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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Information Systems Acquisition, Development and Implementation | 12% | - System Development Lifecycle (SDLC) - Testing and Implementation Controls - Project Management Controls |
| Topic 2: Protection of Information Assets | 27% | - Access Control and Identity Management - Information Security Governance - Data Protection and Security Monitoring |
| Topic 3: Information Systems Auditing Process | 21% | - Audit Reporting and Follow-up - Audit Standards and Guidelines - Audit Planning and Execution |
| Topic 4: Information Systems Operations and Business Resilience | 23% | - Service Level Management - IT Operations Management - Business Continuity and Disaster Recovery |
| Topic 5: Governance and Management of IT | 17% | - IT Governance Frameworks - IT Policies and Procedures - Risk Management and Compliance |
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NEW QUESTION # 581
An IS auditor discovers that validation controls in a web application have been moved from the server side
into the browser to boost performance. This would MOST likely increase the risk of a successful attack by:
Answer: A
Explanation:
Section: The process of Auditing Information System
NEW QUESTION # 582
Which of the following audit risk is related to exposure of a process or entity to be audited without taking
into account the control that management has implemented?
Answer: C
Explanation:
Section: The process of Auditing Information System
Explanation:
Inherent Risk is the risk level or exposure of a process or entity to be audited without taking into account
the control that management has implemented. Inherent risk exists independent of an audit and can occur
because of the nature of the business.
For your exam you should know below information about audit risk:
Audit risk (also referred to as residual risk) refers to the risk that an auditor may issue unqualified report
due to the auditor's failure to detect material misstatement either due to error or fraud. This risk is
composed of inherent risk (IR), control risk (CR) and detection risk (DR), and can be calculated thus:
AR = IR × CR × DR
Inherent Risk
Auditors must determine risks when working with clients. One type of risk to be aware of is inherent risk.
While assessing this level of risk, you ignore whether the client has internal controls in place (such as a
secondary review of financial statements) in order to help mitigate the inherent risk. You consider the
strength of the internal controls when assessing the client's control risk. Your job when assessing inherent
risk is to evaluate how susceptible the financial statement assertions are to material misstatement given
the nature of the client's business. A few key factors can increase inherent risk.
Environment and external factors: Here are some examples of environment and external factors that can
lead to high inherent risk:
Rapid change: A business whose inventory becomes obsolete quickly experiences high inherent risk.
Expiring patents: Any business in the pharmaceutical industry also has inherently risky environment and
external factors. Drug patents eventually expire, which means the company faces competition from other
manufacturers marketing the same drug under a generic label.
State of the economy: The general level of economic growth is another external factor affecting all
businesses.
Availability of financing: Another external factor is interest rates and the associated availability of financing.
If your client is having problems meeting its short-term cash payments, available loans with low interest
rates may mean the difference between your client staying in business or having to close its doors.
Prior-period misstatements: If a company has made mistakes in prior years that weren't material (meaning
they weren't significant enough to have to change), those errors still exist in the financial statements. You
have to aggregate prior-period misstatements with current year misstatements to see if you need to ask the
client to adjust the account for the total misstatement.
You may think an understatement in one year compensates for an overstatement in another year. In
auditing, this assumption isn't true. Say you work a cash register and one night the register comes up $20
short. The next week, you somehow came up $20 over my draw count. The $20 differences are added
together to represent the total amount of your mistakes which is $40 and not zero. Zero would indicate no
mistakes at all had occurred.
Susceptibility to theft or fraud: If a certain asset is susceptible to theft or fraud, the account or balance level
may be considered inherently risky. For example, if a client has a lot of customers who pay in cash, the
balance sheet cash account is going to have risk associated with theft or fraud because of the fact that
cash is more easily diverted than customer checks or credit card payments.
Looking at industry statistics relating to inventory theft, you may also decide to consider the inventory
account as inherently risky. Small inventory items can further increase the risk of this account valuation
being incorrect because those items are easier to conceal (and therefore easier to steal).
Control Risk
Control risk has been defined under International Standards of Auditing (ISAs) as following:
The risk that a misstatement that could occur in an assertion about a class of transaction, account balance
or disclosure and that could be material, either individually or when aggregated with other misstatements,
will not be prevented, or detected and corrected, on a timely basis by the entity's internal control.
In simple words control risk is the probability that a material misstatement exists in an assertion because
that misstatement was not either prevented from entering entity's financial information or it was not
detected and corrected by the internal control system of the entity.
It is the responsibility of the management and those charged with governance to implement internal control
system and maintain it appropriately which includes managing control risk.
There can be many reasons for control risk to arise and why it cannot be eliminated absolutely. But some
of them are as follows:
Cost-benefit constraints
Circumvention of controls
Inappropriate design of controls
Inappropriate application of controls
Lack of control environment and accountability
Novel situations
Outdated controls
Inappropriate segregation of duties
Detection Risk
Detection Risk is the risk that the auditors fail to detect a material misstatement in the financial statements.
An auditor must apply audit procedures to detect material misstatements in the financial statements
whether due to fraud or error. Misapplication or omission of critical audit procedures may result in a
material misstatement remaining undetected by the auditor. Some detection risk is always present due to
the inherent limitations of the audit such as the use of sampling for the selection of transactions.
Detection risk can be reduced by auditors by increasing the number of sampled transactions for detailed
testing.
The following answers are incorrect:
Control Risk - The risk that material error exist that would not be prevented or detected on timely basis by
the system of internal controls.
Detection risk - The risk that material errors or misstatements that have occurred will not be detected by an
IS auditor.
Overall audit risk - The probability that information or financial report may contain material errors and that
the auditor may not detect an error that has occurred. An objective in formulating the audit approach is to
limit the audit risk in the area under security so the overall audit risk is at sufficiently low level at the
completion of the examination.
The following reference(s) were/was used to create this question:
CISA review manual 2014 page number 50
http://en.wikipedia.org/wiki/Audit_risk
http://www.dummies.com/how-to/content/how-to-assess-inherent-risk-in-an-audit.html
http://pakaccountants.com/what-is-control-risk/
http://accounting-simplified.com/audit/risk-assessment/audit-risk.html
NEW QUESTION # 583
Which of the following could an IS auditor recommend to improve the estimated resources required in
system development?
Answer: C
Explanation:
Section: Information System Acquisition, Development and Implementation
NEW QUESTION # 584
An organization has recently Implemented a Voice-over IP (VoIP) communication system. Which of the following should be the IS auditor's PRIMARY concern?
Answer: A
NEW QUESTION # 585
Which of the following BEST ensures the integrity of a server's operating system?
Answer: B
Explanation:
Section: Protection of Information Assets
Explanation:
Hardening a system means to configure it in the most secure manner (install latest security patches, properly define the access authorization for users and administrators, disable insecure options and uninstall unused services) to prevent nonprivileged users from gaining the right to execute privileged instructions and thus take control of the entire machine, jeopardizing the OS's integrity. Protecting the server in a secure location and setting a boot password are good practices, but do not ensure that a user will not try to exploit logical vulnerabilities and compromise the OS. Activity logging has two weaknesses in this scenario-it is a detective control (not a preventive one), and the attacker who already gained privileged access can modify logs or disable them.
NEW QUESTION # 586
......
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