This article comes from a section of our paper An IT Manager’s Guide to a Successful Audit
The audit process can vary from engagement to engagement, company to company, or even auditor to auditor. But you should find that IT auditors take a consistent approach, even if the phases have different names based on the environment. It’s very important for you to fully understand the phases of your audit to ensure that you have the appropriate resources and input available at each stage. Just like in the Software Development Life Cycle (SDLC), it’s much easier and less costly to get all requirements for the project upfront so no future work has to be scrapped..
In this blog, we’ll cover these phases:
- Announcement of an upcoming audit
- Delivery of the engagement letter
- Scoping activity and self-identifying gaps
- Fieldwork and control testing
For each phase, we’ll describe the phase’s purpose and the role of IT management during that phase.
This is simply a time for the auditors to announce their intentions to audit a group, function, system, etc. Most internal audit departments try to plan their work in advance just as you do. They may even know their anticipated schedule a full year in advance. They probably won’t release any details other than a name for the audit, the audit manager or team leader, and a preliminary date. The longer the lead time, the more fluid plan will be. As in any other operational group, audit timelines slip due to personnel, weather, technology and other business drivers.
The timing of audit announcements can be brutal. Sometimes audits are on a cycle, and you know to expect them every quarter, every other year, etc. These audits are much easier to plan for. The associated workload is known, and you’ll have a staffing plan to deal with the resources the audit will require. Sometimes, however, the auditors show up without warning. That usually happens when something doesn’t go as planned. You might not have known the timing of the audit, but because of whatever happened, you probably expected an audit.
The announcement phase is the key time for you as an IT manager to begin preparing. This is also the phase that most of us ignore, which costs us dearly. Once an audit is announced, you should have ample time to begin getting ready. Take advantage of this time because once the auditors arrive, they will expect you to have your prep work done. Here are a few key ways to start preparing:
- Start collecting and centralizing all information that auditors might request. Gather things like system documentation, work or change requests, policy, procedures, risk assessment information or penetration testing results. You may want to develop a documentation portal where you can store the information and give auditors granular access for a given period.
- Review previous audits. Many teams overlook this. Do you have any outstanding issues that need to be resolved? This will be first on an auditor’s checklist. Make sure you’ve done everything you said you would after the last audit and documented it appropriately. Remember that police officers don’t give warnings when they pull you over for speeding and discover you have a pile of unpaid tickets.
- Assign a point of contact (POC) for the auditors. This ensures you are kept in the loop regarding any changes. If the intended purpose or timelines change, you will want to be the first to know. You should also begin to plan for resource utilization to handle time-consuming audit responses. You need to make sure your people have availability during the engagement. If you see any red flags, talk with your auditor. Now is the time to try and adjust the schedule, not three weeks before they are on-site.
- If you don’t have a self-assessment process, start one now. This shows auditors that you have a continual process and system reviews to identify any gaps and work toward remediation objectives.
Audit teams use engagement letters to spell out their specific objectives for an engagement. Perhaps they want to assess HIPAA compliance or review the effectiveness of your identity and access management controls. They should clearly define their intentions along with proposed timelines for each phase of the engagement. This is also a time for the audit team to introduce themselves to the business unit. Knowing the audit team and everyone’s role will help the entire engagement flow more smoothly.
Along with stating the audit objectives, the engagement letter summarizes the audit’s scope. This entails determining which systems can be reviewed and the look back period (date range for review) among other details. The scoping information is often just a best guess from the audit staff, as they probably don’t have the specific system knowledge to know if this scope is too big or too small to accomplish the stated objectives.
You should scrutinize the details of the engagement letter. Are the dates as expected? Is the objective clear? Has the objective changed from the initial announcement? Is the scope too broad or too narrow?
This is the time for you to drive the engagement. You have 4 key action items during the engagement process:
Confirm the overall timeline for each phase of the audit. Auditors are famous for trying to get in and get out as fast as possible, so you’ll need to review the timeline in light of the operational impact on your systems. Perhaps you’ll need to run 10 reports, which take 4 hours each to generate and can be run only in your evening maintenance windows after the backup runs. This might mean you can only run one per night, which means you need 10 days just to run the reports. If the auditor expects to finish gathering evidence in 5 days, you need to explain why this is unrealistic and negotiate a different timeline.
