Which Of The Following Is Not An Example Of A Processing Control?

Internal controls (which include manual, Information technology-dependent transmission, IT general, and application controls) are essential process steps that allow for one to make up one's mind or confirm whether certain requirements are existence washed per a certain expectation, constabulary, or policy. Additionally, internal controls allow auditors to perform tests to proceeds assurance that a process is designed and operating properly.

In this post, nosotros volition hash out the definition of controls and examples of the dissimilar types of internal controls used to support business processes. Finally, we volition also discuss how auditors rely on internal controls and how agreement that can help a company prepare for an upcoming SOC 1, SOC 2, HIPAA, or another type of audit.

What are Internal Controls?

Co-ordinate to the Executive Summary of the Internal Control – Integrated Framework from the Committee of Sponsoring Organizations (COSO), an "internal command is a process, effected by an entity'due south lath of directors, management, or other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance." The main goal of having internal controls is to set up key points in a procedure, which allows companies to rails progress and sustainability of operation. In the next department, we will review control definitions and internal control examples.

What Are the 4 Different Types of Controls?

When performing an audit, auditors will wait to see that they can proceeds assurance over a process by focusing on four chief types of internal controls. These types of controls consist of the post-obit:

• Manual Controls
• IT Dependent Manual Controls
• Awarding Controls
• IT General Controls

The four types of internal controls mentioned above are central equally they are pervasive (or at least should be) in the processes that support the systems and services provided by service organizations to their user organizations (i.due east. clients and customers).

What Are Internal Control Definitions & Examples?

What Are Manual Controls?

Transmission controls are performed by individuals outside of a organization.

What Are Some Examples of Manual Controls?

Examples of transmission controls could be a supervisor review and sign-off of a document, bank reconciliation, or having an employee sign a privacy policy acknowledgment. Another example of a transmission control could exist the manual application (or matching) of greenbacks received in an organisation's lockbox bank business relationship against a customer's open accounts receivable (A/R) residue. In many organizations, these controls are done manually, hence the term transmission controls.

Since the operation of these controls depends on a human, it is key that these process points have owners. When manual controls are non owned by cardinal personnel within the arrangement, they often volition not operate consistently. This generally poses an issue considering to properly test manual controls, a sample of transactions is chosen to confirm that the command has operated for a divers period of time. If the control did not operate consistently, a difference or exception will be noted inside the audit written report.

What Are IT-Dependent Transmission Controls?

IT Dependent Transmission Controls are similar to manual controls as they rely on a manual process from personnel but differ every bit a portion of the command requires some level of system involvement.

What Are Some Examples of It-Dependent Manual Controls?

A system-generated study lists users that take not accessed (due east.thou., logged into a arrangement) a particular system within the past 90 days. The internal control may require an administrator to review such reports and disable certain users whose accounts take not been accessed within the defined 90 days, as a event.

The It-dependent portion of this control is the organisation-generated report. The manual portion of this control is the administrator review of the written report and disabling certain users as a event.

Much like manual controls, IT-dependent transmission controls should have a process owner. This volition facilitate the consistent performance of these controls and avoid any exceptions being noted inside an audit report.

What Are Awarding Controls?

There are many dissimilar forms of awarding controls. Almost any configuration setting in a system that tin be used to prevent or detect bug might be classified as a blazon of application command.

What Are Some Examples of Application Controls?

Google M-Suite and Microsoft'southward Office 365 tin can exist configured to crave two-factor authentication (east.chiliad., 2FA, MFA) in lodge for users to log in and access organization resources and data. Enabling 2FA helps foreclose unauthorized users from logging in to the system.

Some other instance is if the system is configured to lock out a user that enters an incorrect password after three attempts, it has an application control that detects problems possibly associated with unauthorized access attempts.

A third example could be that the system is configured to automatically download and apply security patches or updates to software (this would have probable helped forbid the Equifax hack).

Application controls which are as well known as automated controls take a few benefits. One benefit is that because the control is the result of a configuration, they by and large exercise rely on an individual to operate consistently. That existence said, information technology is always a good idea to periodically bank check to confirm that the configuration has not been disabled for any reason or the configuration has non been modified.

In the effect that a configuration has been modified or is no longer enabled, this can result in an exception inside the report. Another benefit of having application or automated controls is that there is more often than not only a sample of one versus many since it is based upon a system configuration. This creates efficiency in the process and saves time during an audit.

What Are Information technology Full general Controls?

This blazon of control is usually the focal point of most SOC audits. Information technology full general controls are comprised of policy management, logical access, change management, and physical security.

What Are Some Examples of IT Full general Controls?

User access administration controls are used so that the correct people have the right access to system resources (i.e., right people & right access). These processes and the controls supporting these processes are IT full general controls.

Another instance could exist the organisation's modify management process tracks and documents that changes are authorized, tested, approved, and implemented into production. Moreover, it helps an organization gain balls that changes happen in an environment where at that place is proper segregation of duties.

It General Controls tin be a combination of manual and awarding controls. As such, the type of sampling to test these controls varies past command type.

Preventative & Detective Controls

In addition to the types of controls named, internal controls are either preventative or detective in nature (note: sometimes corrective is added; all the same, it really should be considered office of detective, as in detective and corrective).

All other things being equal, preventative controls are more often than not superior to detective controls. The reason is this- it is usually easier and more cost-effective to right a situation before a problem occurs than to correct a trouble later detection. Those implementing internal controls into their environment will be well served by implementing a combination of preventative and detective controls with a greater focus on the former.

What Is the Purpose of Internal Controls?

