As businesses increasingly rely on technology to process, store, and transmit financial information, the risks associated with cybersecurity threats have become more pronounced. Cyberattacks, data breaches, and other malicious activities can compromise the integrity and confidentiality of financial data, posing significant challenges to financial reporting. Thus, the role of IT controls in financial reporting has become increasingly critical.

To "stay with the times," many accounting standards are being updated to address the variety of ways in which technology has changed over the years. To address the escalating cybersecurity risks, these accounting standards will require additional IT-related inquiries. The majority of these inquiries will occur during the annual walkthrough of processes and controls. This is not an arbitrary shift but a strategic response to the evolving business and risk landscape.

Understanding IT Controls and Their Impact

IT controls are the policies, procedures, and measures implemented to safeguard information systems and ensure the accuracy and reliability of financial data. A few key areas of IT controls for you to be aware of include:

Access Controls

What processes are in place to manage user access to financial systems? Understanding who has access to sensitive financial data and the measures in place to restrict unauthorized access is crucial for ensuring the confidentiality and integrity of financial information.

Data Encryption

What encryption mechanisms do you employ to protect financial data as it travels across networks? In the age of digital communication, securing data in transit is paramount to help minimize the risk of interception and unauthorized access.

Disaster Recovery Plans

What measures has your organization implemented to ensure the timely recovery of critical financial systems and data? In the unfortunate event of a cybersecurity incident, having a robust disaster recovery plan in place is essential.

Monitoring and Incident Response

What are your organization's processes for monitoring system activities and responding promptly to any cybersecurity incidents? Regular monitoring of IT systems allows for the early detection of potential threats, minimizing the impact on financial reporting.

Collaboration for Strengthened Assurance

Strengthening IT controls in financial reporting is pivotal for maintaining data integrity and compliance. This increased focus on IT controls is not meant to be disruptive but collaborative. By working closely with your IT teams, we aim to gain a comprehensive understanding of your organization's IT environment. In addition to the increased inquiries during our annual walkthrough processes, we encourage open communication regarding any changes or updates to your IT environment throughout the year.

Please reach out if you have any questions regarding your IT environment, controls, or security. Delap has an IT team that would love to help answer questions or provide recommendations for improvements.

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