What is Information technology Audit?

IT audit refers to the process of evaluating an organization's information technology infrastructure, policies, procedures, and operations to ensure they are aligned with the organization's objectives and goals and are compliant with relevant laws and regulations.

An IT audit typically involves a thorough examination of an organization's hardware, software, networks, databases, security systems, and other related components to identify potential risks and vulnerabilities that could impact the confidentiality, integrity, and availability of its information assets.

Further an IT audit also looks at whether the existing security measures that are in place to safeguard the organization’s digital assets are adequate or not. Based on the results of the security audit, an organization can take the necessary steps required to bring about any corrective measures that are required; this helps to improve the IT system of the business, which naturally leads to better performance and enhanced security.

Information System Audit Procedure

As we aware timely and effective Internal audit of Information systems at periodical intervals will be an important control point to identify existing or potential IT risks. It is better to have an awareness about audit procedure. It includes detailed report on below aspects.

How IT audit can help mitigate risks

IT audit helps organizations by identifying and mitigating IT-related risks, ensuring compliance, enhancing operational efficiency, and promoting data integrity. It also assists in strengthening cybersecurity, managing third-party risks, and optimizing costs. By providing insights for strategic planning and improving decision-making, IT audits create value for the organization.

What IT audit services can chartered accountants offer to address organizations' IT-related requirements?

Chartered accountants can offer a range of IT audit services, including financial systems audits, compliance assessments, cybersecurity evaluations, risk management, data integrity checks, and strategic IT alignment, among others, to help organizations effectively manage their IT environments.

Recent Breaches and Failures

1. Upstox – Password data breach (2021)

Upstox, a leading online trading platform in India, experienced a data breach affecting customer contact and KYC details. While the breach was limited, it underscores the importance of enhancing cybersecurity measures, particularly for third-party data warehouses.

2. India Healthcare website – Data Steal (2019)

A US-based cybersecurity firm revealed that hackers stole over 68 lakh patient and doctor records from a prominent India-based healthcare website. This incident emphasizes the growing threat to sensitive medical data and the need for robust defenses against cybercriminals.

3. Amazon Web Services Outage (2017):

Amazon Web Services suffered a significant outage due to human error during routine maintenance. This event serves as a reminder of the interconnectedness of digital services and the necessity of well-executed maintenance procedures.

4. British Airways IT Outage (2017):

British Airways experienced a prolonged IT outage that resulted in flight cancellations and passenger disruptions. The incident highlights the potential impact of technology failures on critical operations and customer experience.

IT Risks – Impacts – Control Measures

As the information system brings forth the fresh style in which companies interact and the organization is structured. It enhances the company's core competencies and lowering the cost of communication and coordination between the supply chains lay forward a different approach for effective information communication. In today’s time, success of an organisation is highly dependent on its ability to deploy effective, secured and robust IT system, otherwise the business will go disrupted.

As we know, identifying, assessing, and implementing controls to IT Risks is an integral part of IS Audit herein below provided few of major Risks associated with IT, consequences there on and controls to mitigate those IT risks.

S.No	Risk	Impact or consequences	How to mitigate?
Risks associated with data
1	Data Quality Risk: It refers to the inaccuracy, incompleteness, and inconsistency of data	Inaccurate decision-making Increased operational costs Reputational damage	Implementing data validation controls to prevent inaccuracy & incompleteness risk Develop detailed Policy manual for data inputting Automate the data collection process to avoid manual errors
2	Data Processing Risk: Inaccuracy in data processing by system software application	Inaccurate decision-making Increased operational costs Reputational damage Legal consequences - penalties, imprisonment	Implementing software after testing it under real time environment. Develop detailed Policy manual for software acquisition or development
3	Data Loss/Breach: Sensitive data can be stolen or accessed, may lost due to hardware failure, software bugs, human error, environmental disasters	Legal consequences - penalties, imprisonment Damage to reputation Impact over customer trust Operational disruption	Use encryption to protect data in transit and at rest Installing antivirus & anti malware software applications Implement strong access control measures, including authentication, authorization, and access logging Implement a sound data backup and recovery plan
Physical Risks to Information System
4	IT Assets Misappropriation: It refers to unauthorised utilisation for personal benefit or stealing of IT assets	Increased operational costs Reputational damage Loss of Investor confidence Legal consequences - penalties, imprisonment	Implement controls to prevent unauthorised access to premises (biometric based authentication & access, Audit log) Covering premises under CCTV surveillance Maintaining IT assets register indicating location of assets Periodical assets verification (IT Assets Audit)
5	Environmental Risks: Environmental factors, such as temperature, humidity, and dust, earthquakes, floods, hurricanes, and fires can damage Information systems	Surge in IT costs due to IT assets loss & replacement costs thereon IT System downtime leading to operational inefficiency Failure to deliver product to customer on time	Implementing well documented & tested Disaster recovery & business continuity plan to ensure minimal disruption to operations Installing proper air conditioning system to prevent risks associated with temperature, humidity, and dust. Implementing Fire & water resistant controls.
System Security Risk
6	Malware is a type of malicious software that can cause a wide range of risks to your computer system,	Data Theft or loss of sensitive data System Damage such as system crashes, slow performanc System hijacking Ransomware Identity theft by stealing names, credentials, addresses etc	Install antivirus software Keep your software up-to-date Be cautious when downloading or opening attachments Use a firewall Use strong passwords

Disclaimer:

“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”

Prepared On:
17/10/23