Question

Smith, a certified public accounting firm, was engaged to audit the financial statements of the Sky-is-the-Limit company. The company has its own IT installation. While obtaining an understanding of internal control, Smith found that Sky-is-the-Limit lacked proper segregation of the programming and operating functions. Smith analyzed the internal control surrounding the system to ensure that the corporate governance was being maintained, and he concluded that the existing compensating general control activities provided reasonable assurance that the objectives of internal control were being met.

Write a business letter addressed to the board of directors that discusses the following:

• How is the separation of the programming and operating functions accomplished in a properly functioning IT environment?
• Explain the 3 subdivisions of information systems management, and discuss how they apply to this situation.

Answer 1

To the BOD, Sky-is-the-limit,

We have gone through the IT department of the company and find out that there does not exists any segregation point in the function of the department in terms of programming and operating level. The department must be divisional in parts like Strategic, management and operational levels. The programming functions should be confined to the Strategic and the management levels and the all operational functions should be left to the last Operational division. The segregation of the functions is essential to de-mark what authorities and functional duties one division and its employees have. The strategic and operation division should not be inter-mixed because then it will be difficult to bring out the accountability of the divisions. The Strategic division are concerned with senior managers who will frame the strategies of the IT department have to undertake to fulfill its functions in the company. The Managerial division will translate the strategies into functional activities to be executed any the lower levels. The operational division will undertake all the execution functions of all transactions of the company’s business under execution authorities.

Thus, we hereby advise you to have proper divisions of the IT department in terms of functions to be executed.

Thanks, Smith CPA