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3. Risk analysis:
Risk is a combination of the probability of an event and its consequence
(International Organization for Standardization [ISO] 31000:2009)
Risk analysis is part of audit planning, and help identify risk and vulnerabili
ties so the IS auditor can determine the controls needed to mitigate those
risk
Point to remember: CISA candidate should be able to differentiate
between threat and vulnerability. Threat is anything that can exploit a vul-
nerability, intentionally or accidentally, and obtain, damage, or destroy an
asset. Vulnerability is Weakness or gap in a security program that can be
exploited by threats to gain unauthorized access to an asset
Risk analysis covers Risk Management Framework – ISO 27005, ISO
31000
Risk Assessment Process –The process starts with identifying the source
& events, then identifying the vulnerabilities associated with the sources, &
then analyzing the probability of the occurrence and the impact.
Risk Management Process - It begins with identifying the business object
ives, the information assets that are associated with business, assessmen
t of risk, how to mitigate the risk (either to avoid or transfer or mitigate/
reduce the risk) and implementing controls to mitigate the risk)
Point to remember:
CISA candidate should be aware of the difference between Risk
assessment and Risk management. Risk assessment is the process
of finding where the risk exists. Risk management is the second step
after performing risk assessment.
Risk can be mitigated/reduced through implementation of controls/
third-party insurance, etc.](https://image.slidesharecdn.com/cisadomain1-210928174332/85/CISA-Domain-1-The-Process-On-AUDITING-INFORMATION-SYSTEMS-5-320.jpg)
![https://www.infosectrain.com sales@infosectrain.com Page No.13
b. Variable sampling - Applied in substantive testing situations, deals
with population characteristics that vary, such as monetary values &
weights or any other measurement and provides conclusions related
to deviations from the norm. Involves three types:
Stratified mean per unit – It a statistical model in which population is
divided into groups and samples are drawn from the various groups
Un-stratified mean per unit – A statistical model in which sample
mean (Average) is calculated and projected as an estimated total.
Difference estimation – Statistical model used to estimate the total
difference between audited values and unaudited values based on
differences obtained from sample observations.
c. Important statistical terms:
Confident coefficient (CC) – A percentage expression of the probabil
ity that the characteristics of sample are true representation of the
population.
Stronger the internal control,
lower the confident
coefficient
Level of risk – Equal to
one minus the confidence
coefficient [if confident
co-efficient is
95%, the level of
risk is
(100-95= 5%)]
Expected error
rate (ERR) – An
estimate stated
as a percent of
the error that
may exist. The greater the ERR, greater the sample size
Point to remember: The IS auditor should be familiar with the different
types of sampling techniques and when it is appropriate to use each of
them](https://image.slidesharecdn.com/cisadomain1-210928174332/85/CISA-Domain-1-The-Process-On-AUDITING-INFORMATION-SYSTEMS-14-320.jpg)
CISA Domain 1 The Process On AUDITING INFORMATION SYSTEMS
- 1. [email protected] https://www.infosectrain.com +91-97736-67874 CISA Domain 1 The Process On AUDITING INFORMATION SYSTEMS
