Risks and Internal Controls in ICT

Introduction to Risks and Internal Controls

• ICT is crucial in modern businesses, influencing operations, client interaction, and process control.
• Implementation of internal controls is necessary to manage associated risks.
• The chapter discusses basic technology and ICT principles relevant to a computerized environment.

Evolution of Information Technology

• Historically, personal computers operated standalone with manual processes and printed documents.
• Modern IT utilizes networks for computer connections, replacing many manual controls with automated systems.
• Key trends include decentralized networks, mobile technology, open-source software, and cloud computing.
• The Fourth Industrial Revolution features technologies like AI, machine learning, Big Data, robotics, and blockchain.

Information System Governance

• Governed by King IV’s principle 12, which emphasizes IT governance, risk management, and internal controls.
• Effective IT governance enhances risk management and compliance with legal obligations.
• Risks of poor IT governance include data loss and inappropriate IT use.

Internal Controls Components

• The board is responsible for establishing a control environment and overseeing IT governance.
• Five key components:
  • People: All individuals interacting with Computer Information Systems (CIS).
  • Procedures: Guidelines for data collection, storage, and processing.
  • Data: Accurate storage and management of data in hardware.

Computerized Accounting System Operation

• Key steps in transaction processing:
  • Capture Data: Done through source documents.
  • Input Source Document: Into the accounting system.
  • Process Transactions: Using journals and ledgers to maintain accurate records.
  • Report Generation: Producing financial statements based on processed data.

Security Controls in Computerized Systems

• Library Function: Assigning a data librarian for data management.
• Data Communication Controls: Utilize measures like encryption, firewalls, and antivirus programs.
• Regular software updates are essential for maintaining security.

Business Continuity Controls

• Prevent disruptions and ensure continuous processing of business operations.
• Types of controls include:
  • Preventative Controls: Protect against unauthorized access and physical dangers (e.g., fire alarms).
  • Detective and Corrective Controls: Involves data backups and disaster recovery plans to mitigate risks.

Operating and System Maintenance Controls

• Standards for managing IT resources include effective scheduling, maintenance, and user practice policies.
• Maintenance of logs and registers for software/hardware usage reviewed by management.

Application Controls in Computerized Processes

• Focus on input, processing, and output controls:
  • Input Controls: Error correction during data capture and management of rejected transactions.
  • Processing Controls: Ensure data integrity with minimal user intervention; critical to prevent data errors or losses.
  • Output Controls: Manage the distribution and format of data for proper accessibility (e.g., hard-copy or digital).

Overall Control Mechanisms

• User-Related Controls: Ensure correct program usage and data handling.
• Processing Control Mechanisms: Involve completeness tests and exception monitoring to maintain processing accuracy.
• Effective application controls are crucial to reduce errors in computerized business transactions.

This quiz covers essential concepts related to risks and internal controls in Information and Communication Technology (ICT). It explores the evolution of information technology, highlighting significant trends and the importance of governance in managing risks. Understand how modern technologies impact operations and control processes.