Definition of IT audit An IT audit can be defined as any audit that encompasses review and

evaluation of automated information processing systems, related non-automated processes and the
interfaces among them. Planning the IT audit involves two major steps. The first step is to gather
information and do some planning the second step is to gain an understanding of the existing
internal control structure. More and more organizations are moving to a risk-based audit approach
which is used to assess risk and helps an IT auditor make the decision as to whether to perform
compliance testing or substantive testing. In a risk-based approach, IT auditors are relying on
internal and operational controls as well as the knowledge of the company or the business. This
type of risk assessment decision can help relate the cost-benefit analysis of the control to the known
risk. In the Gathering Information step the IT auditor needs to identify five items:

Knowledge of business and industry

Prior years audit results

Recent financial information

Regulatory statutes

Inherent risk assessments

A side note on Inherent risks, is to define it as the risk that an error exists that could be material or
significant when combined with other errors encountered during the audit, assuming there are no
related compensating controls. As an example, complex database updates are more likely to be
miswritten than simple ones, and thumb drives are more likely to be stolen (misappropriated) than
blade servers in a server cabinet. Inherent risks exist independent of the audit and can occur
because of the nature of the business.
In the Gain an Understanding of the Existing Internal Control Structure step, the IT auditor needs to
identify five other areas/items:

Control environment

Control procedures

Detection risk assessment

Control risk assessment

Equate total risk

Once the IT auditor has Gathered Information and Understands the Control then they are ready
to begin the planning, or selection of areas, to be audited. Remember one of the key pieces of
information that you will need in the initial steps is a current Business Impact Analysis (BIA), to assist
you in selecting the application which support the most critical or sensitive business functions.

Objectives of an IT audit
Most often, IT audit objectives concentrate on substantiating that the internal controls exist and are
functioning as expected to minimize business risk. These audit objectives include assuring
compliance with legal and regulatory requirements, as well as the confidentiality, integrity, and
availability (CIA no not the federal agency, but information security) of information systems and
data.

IT audit strategies
There are two areas to talk about here, the first is whether to do compliance or substantive testing
and the second is How do I go about getting the evidence to allow me to audit the application and
make my report to management? So what is the difference between compliance and substantive
testing? Compliance testing is gathering evidence to test to see if an organization is following its
control procedures. On the other hand substantive testing is gathering evidence to evaluate the
integrity of individual data and other information. For example, compliance testing of controls can be
described with the following example. An organization has a control procedure which states that all
application changes must go through change control. As an IT auditor you might take the current
running configuration of a router as well as a copy of the -1 generation of the configuration file for the
same router, run a file compare to see what the differences were; and then take those differences
and look for supporting change control documentation. Dont be surprised to find that network
admins, when they are simply re-sequencing rules, forget to put the change through change control.
For substantive testing, lets say that an organization has policy/procedure concerning backup tapes
at the offsite storage location which includes 3 generations (grandfather, father, son). An IT auditor

would do a physical inventory of the tapes at the offsite storage location and compare that inventory
to the organizations inventory as well as looking to ensure that all 3 generations were present.
The second area deals with How do I go about getting the evidence to allow me to audit the
application and make my report to management? It should come as no surprise that you need to:

Review IT organizational structure

Review IT policies and procedures

Review IT standards

Review IT documentation

Review the organizations BIA

Interview the appropriate personnel

Observe the processes and employee performance

Examination, which incorporates by necessity, the testing of controls, and

therefore includes the results of the tests.

As additional commentary of gathering evidence, observation of what an individual actually does

versus what they are supposed to do, can provide the IT auditor with valuable evidence when it
comes to control implementation and understanding by the user. Also performing a walk-through
can give valuable insight as to how a particular function is being performed.

Application vs. general controls

General controls apply to all areas of the organization including the IT infrastructure and support
services. Some examples of general controls are:

Internal accounting controls

Operational controls

Administrative controls

Organizational security policies and procedures

Overall policies for the design and use of adequate documents and records

Procedures and practices to ensure adequate safeguards over access

Physical and logical security policies for all data centers and IT resources

Application controls refer to the transactions and data relating to each computer-based application
system; therefore, they are specific to each application. The objectives of application controls are to

ensure the completeness and accuracy of the records and the validity of the entries made to them.
Application controls are controls over IPO (input, processing, output) functions, and include methods
for ensuring that:

Only complete, accurate and valid data are entered and updated in an
application system

Processing accomplishes the designed and correct task

The processing results meet expectations

Data is maintained

As an IT auditor, your tasks when performing an application control audit should include:

Identifying the significant application components; the flow of transactions

through the application (system); and to gain a detailed understanding of the
application by reviewing all available documentation and interviewing the
appropriate personnel, such as system owner, data owner, data custodian
and system administrator.

Identifying the application control strengths and evaluating the impact, if any,
of weaknesses you find in the application controls

Developing a testing strategy

Testing the controls to ensure their functionality and effectiveness

Evaluating your test results and any other audit evidence to determine if the
control objectives were achieved

Evaluating the application against managements objectives for the system to

ensure efficiency and effectiveness.

IT audit control reviews

After gathering all the evidence the IT auditor will review it to determine if the operations audited are
well controlled and effective. Now this is where your subjective judgment and experience come into
play. For example, you might find a weakness in one area which is compensated for by a very
strong control in another adjacent area. It is your responsibility as an IT auditor to report both of
these findings in your audit report.

The audit deliverable

So whats included in the audit documentation and what does the IT auditor need to do once their
audit is finished. Heres the laundry list of what should be included in your audit documentation:

Planning and preparation of the audit scope and objectives

Description and/or walkthroughs on the scoped audit area

Audit program

Audit steps performed and audit evidence gathered

Whether services of other auditors and experts were used and their
contributions

Audit findings, conclusions and recommendations

Audit documentation relation with document identification and dates (your

cross-reference of evidence to audit step)

A copy of the report issued as a result of the audit work

Evidence of audit supervisory review

When you communicate the audit results to the organization it will typically be done at an exit
interview where you will have the opportunity to discuss with management any findings and
recommendations. You need to be absolutely certain of:

The facts presented in the report are correct

The recommendations are realistic and cost-effective, or alternatives have

been negotiated with the organizations management

The

recommended

implementation

dates

will

be

agreed

to

for

the

recommendations you have in your report.

Your presentation at this exit interview will include a high-level executive summary (as Sgt. Friday
use to say, just the facts please, just the facts). And for whatever reason, a picture is worth a
thousand words so do some PowerPoint slides or graphics in your report.
Your audit report should be structured so that it includes:

An introduction (executive summary)

The findings are in a separate section and grouped by intended recipient

Your overall conclusion and opinion on the adequacy of controls examined

and any identified potential risks

Any reservations or qualifications with respect to the audit

Detailed findings and recommendations

Finally, there are a few other considerations which you need to be cognizant of when preparing and
presenting your final report. Who is the audience? If the report is going to the audit committee, they
may not need to see the minutia that goes into the local business unit report. You will need to identify
the organizational, professional and governmental criteria applied such as GAO-Yellow Book, CobiT
or NIST SP 800-53. Your report will want to be timely so as to encourage prompt corrective action.
And as a final, final parting comment, if during the course of an IT audit, you come across a
materially significant finding, it should be communicated to management immediately, not at the end
of the audit.