- 2. https://www.infosectrain.com [email protected] Page No.1 Overall understanding of the domain: Weightage - This domain constitutes 21 percent of the CISA exam (approximately 32 questions) Covers 11 Knowledge statements covering the process of auditing information systems 1. ISACA IS Audit and Assurance Standards, Guidelines, and Tools & Techniques, Code of Professional Ethics & other applicable standard 2. risk assessment concepts and tools and techniques in planning, examination, reporting and follow-up 3. Fundamental business processes & the role of IS in these processes 4. Control principles related to controls in information systems 5. Risk-based audit planning and audit project management techniques 6. Applicable laws and regulations which affect the scope, evidence collection and preservation and frequency of audits 7. Evidence collection techniques used to gather, protect and preserve audit evidence 8. Different sampling methodologies & other substantive/data analyti- cal procedures 9. Reporting and communication techniques 10. Audit quality assurance (QA) systems and frameworks 11. Various types of audits & methods for assessing and placing reliance on the work of other auditors or control entities
- 3. https://www.infosectrain.com [email protected] Page No.2 Important concepts from exam point of view: 1. Audit Charter: Audit Charter outlines the overall authority, scope and responsibilities of audit function Audit charter should be approved by Audit committee, senior management Internal audit function is always independent of management committee Points to remember: When CISA question is on the approval of audit charter, the answer should be senior most management, based on the options available. IS auditor’s role being more of reporting of audit observations and giving an “independent audit opinion” https://www.infosectrain.com/courses/cisa-certification-training/
- 4. https://www.infosectrain.com [email protected] Page No.3 2. Audit planning: Step 1 – Understanding of business mission, vision, objectives, process which includes information requirements under CIA trait (Confidentiality, Integrity and Availability of data) Step 2 – Understanding of business environment Step 3 - Review prior work papers Step 4 - Perform Risk analysis Step 5 - Set audit scope and objectives Step 6 - Develop audit plan/strategy Step 7 - Assign audit personal/resources Point to remember: The first step in the audit planning is always under- standing the business mission, objectives and business environment, then analyzing the risk involved based in the audit scope. Audit planning includes – 1. Short term planning – considers audit issues that will be covered during the year 2. Long term planning - audit plans that will take into account risk-related issues regarding changes in the organization’s IT strategic direction that will affect the organization’s IT environment.
- 5. https://www.infosectrain.com [email protected] Page No.4 3. Risk analysis: Risk is a combination of the probability of an event and its consequence (International Organization for Standardization [ISO] 31000:2009) Risk analysis is part of audit planning, and help identify risk and vulnerabili ties so the IS auditor can determine the controls needed to mitigate those risk Point to remember: CISA candidate should be able to differentiate between threat and vulnerability. Threat is anything that can exploit a vul- nerability, intentionally or accidentally, and obtain, damage, or destroy an asset. Vulnerability is Weakness or gap in a security program that can be exploited by threats to gain unauthorized access to an asset Risk analysis covers Risk Management Framework – ISO 27005, ISO 31000 Risk Assessment Process –The process starts with identifying the source & events, then identifying the vulnerabilities associated with the sources, & then analyzing the probability of the occurrence and the impact. Risk Management Process - It begins with identifying the business object ives, the information assets that are associated with business, assessmen t of risk, how to mitigate the risk (either to avoid or transfer or mitigate/ reduce the risk) and implementing controls to mitigate the risk) Point to remember: CISA candidate should be aware of the difference between Risk assessment and Risk management. Risk assessment is the process of finding where the risk exists. Risk management is the second step after performing risk assessment. Risk can be mitigated/reduced through implementation of controls/ third-party insurance, etc.
