1. CYBER SECURITY & ITS IMPACT ON FINANCIAL STATEMENTS AUDITS BOB WAGNER TUESDAY, NOVEMBER 10 2015 FLORIDA SCHOOL FINANCE OFFICERS ASSOCIATION CONFERENCE

2. CORPORATE BOARDS RACE TO SHORE UP CYBERSECURITY Wall Street Journal June 29, 2014

3. CHINA’S HACKERS ACCUSED OF A SPYING CAMPAIGN Wall Street Journal April 13, 2015

4. WSJ, 2015

5. WHO IS THIS GUY? CTO For Tupperware Brands Past 14 years Previous Technology Consultant for Ernst & Young Developed Cyber Security Program for Tupperware Brands Sox & Audit Compliance Experience MBA-UCF

6. WHY SHOULD WE CARE ABOUT CYBER SECURITY? Financial impact depends on many factors Target pay load compromised (e.g. credit cards or social security numbers) Length of intrusion and theft Intent of hackers Disruption or Destruction Political Environmental Anonymous Because a CS breach can impact your financial statements

7. WHY SHOULD WE CARE ABOUT CYBER SECURITY? Ransom Ware Direct Dollar Impact How much & how often

8. IMPACT OF THE CYBER SECURITY BREACH For some companies, it could be a going out of business situation Significant dollar expenditures to remedy situation Loss of client confidence Legal fees & lawsuits Media humiliation Employee attrition

9. WHAT CAN YOU DO TO GET STARTED? Keep up with software patches Close your online doors (within reason) Encrypt data when it makes sense Cost Speed Consider new password methods Finger prints Change password policy; 10 vs 5 Evaluate third party vendors access Target hit through heating/ac vendor equipment ISO 27001 Family of standards to help secure data Includes people, processes, and IT systems Source WSJ Begin with the Basics

10. FRAMEWORK FOR IMPROVING CYBER SECURITY National Institute of Standards and Technology (NIST) 5 Core Functions 1. Identify 2. Protect 3. Detect 4. Respond 5. Recover

11. IMPACT OF A CYBER SECURITY BREACH Two main areas of CS oversight Risk Management Security is not just an IT issue Senior Management needs to drive the effort CS is one element of overall company risk Don’t fret about the technical aspects! Cyber liability insurance Employee security education

12. IMPACT OF A CYBER SECURITY BREACH Response Management or Crisis Management Who wants to talk to the Chanel 9 reporter? Who put us in “the Cloud” Response Team (C-level, legal, IT, HR, PR) Have a documented Response Plan

13. SUMMARY In short, this is a nightmare in your future You could spend millions and still not be 100% protected This is the new “Cost of doing Business” A breach could significantly damage the financial health of any company Recommendation is to take steps NOW to show due diligence in this area

14. AUDIT & BUSINESS RISK OF IT BOB WAGNER TUESDAY, NOVEMBER 10, 2015 FLORIDA SCHOOL FINANCE OFFICERS ASSOCIATION CONFERENCE

15. AUDIT & BUSINESS RISK OF IT Our business depends on technology working everyday Technology is growing more complicated More devices attached “Internet of Everything” Millions of lines of code Internal associates and clients, are increasingly demanding Access from any place, any time, any device This all adds to risk- lots of moving parts IT holds the keys to the kingdom Heavily dependent on a strong IT team to keep business going Risk element of IT employee who goes bad Risk of outsourcing

16. AUDIT & BUSINESS RISK OF IT If email is down business is down If clients can’t place orders the cash cycle stops If distribution software is slow trucks are backed up at dock If the local server is down We can not deliver the promised proposal to clients So… OUR BUSINESS CAN NEVER BE DOWN!

17. HOW TO MITIGATE RISK? Senior Management involvement and understanding; not just an IT function What level of engagement do they have? This is the red flag you are looking for Each company should have an overall risk assessment IT can be one of the larger risks (both business & audit) Review IT Policies Look for lax policies or no policies Each company should have a risk team that sets policies Segregation of duties is huge, but many companies are too small, so… One IT person can cause lots of problems

18. HOW TO MITIGATE RISK? Companies are trying to do too many IT things at the same time The business can’t digest all of it Money is wasted on failed projects IT is typically not the stumbling block Even if business folks think they are Consideration should be given to forming an IT Steering Committee Made up of mostly business executives & the top IT person Look for regular meetings Monthly or quarterly Minutes taken with decisions reached Do they communicate the decisions? In short, companies need to ensure the processes are in place to mitigate IT business risk