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As an IS auditor, you can learn a significant amount about an organization by reviewing the strategic plan and organizational and lower-level policies. These documents can provide background on the business objectives and mission, as well as the line or operational policies supporting that mission. If you review strategy and policies before doing observation and conducting interviews, you might identify areas in which potential gaps exist, help define whether the organization has a clear process for policy development, and determine whether the organization is using a top-down or bottom-up approach to policy development.

Policy Development

Organizations follow different approaches in policy development. The top-down approach aligns organization-wide policies with the business strategy; department- and office-level policy then is created in accordance with strategy and organizational policy. The top-down approach works to ensure that all policies are aligned with the organizational strategy, but it generally requires more time to develop and implement and might not address immediate operation priorities of the organization.

Other organizations create policy using the bottom-up approach. They identify immediate areas of concern, compliance, or risk, and develop policy for those areas by performing a risk assessment. Although this approach is more time- and cost-effective, it creates the risk that policies might not align with organizational policies and strategy.

A bottom-up approach to the development of organizational policies is often driven by a risk assessment.

A variety of policy types exist, and it is important that the organization and the auditor understand the distinction between policy types and their enforcement:

  • Regulatory These policies are written to ensure that the organization is following standards set by a specific industry and are regulated by law. These types of policies are frequently used in financial institutions, healthcare facilities, public utilities, and the federal government.

  • Advisory These policies strongly recommend certain types of behaviors, actions, or activities for the organization. These types of policies outline possible consequences for noncompliance and are enforced internally within the organization.

  • Informative These policies are generally not enforceable and are considered "teaching" policies. These types of policies are used in most organizations.

In addition to different policy types, different subsets of the organization need to develop and comply with lower-level policies. Human resources policies at the policy level are those that most of us are familiar with; these policies pertain to training, travel, hiring, promotion, and termination. These policies are implemented organization-wide, regardless of function or authority level, and they guide the actions of employees. The policies should have a process for review as well as communication within the organization, and should address both the long- and short-term objectives of the organization. There are a variety of methods for communicating policy; these might take the form of awareness training, employee manuals, company newsletters, or legal banners. It is important that clear responsibilities are defined and programs are put in place to ensure that employees are aware of and understand the organization's policies.

IT Policy

Although senior managers are responsible for the development, review, and communication of policy, a significant portion of policies pertains to information systems acquisition (hardware/software), compliance, security, network and operations, continuity of operations, and financial/accounting policies.

Table 2.1 lists some definitions of policy types that are used by organizations and that pertain to IT functions.

Table 2.1. Areas of Policy Development

Planning policies

Responsibility: Who is involved with planning?

Timing: When does planning take place?

Process: How should planning be conducted? Deliverables: What planning documents are produced? Priorities: What are the most and least critical planning issues?

Organizational policies

Structure: What is the organizational form of the IT function?

Information architecture: Is the infrastructure aligned with the organization's mission? Communication: Do all affected parties know the IT strategy and policies? Compliance: Are all external regulations and laws being addressed?

Risk assessment: Are IT risks identified, measured, and controlled?

Hardware policy

Acquisition: How is hardware acquired from outside vendors? Standards: What are the hardware compatibility standards?

Performance: How are computing capabilities tested?

Configuration: Where should client/servers, personal computers, and similar technology be used? Service providers: Should third-party service bureaus be used, and when?

Network policy

Acquisition: How is network technology acquired from outside vendors?

Standards: What are the network compatibility standards (LAN, Internet, intranet, and so on)?

Performance: How much bandwidth is needed, and is the network fast enough?

Configuration: What are the logical and physical configuration standards (server, firewalls, routers, and so on)?

Adaptability: Does the network have the capability to support emerging business models?

Security policies

Testing/evaluation: How is security tested or evaluated?

Access: Who can have access to what information and applications?

Monitoring: Who monitors security, and how? Firewalls: Are firewalls effectively configured and utilized? Violations: What happens if an employee or external entity violates security?

Operations policy

Structure: How is the operations function structured?

Responsibilities: Who is responsible for transaction processing? Input: How does data enter into the information system? Processing: What processing modes are used?

Error handling: Who should correct erroneous input/processing items?

Contingency policy

Backup: What are the backup procedures? Recovery: What is the recovery process, and how is it tested?

Disasters: Who is in charge, and what is the plan?

Alternate sites: What types of sites are available for off-site processing?

Financial and accounting policies

Project management: Are IT projects prioritized, managed, and monitored?

Revenue generation: Should services be sold inside or outside the organization?

Technology investments: Are the investment returns being properly evaluated?

Funding priorities: Where and how should resources be allocated most effectively?

Budgets: Are budgets aligned with funding levels and priorities, and aligned with strategy?

Policies are high-level documents that align with the business strategy (both long and short term) and represent the corporate philosophy. The organization's management is responsible for the formulation, documentation, communication, and control of policies. The development of these policies and their implementation show an organization's commitment (due care and diligence) to the use, operation, and security of information systems.

IS auditors should look for both policies and procedures that apply to all phases of the system development life cycle (SDLC) and ensure that they align with the organization's strategy. The SDLC encompasses the planning, analysis, design, implementation, integration/testing, acceptance, maintenance, and security of information systems. The SDLC is a formal model that represents the phased implementation of information systems. The definition of detailed tasks might change by organization, but Figure 2.1 outlines the high-level tasks of an SDLC.

Figure 2.1. SDLC diagram.

Procedures

Procedures are detailed documents that incorporate the intent of the parent policy and that document administrative and operational processes. In some cases, procedures provide step-by-step details for performing a function and writing in a clear and concise manner to allow easy understanding and implementation.

The procedures outline how to perform various business processes within the IT environment and the controls associated with them. The change in business process should drive policy and procedure changes, but this is not always the case. In today's fast-moving business environment, it is not uncommon for business processes to frequently change because of procedures, compliance, or the influence of new technologies in the organization. An IS auditor must pay particular attention to the process for review and implementation of procedures because they are the most fluid documents in the organization. In addition, the auditor might find through direct observation or interviews that the defined procedures are not being followed. This is an indication that there is no defined process for review and update of the procedures, or that the people working in the operational environments are not properly trained on the procedures associated with their function.

The lack of procedures or adherence to procedures could be indicators of a larger issue: Necessary controls in the environment are being bypassed by ad-hoc procedures. In this case, the procedure, or lack thereof, makes it difficult for the auditor to identify controls and ensure that the process is efficient and secure.

When determining the effectiveness of IS policies communication, an auditor typically reviews interviews with user and IS personnel, information-processing facilities operations and procedures manuals, and user department systems and procedures manuals.

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