- 6. https://www.infosectrain.com [email protected] Page No.5 4. Internal Controls: Internal controls are normally composed of policies, procedures, practices & organizational structures which are implemented to reduce risks to the organizations The board of directors are responsible for establishing the effective inter nal control system Point to remember: When CISA question is on the responsibility of internal controls, the answer should be senior most management (BoD, CEO, CIO, CISO etc) , based on the options available Classification of internal controls: a. Preventive controls b. Detective controls c. Corrective controls Point to remember: CISA question will be scenario based, where the candidate should have a thorough understanding of all the three controls and able to differentiate between preventive, detective and corrective controls Preventive controls: are those internal controls which are deployed to pre vent happening of an event that might affect achievement of organization al objectives. Some examples of preventive control activities are: Employee background checks Employee training and required certifications Password protected access to asset storage areas Physical locks on inventory warehouses Security camera systems Segregation of duties (i.e. recording, authorization, & custody all handled by separate individuals) https://www.infosectrain.com/courses/cisa-certification-training/
- 7. https://www.infosectrain.com [email protected] Page No.6 ® Detective controls: Detective controls seek to identify when preventive controls were not effective in preventing errors and irregularities, particu larly in relation to the safeguarding of assets. Some examples of detect- ive control activities are: bank reconciliations control totals physical inventory counts reconciliation of the general ledgers to the detailed subsidiary ledgers Internal audit functions Corrective controls: When detective control activities identify an error or irregularity, corrective control activities should then see what could or should be done to fix it, & hopefully put a new system in place to prevent it the next time around. Some examples of corrective control activities are: data backups can be used to restore lost data in case of a fire or other disaster data validity tests can require users to confirm data inputs if amounts are outside a reasonable range insurance can be utilized to help replace damaged or stolen assets management variance reports can highlight variances from budget to actual for management corrective action training and operations manuals can be revised to prevent future errors and irregularities https://www.infosectrain.com/courses/cisa-certification-training/
- 8. https://www.infosectrain.com [email protected] Page No.7 5. COBIT 5: Developed by ISACA A comprehensive framework that assist enterprises in achieving their objectives for the governance & management of enterprise IT (GEIT) COBIT 5 based on 5 principles and 7 enablers 5 Principles 7 Enablers 1. Meeting Shareholders needs 1. Principles, Policies and Frameworks 2. End-to-End coverage 2. Processes 3. Holistic Approach 3. Organizational Structures 4. Integrated Framework 4. Culture, Ethics and Behaviour 5. Separate governance from management 5. Information 6. Services, Infrastructure, Application 7. People, Skills and Competencies (Note: A CISA candidate will not be asked to specifically identify the COBIT process, the COBIT domains or the set of IT processes defined in each. However, candidates should know what frame- works are, what they do and why they are used by enter- prises)
- 9. https://www.infosectrain.com [email protected] Page No.8 6. Risk based auditing Audit Risk - the risk that information may contain a material error that may go undetected during the course of the audit. The audit approach should be as follows: Step 1 – Gather available information and plan through review of prior year’s audit results, recent financial information, inherent risk assessments Step 2 – Understanding of existing internal controls by analyzing control procedures, detection risk assessment Step 3 – Perform compliance testing by identifying key controls to be tested Step 4 – Perform substantive testing by test of account balances, analytical procedures Step 5 – Conclude the audit - Audit report with independent audit opinion Factors which influence audit risk a. Inherent risk – Risk that an activity would pose if no controls/ other mitigating factors were in place. b. Control risk - Risk that a material error exists that would not be prev ented or detected on a timely basis by the system of internal control c. Detection risk - The risk that material errors or misstatements that have occurred will not be detected by the IS auditor d. Residual risk – Risk that remains after controls are taken into account Point to remember: A CISA candidate should know the differences between preventive, detective and corrective controls. An example of a question in the exam would be: Which of the following controls would BEST detect https://www.infosectrain.com/courses/cisa-certification-training/
- 10. https://www.infosectrain.com [email protected] Page No.9 7. Risk Treatment Risk identified in the risk assessment needs to be treated. Possible risk response options include: Risk mitigation—Applying appropriate controls to reduce the risk Risk acceptance—Knowingly and objectively not taking action, provid ing the risk clearly satisfies the organization’s policy and criteria for risk acceptance Risk avoidance—Avoiding risk by not allowing actions that would cause the risk to occur Risk transfer/sharing—Transferring the associated risk to other par ties (e.g., insurers or suppliers)