Don’t drag things out just to play it safe, though. Remember that the longer the auditor has to review and look over things, the more they uncover and the more they want to probe. This could expand the audit’s scope.
Set clear objectives for the engagement. Understanding the auditor’s goals will help you in the upcoming scoping phase. This is no different from getting business requirements from an operational unit before you begin coding their application. Another key in this step is understanding definitions. Even within the same company, acronyms and abbreviations may be used differently by different business units. Agree upfront on how you’ll communicate these items. Also, make sure to clarify what someone means when talking in technical terms. For example, people often throw around the terms “authorized” and “authenticated” interchangeably when discussing access controls. Make sure the term someone says is the term they mean.
Find out if the auditors have any pre-existing concerns about your organization or the systems. Unless you like being blindsided during the reporting phase, this is your time to get all the cards on the table. Auditors should tell you upfront about anything they are looking for. It’s not fair for you to be judged on criteria you don’t know about. You may also find you have some perception issues to work through to make this a successful engagement.
Take time to gain visibility into your problem areas. Do you have any gap remediation that management just hasn’t been willing to fund? When that gap becomes an issue in the auditor’s opinion report, management’s opinion is sure to change. Be careful, though. Your management may view this as an underhanded trick to get your pet project pushed through. Or if it becomes a big issue in the audit report, you might be on the hook for not having responded to it earlier. It takes some experience to balance getting visibility into known problem areas and just continuing to work on them in the background. We don’t recommend trying it on your first pass.
Scoping Activity and Self-Identifying Gaps
During the scoping activity, auditors tell you what systems they plan to review, what the lookback period will be, how many samples they plan to take, what the sample sizes will be, etc. Some of this information will be based on their previous experience with your organization or system. If this is an internal group that has performed the same audit several years in a row, their initial scope may be right on. If, however, this is the first time the audit has been performed, the team membership has changed, or the system has gone through a major revision, this might not be the case.
Your announcement phase should have included a self-assessment and gap analysis. That exercise may have resulted in some remediation plans. Most auditors will allow you to provide them with information regarding known gaps upfront. If you have an action plan and have made significant process on the plan, this can help improve your audit rating. Auditors are more concerned with ensuring things are done right than with who gets credit for finding the gap and making the changes. The scoping phase is a good time to disclose self-identified gaps. Some auditors prefer that this happens during the engagement negotiations, so be sure to check their expectations.
If negotiation isn’t one of your strong suits, you either need to develop your skills in this area or have someone on your team who can do it for you. Auditors are driven by best practices and repeatable processes. If the auditor feels you’re trying to get around these during the process, they will certainly push back. If you need to change the scope of your audit for any reason, you need to be prepared to justify your reasoning.
Simply thinking something will work better probably won’t sway an auditor. You and your team need to utilize your specific knowledge of the system architecture and operation to explain why the scope needs to be modified. For example, maybe the audit scope includes reviewing any authentication process for users of a web application. The architecture diagram provided to the auditor includes a proxy or load balancer in the middle. With your expert knowledge, you could explain how these devices have no direct impact on the authentication process and the logs can be excluded from this audit. The auditors will rely on your knowledge to help drive the scope. They don’t want to review meaningless data any more than you want to collect it for them.
Fieldwork and Control Testing
This is where most of the heavy lifting will take place. One of the first things an auditor will ask for is information relating to your process and procedures. They want to see how well these accomplish the successful implementation of your policy and related control standards. They will also be looking for whether all your controls are documented.
Auditors will interview system administrators to determine how they perform their duties daily and then check for supporting documentation. Written operating procedures are always best. Even if you’re doing the right things, if it’s not documented, you can probably expect that issue to be noted on your final review. Without the written documentation, there is no level of assurance that the process will be repeated the same each time. Staff transition or a disaster could prevent the regular administrator from performing their duties and cause the process to be changed if not documented.
Once the auditor has identified all the controls, they will review for effectiveness.
