1. Audit Guidance
Using the Federal Information System Controls Audit Manual (FISCAM) to Achieve Audit Objectives in Financial and Performance Audits
Mickie E. Gray & David B. Hayes
U.S. Government Accountability Office

2. IS Controls – Audit Objectives
IS Support is Required to Identify, Quantify and Respond to:
Control Risk – opinion/reporting on internal control
Audit Risk – compliance with evidence standards & design of audit procedures

3. Managing Audit Risk Audit Risk =
Risk of Material Misstatement X Detection Risk
Audit Risk is a combination of Risk of Material Misstatement and Detection Risk.
Risk of Material Misstatement is the auditor’s combined assessment of inherent risk and control risk (SAS No. 107).
Detection Risk is the risk that the auditor will not detect a material misstatement that exists in an assertion.

4. Understanding Risk – Auditor’s Perspective
An auditor can (MUST) control detection risk by changing the nature, timing, and extent of audit procedures.
An auditor cannot control the risk of material misstatement.
However, an auditor MUST assess the risk of material misstatement.
Assessing the risk of material misstatement (the risk assessment process) allows the auditor to gather information and to design further audit procedures that reduce audit risk to an acceptable low level.

5. Important Auditing Standards that Should be Consulted when Planning & Performing IS Audit Procedures
SAS-108 – Planning and Supervision
SAS-106 – Audit Evidence
SAS-109 – Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
SAS-110 – Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
SAS-115 – Communicating Internal Control Matters Identified in an Audit
AT-501 – An Examination of an Entity’s Internal Control Over Financial Reporting That Is Integrated With an Audit of Its Financial Statements
Government Auditing Standards (Yellow Book)

6. Objectives of this Session
Include IS in engagement designs so that objectives are achieved
Determine skill sets and resources needed for the engagement team
Identify elements of an effective audit approach
Introduce the FISCAM methodology for engagements that include IS work

7. Different Types of Engagements
Financial Audits (including Attestations) - Express an opinion on financial statements (or selected information)
Performance Audits - Determine the reliability of performance measures of a specific program or activity

8. Comparison of Standards for Performance and Financial Audits
How do the audit standards compare?
Based on the audit standards, material = significant.
Financial auditors “obtain sufficient appropriate audit evidence…to afford a reasonable basis for an opinion”
Performance auditors “provide reasonable assurance
that evidence is sufficient and appropriate to support…conclusions”
Standards for assessment of risk, evaluation of internal controls, understanding of the entity and quality of evidence are the same
Source: Government Auditing Standards GAO G

9. Planning the Engagement
What is needed to achieve objectives?
Multi-discipline teams - auditors, specialists, contractors
Strong auditor leadership - control and management of teams and their members
An approach that is inclusive of automation

10. Preliminary Steps for IS Work
What approach, inclusive of automation, will achieve adequate information system (IS) coverage?
Develop an understanding of the process
Understand the information and IS infrastructure
Identify and assess risks

11. Take Advantage of the COSO Internal Control Framework
Develop an understanding of the process, including components of internal control.
Control Environment
Information & Communication
Risk Assessment
Monitoring
Control Activities

12. FISCAM – A Structured IS Audit Methodology
How is the approach implemented?
Federal Information System Controls Audit Manual (FISCAM), GAO G - February 2009
Methodology for performing IS control audits involving federal information and/or federal funds
Designed such that GAGAS will be achieved
Risk-based and efficient approach to assessing the effectiveness of IS controls

13. FISCAM Structure
Top-down, risk-based approach that considers materiality/significance
Evaluation of entity-wide controls & effect on audit risk
Evaluation of general controls & effect on application controls
Evaluation of security management at all levels - entitywide, system, and business process application levels.
Control hierarchy - control categories, critical elements, control activities, and control techniques

14. What are IS Controls?
Internal controls that are dependent on information systems processing and include:
general controls
business process application controls
user controls

15. IS Control Types
General controls and business process application controls are always IS controls.
User controls* can be IS controls.
* User controls are manual controls -- controls that are performed by people interacting with IS controls and are IS controls if their effectiveness depends on information systems processing or reliability of information processed by information systems.

16. General & Application Controls
General Controls - policies and procedures that apply to all or a large segment of an entity’s information systems and help ensure the proper operation of information systems by creating the environment for proper operation of application controls.
Business Process Application Controls - controls that are incorporated directly into computer applications to help ensure the validity, completeness, accuracy, and confidentiality of transactions and data during application processing.

17. General Control Categories
Security Management
Access Control
Configuration Management
Segregation of Duties
Contingency Planning

18. Application Control Categories
Application Security (application level general controls)
Business process controls
Interface controls
Data management system controls

19. Relationship Between Controls
Effective general controls can support the effectiveness of business process application controls, while
Ineffective general controls generally render business process application controls ineffective.

20. Audit Guidance What General Controls are being relied upon?
Typical Agency Network Map
Source: Unnamed Agency

21. FISCAM – A Tool for Auditors
A structured, standards-based approach for planning and conducting IS work
An efficient, risk-based approach to conduct IS work with limited audit resources
An organized approach that will support the collection and organization of audit documentation and promote effective reporting

22. Achieving Objectives
Using FISCAM can help achieve the overall objectives needed in all audit engagements that involve IS work:
Identify, Assess and Report on Control Risk
Manage Audit Risk

23. Contact Information
Mickie E. Gray – GAO Financial Management and Assurance Team
David B. Hayes – GAO Applied Research and Methods Team