CISA Certified Information Systems Auditor (CISA) Practice Questions

Explanation: Operational audit is mainly designed to evaluate the internal control structure in a given process or area. Operational Audit is a systematic review of effectiveness, efficiency and economy of operation. Operational audit is a future-oriented, systematic, and independent evaluation of organizational activities. In Operational audit financial data may be used, but the primary sources of evidence are the operational policies and achievements related to organizational objectives. Operational audit is a more comprehensive form of an Internal audit.

For your exam you should know below information about different types of audit:What is an audit?An audit in general terms is a process of evaluating an individual or organization’s accounts. This is usually done by an independent auditing body. Thus, audit involves a competent and independent person obtaining evidence and evaluating it objectively with regard to a given entity, which in this case is the subject of audit, in order to establish conformance to a given set of standards. Audit can be on a person, organization, system, enterprise, project or product.

Compliance AuditA compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controls and risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

What, precisely, is examined in a compliance audit will vary depending upon whether an organization is a public or private company, what kind of data it handles and if it transmits or stores sensitive financial data. For instance, SOX requirements mean that any electronic communication must be backed up and secured with reasonable disaster recovery infrastructure. Health care providers that store or transmit e-health records, like personal health information, are subject to HIPAA requirements. Financial services companies that transmit credit card data are subject to PCI DSS requirements. In each case, the organization must be able to demonstrate compliance by producing an audit trail, often generated by data from event log management software.

Financial AuditA financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide anobjective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Operational AuditOperational Audit is a systematic review of effectiveness, efficiency and economy of operation. Operational audit is a future-oriented, systematic, and independent evaluation of organizational activities. In Operational audit financial data may be used, but the primary sources of evidence are the operational policies and achievements related to organizational objectives. Operational audit is a more comprehensive form of an Internal audit.

The Institute of Internal Auditor (IIA) defines Operational Audit as a systematic process of evaluating an organization's effectiveness, efficiency and economy of operations under management's control and reporting to appropriate persons the results of the evaluation along with recommendations for improvement.

ObjectivesTo appraise the effectiveness and efficiency of a division, activity, or operation of the entity in meeting organizational goals.

To understand the responsibilities and risks faced by an organization.

To identify, with management participation, opportunities for improving control.

To provide senior management of the organization with a detailed understanding of the Operations.

Integrated AuditsAn integrated audit combines financial and operational audit steps. An integrated audit is also performed to assess overall objectives within an organization, related to financial information and asset, safeguarding, efficiency and or internal auditors and would include compliance test of internal controls and substantive audit step.

IS AuditAn information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization's goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.

The primary functions of an IT audit are to evaluate the systems that are in place to guard an organization's information. Specifically, information technology audits are used to evaluate the organization's ability to protect its information assets and to properly dispense information to authorized parties. The IT audit aims to evaluate the following:Will the organization's computer systems be available for the business at all times when required? (known as availability) Will the information in the systems be disclosed only to authorized users? (known as security and confidentiality) Will the information provided by the system always be accurate, reliable, and timely? (measures the integrity) In this way, the audit hopes to assess the risk to the company's valuable asset (its information) and establish methods of minimizing those risks.

Forensic AuditForensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefined context - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative advice.

The purpose of a forensic audit is to use accounting procedures to collect evidence for the prosecution or investigation of financial crimes such as theft or fraud. Forensic audits may be conducted to determine if wrongdoing occurred, or to gather materials for the case against an alleged criminal.

The following answers are incorrect:Compliance Audit - A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controls and risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

Financial Audit- A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Forensic Audit - Forensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefinedcontext - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative advice. -- Reference: CISA Review Manual 2014 Page number 44http://searchcompliance.techtarget.com/definition/compliance-audithttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/Operational_auditinghttp://en.wikipedia.org/wiki/Information_technology_audithttp://www.investorwords.com/16445/forensic_audit.html

Explanation: An integrated audit combines financial and operational audit steps. An integrated audit is also performed to assess overall objectives within an organization, related to financial information and asset, safeguarding, efficiency and or internal auditors and would include compliance test of internal controls and substantive audit step.

For your exam you should know below information about different types of audit:

What is an audit?

