputation.

Digital security incidents are more likely to target organizations that rely heavily on digital systems and possess valuable assets, such as intellectual property or sensitive data.

Digital security incidents are more likely to occur when organizations fail to implement appropriate security measures, including strong passwords, encryption, and multi-factor authentication.

Entity-level controls are the foundation of an organization's internal control system. They provide a framework for the other control components to operate effectively.

The control environment sets the tone for the organization's internal control system and influences the effectiveness of other controls. It includes factors like integrity, ethical values, and commitment to competence.

The entity's risk assessment process identifies, analyzes, and manages risks. It involves assessing the likelihood and impact of potential risks to the organization.

The entity's process to monitor the system of internal control involves assessing the effectiveness of controls and making necessary adjustments. This includes regular check-ins and evaluation of control components.

Entity-level controls directly impact the identification and assessment of risks at the financial statement level, providing a foundation for understanding an organization's financial reporting process.

Controls like information systems, communication, and control activities are more likely to relate to the identification and assessment of risks at the assertion level, focusing on specific financial statement accounts and balances.

Deficiencies in entity-level controls can have pervasive effects on the preparation of financial statements, impacting the reliability and accuracy of the overall financial reporting process.

Entity-level controls are crucial for auditors to understand how the entity identifies and addresses business risks. This knowledge guides the auditor in planning and performing their audit work.