- 11. https://www.infosectrain.com [email protected] Page No.10 8. Compliance testing Vs. substantive testing Compliance testing - determines whether controls are in compliance with management policies and procedures Examples: User access rights Program change control procedures Review of logs Software license audit Substantive testing - gathers evidences to evaluate the integrity of individual transactions, data or other information Examples: performance of a complex calculation on sample basis testing of account balances Point to remember: CISA question will be scenario based and the candidate should able to differentiate between substantive testing & compliance testing. statistical sampling is to be used when the probability of error must be objectively quantified (i.e no subjectivity is involved). Statistical sampling is an objective method of sampling in which each item has equal chance of selection https://www.infosectrain.com/courses/cisa-certification-training/
- 12. Point to remember: A CISA candidate, given an audit scenario, should be able to determine which type of evidence gathering tech- nique would be best https://www.infosectrain.com [email protected] Page No.11 9. Audit Evidence any information used by the IS auditor to determine whether the entity or data being audited follows the established criteria or objectives & supports audit conclusions Techniques for gathering evidence: Review IS organization structures Review IS policies and procedures Review IS standards Review IS documentation Interview appropriate personnel Observe processes and employee performance Walkthrough
- 13. https://www.infosectrain.com [email protected] Page No.12 10.Audit Sampling The subset of population members used to perform testing Two approaches of sampling: a. Statistical sampling - using mathematical laws of probability to create the sample size b. Non-Statistical sampling - Uses auditor judgment to determine the method of sampling Methods of sampling a. Attribute sampling - Applied in compliance testing situations, deals with the presence or absence of the attribute & provides conclusions that are expressed in rates of incidence. Involves three types: Attribute sampling - selecting a small number of transactions & ma- king assumptions about how their characteristics represent the full population of which the selected items are a part Stop-or-Go Sampling - This model help prevents excessive sampling of an attribute by allowing an audit test to be stopped at the earliest po ssible moment. It is mostly used when auditor believes that relatively few errors will be found in populations Discovery sampling – It is mostly used when the objective of audit is to discover fraud 24 https://www.infosectrain.com/courses/cisa-certification-training/
- 14. https://www.infosectrain.com [email protected] Page No.13 b. Variable sampling - Applied in substantive testing situations, deals with population characteristics that vary, such as monetary values & weights or any other measurement and provides conclusions related to deviations from the norm. Involves three types: Stratified mean per unit – It a statistical model in which population is divided into groups and samples are drawn from the various groups Un-stratified mean per unit – A statistical model in which sample mean (Average) is calculated and projected as an estimated total. Difference estimation – Statistical model used to estimate the total difference between audited values and unaudited values based on differences obtained from sample observations. c. Important statistical terms: Confident coefficient (CC) – A percentage expression of the probabil ity that the characteristics of sample are true representation of the population. Stronger the internal control, lower the confident coefficient Level of risk – Equal to one minus the confidence coefficient [if confident co-efficient is 95%, the level of risk is (100-95= 5%)] Expected error rate (ERR) – An estimate stated as a percent of the error that may exist. The greater the ERR, greater the sample size Point to remember: The IS auditor should be familiar with the different types of sampling techniques and when it is appropriate to use each of them
- 15. https://www.infosectrain.com [email protected] Page No.14 11.Control Self-assessment (CSA) a. What is CSA? assessment of controls made by the staff and management of the unit or units involved management technique that assures stakeholders, customers and other parties that the internal control system of the organization is reliable. Ensures that employees are aware of the risk to the business & they conduct periodic, proactive reviews of controls b. Objectives of CSA to leverage the internal audit function by shifting some of the control monitoring responsibilities to the functional areas not intended to replace audit’s responsibilities but to enhance them c. Benefits of CSA Early detection of risk More effective and improved internal controls Developing a sense of ownership of the controls in the employees and process owners reducing their resistance to control improvement initiatives Increased communication between operational and top management Highly motivated employees https://www.infosectrain.com/courses/cisa-certification-training/
- 16. https://www.infosectrain.com [email protected] Page No.15 d. Disadvantages of CSA mistaken as an audit function replacement considered as an additional workload Failure to act on improvement suggestions could damage employee morale Lack of motivation may limit effectiveness in the detection of weak controls e. Auditor’s role in CSA The auditor’s role in CSAs should be considered enhanced when audit departments establish a CSA program. Auditors internal control professionals & assessment facilitators https://www.infosectrain.com/courses/cisa-certification-training/
- 17. https://www.infosectrain.com [email protected] Page No.16 THANKS https://www.infosectrain.com [email protected] +91-97736-67874