Before even looking at the system, the auditor will try to ascertain if a control can meet a policy objective. They will look at the control and assume it has been implemented correctly and consistently. They will also consider the technology aspect of the control and the system it was meant to protect. If there is a significant chance a policy could be violated even with the control in place, it probably isn’t going to be considered an effective control and will need to be reviewed. Sometimes this just means modifying the written documentation for the control to better reflect its design. Sometimes you’ll need to scrap the control and start over.
Once the auditors consider the control’s effectiveness, they will review it for efficiency. This is the point we see how well something works. While the control may be deemed effective, it may not be working well in the actual implementation. Perhaps it was implemented incorrectly or the process isn’t being followed. Many things can impact a control’s efficiency.
Since fieldwork is where the auditors begin to dive into your technology environment, you have home field advantage. Nobody knows the environment like you, so take advantage of that. Assigning a senior staff member as the POC assures the auditor that you take this engagement seriously and want to do everything you can to make it a smooth process. You also get the benefit that if the auditor tried to exceed the scope of the audit, your staff member will know the system well enough to catch and adjust the auditor’s focus.
Review Prepackaged Testing Scenarios
Some auditors come with prepackaged or predetermined testing scenarios. Make sure you review these to ensure they are appropriate for the way your environment is designed.
Databases and directory services are prime examples. Both can be customized to the point that they almost seem like in-house developed solutions. The standard fields an auditor tests may not be in use or may be used in vastly different ways by your organization. It’s important that both of you understand this before going through the laborious process of pulling data. Don’t be afraid to suggest scenarios you think will yield the results the auditor is looking for.
Many times, auditors ask for a report without any idea of what the report’s result will be. In one company, an auditor wanted to see information related to every Active Directory account in the company. Once it was explained that the company had over 210,000 accounts, that this would take about two days to run and that it would print out on about 30,000 pages, they changed their tune. The company was allowed to run smaller samples from several business units and finished with about 40 managers, 200 accounts and 5 pages. This was a statistically valid sample of the accounts, which would indicate whether the control was efficient. Work with your auditors to find valid samples instead of testing the entire environment.
Reports typically have two main sections:
Section 1: Opinion Statement
Auditor’s reports begin with their opinion statements on the overall effectiveness and efficiency of your organization’s controls. If all goes well and there are no major issues to report, this should be succinct.
In an internal audit, this will usually be no more than a couple of paragraphs and high level in nature, depending on the system complexity and audience for the report. External or regulatory audits are typically much longer. In most cases, there will be an executive summary section if the opinion section is more than a few pages. If your auditor has uncovered multiple deficiencies, the report will be as long as it needs to be to accurately describe the impact.
Section 2: Recommendations
The report’s second section offers recommendations. Auditors can’t be too specific here, as this would cause a conflict of interest when they go on to review the control. If they tell you step-by-step how to fix a control and then sign off on it in the next round, their motives would be suspect. If they again failed the control, you’d be none too happy with them. For this reason, they will tell you what needs to be fixed but not how to fix it.
As the audited organization, you have several key rights and responsibilities when it comes to the final report.
- Remember that this audit process has been a partnership between you and the audit team. You should get to help shape the final report. After all, it is at least to some degree a reflection of how well you and your team do their job. You certainly don’t want your signature on a scathing report that you had no input on. If an auditor balks at including your input in the final report, this is a red flag that must be addressed immediately.
- You should agree with all the facts in the report. You may not like everything that is stated or how it is stated, but there should be no assumptions. All the stated facts should be backed up with evidence from the fieldwork. Feel free to challenge the auditor and show additional evidence of your own if you believe the report to be inaccurate. It’s important to get these issues cleared up while the report is in draft format. You want a limited audience to see the “dirty laundry”. Once the final report is published, it’s hard to have it changed.
- During this phase, you’ll also need to develop a timeline for remediating any identified control deficiencies. Most times you have a week or two at best to review the draft report and build a management response. There is little chance that you’ll fully understand the changes that need to happen or the impact on budget and operations. One smart approach is to commit to building a project plan by a certain date but not to fixing the problem. Committing to building a project plan shows you’re serious about fixing the problem but realistic about potential impact. Most auditors are fine with this because you will be tracking and reporting progress as you go. Just remember that the deficiencies need to be fixed before the next audit cycle.
To read the rest of the articles in our series on IT audits, download the complete paper here.
And if you need help planning or conducting an IT audit, contact us today.