The purpose of internal controls is to create touchpoints within a process that can exist evidenced and reviewed and ultimately create accountability while also lowering the risk of fraud, waste product, corruption, and unproblematic mistakes.

Internal controls are generally gear up up by management or the Board of Directors. They prepare upward internal controls to proceeds assurance that the objectives of an organization tin can exist achieved. This can be to meet internal milestones or even external requirements such as an audit or manufacture standards.

Finally, internal controls let for a company to grade metrics around the efficiency and effectiveness of a process. During the review of internal controls, it can become obvious that a process is working as expected or at times the operating effectiveness of controls can prove to have failures. This allows management to decide if a unlike process is required to better meet company objectives.

What are Control Weaknesses?

A control weakness tin can fall into 1 of two categories. There is either a weakness in the design of a control or in its operating effectiveness. When there is a control weakness in the design of a control, that means that information technology was not in place, and equally a effect, a control failure occurred. For example, if at that place is a requirement for monthly patching just at that place is no control in place to validate that it occurs, the take chances that patching does non occur and that a vulnerability can be exploited is increased. This is considered a control weakness specific to the design of a control.

The other type of control weakness is a deficiency in the operating effectiveness of a control. In this scenario, a process exists but due to a system error or personnel failure, the command does not operate equally expected. Let's go back to the server example. Permit's say that the organization has a procedure in which the system administrator is supposed to manually apply patches each month. However, due to turnover, patching does not occur for a number of months. The months that the server was non patched is considered a control weakness, specific to the operating effectiveness.

How Do You Strengthen Internal Controls?

The all-time manner to strengthen internal controls is by completing a review of the current controls in place and performing a limited corporeality of testing to determine whether required controls operated as expected. If during the review it is adamant that controls are not ever operating consistently, then remediation steps should be documented and implemented. Boosted testing for controls that are scarce should be re-evaluated inside a few months to determine whether required implementation steps occurred.

A more formalized approach to strengthening internal controls can too be done by having a third party come in to perform a review of controls and provide input on whether a procedure could be updated to strengthen controls. This can be in the form of a SOC 1 or SOC 2 study, another security framework, or by having the third party complete advisory work. This tin can be a great pick every bit the third party can provide their professional opinion and recommendations based on the industry standard. One thing to note is that strengthening of controls should not necessarily mean more money or a more complex process that does not align with Company requirements. When strengthening controls, the all-time option is generally i that streamlines the process and makes it easier to complete a control consistently, non harder.

Internal Controls & Coronavirus (COVID-19)

During these times, it may seem like working and implementing controls is either impossible or irrelevant, but in fact, in high-stress times like these internal controls are even more of import. The reason for this is that stressful times can create urgency which often leads to mistakes. Just with controls in place, as mentioned earlier, controls can help lower the chance that they occur or will be caught during a review. At that place is another major divergence many companies are having to work out, which is having much of their workforce piece of work from home. There are a number of awarding controls that tin help a company do this while protecting customer data. Below are a few application control examples that companies should consider as they continue to shore up their work from habitation processes.

1. Virtual Private Network ( VPN ) or Remote Desktop Protocols (RDP) – These allow users to work remotely while maintaining a secure connexion to protect client information.
2. Vocalization over IP (VoIP) –  Using VoIP allows businesses to make concern calls from habitation, from their computers, or fifty-fifty have office lines forwarded to dwelling house or cell phones.
3. Remote Conferencing – There are a number of resource that allow companies to hold video conference calls with multiple team members. Some examples include just are not express to Google Hangouts, Microsoft Teams, Zoom, Skype for Business, and GoToMeeting.
4. Firewall – A firewall allows a company to monitor and control incoming and outgoing network traffic based on predetermined security rules.
5. Endpoint Protection – Setting upwards endpoint protection on devices such equally laptops and mobile phones to include automatic patching, anti-virus, and encryption is helpful in protecting client information existence accessed or maintained from outside the network.
6. Backups – Having a process in identify to backup and complete restores is important in the issue an incident occurs where retrieving by information is necessary.

Finally, the best class of action is to stay calm. The environment that your remote workforce is currently working in may non be perfect merely that does non mean you lot should stress out and make decisions without proper testing and completing vendor due diligence. It's of import to keep working with the internal controls possible today and brand changes equally required to create a more secure environs and even amend system of internal command with the main objective of protecting client information.

Summary

If the controls in the SOC audit report practise not seem to fall into one of these 4 areas, information technology could be that a procedure is being described rather than a control.

Linford & Company service auditors work advisedly with the service organizations to make sure that descriptions of the controls are accurate and support the accomplishment of the control objectives in a SOC one audit exam or Trust Services Criteria (TSC) for a SOC 2 inspect examination.

It's too important to note that these definitions and descriptions work every bit well for an inspect of internal control in a financial statement audit, or for internal audits.

For more information, check out these other related Linford & Company posts:

• What is an Integrated Inspect? Assessing Internal Controls
• Establishing an Effective Internal Control Environment
• Understanding the Limitations of Internal Controls – Learning to Mitigate Your Risk
• Monitoring the Effectiveness of Controls at Subservice Organizations for SOC Reports

This article was originally published on iii/31/2020 and was updated on one/25/2022.

Jaclyn Finney started her career as an auditor in 2009. She started with Linford & Co., LLP. in 2016 and is a partner with the firm. She is a CISA with a special focus on SOC, HITRUST, FedRAMP and royalty examinations. Jaclyn works with her clients to provide a process that meets the needs of each customer and generates a tailored written report that is useful to the customer and the users of the study.

Which Of The Following Is Not An Example Of A Processing Control?,

Source: https://linfordco.com/blog/types-of-controls/

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