An audit in general terms is a process of evaluating an individual or organization’s accounts. This is usually done by an independent auditing body. Thus, audit involves a competent and independent person obtaining evidence and evaluating it objectively with regard to a given entity, which in this case is the subject of audit, in order to establish conformance to a given set of standards. Audit can be on a person, organization, system, enterprise, project or product.

Compliance Audit

A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controls and risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

What, precisely, is examined in a compliance audit will vary depending upon whether an organization is a public or private company, what kind of data it handles and if it transmits or stores sensitive financial data. For instance, SOX requirements mean that any electronic communication must be backed up and secured with reasonable disaster recovery infrastructure. Health care providers that store or transmit e-health records, like personal health information, are subject to HIPAA requirements. Financial services companies that transmit credit card data are subject to PCI DSS requirements. In each case, the organization must be able to demonstrate compliance by producing an audit trail, often generated by data from event log management software.

Financial Audit

A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Operational Audit

Operational Audit is a systematic review of effectiveness, efficiency and economy of operation. Operational audit is a future-oriented, systematic, and independent evaluation of organizational activities. In Operational audit financial data may be used, but the primary sources of evidence are the operational policies and achievements related to organizational objectives. Operational audit is a more comprehensive form of an Internal audit.

The Institute of Internal Auditor (IIA) defines Operational Audit as a systematic process of evaluating an organization's effectiveness, efficiency and economy of operations under management's control and reporting to appropriate persons the results of the evaluation along with recommendations for improvement.

Objectives

To appraise the effectiveness and efficiency of a division, activity, or operation of the entity in meeting organizational goals.

To understand the responsibilities and risks faced by an organization.

To identify, with management participation, opportunities for improving control.

To provide senior management of the organization with a detailed understanding of the Operations.

Integrated Audits

An integrated audit combines financial and operational audit steps. An integrated audit is also performed to assess overall objectives within an organization, related to financial information and asset, safeguarding, efficiency and or internal auditors and would include compliance test of internal controls and substantive audit step.

IS Audit

An information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization's goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.

The primary functions of an IT audit are to evaluate the systems that are in place to guard an organization's information. Specifically, information technology audits are used to evaluate the organization's ability to protect its information assets and to properly dispense information to authorized parties. The IT audit aims to evaluate the following:

Will the organization's computer systems be available for the business at all times when required? (known as availability) Will the information in the systems be disclosed only to authorized users? (known as security and confidentiality) Will the information provided by the system always be accurate, reliable, and timely? (measures the integrity) In this way, the audit hopes to assess the risk to the company's valuable asset (its information) and establish methods of minimizing those risks.

Forensic Audit

Forensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefined context - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative advice.

The purpose of a forensic audit is to use accounting procedures to collect evidence for the prosecution or investigation of financial crimes such as theft or fraud. Forensic audits may be conducted to determine if wrongdoing occurred, or to gather materials for the case against an alleged criminal.

The following answers are incorrect:

Compliance Audit - A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controls and risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

Financial Audit- A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Forensic Audit - Forensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefined context - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative advice. -- Reference: CISA Review Manual 2014 Page number 44

http://searchcompliance.techtarget.com/definition/compliance-audit

http://en.wikipedia.org/wiki/Financial_audit

http://en.wikipedia.org/wiki/Operational_auditing

http://en.wikipedia.org/wiki/Information_technology_audit

http://www.investorwords.com/16445/forensic_audit.html

Explanation: Forensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefined context - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative adviceFor your exam you should know below information about different types of audit:What is an audit?An audit in general terms is a process of evaluating an individual or organization’s accounts. This is usually done by an independent auditing body. Thus, audit involves a competent and independent person obtaining evidence and evaluating it objectively with regard to a given entity, which in this case is the subject of audit, in order to establish conformance to a given set of standards. Audit can be on a person, organization, system, enterprise, project or product.

Compliance AuditA compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controlsand risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

What, precisely, is examined in a compliance audit will vary depending upon whether an organization is a public or private company, what kind of data it handles and if it transmits or stores sensitive financial data. For instance, SOX requirements mean that any electronic communication must be backed up and secured with reasonable disaster recovery infrastructure. Health care providers that store or transmit e-health records, like personal health information, are subject to HIPAA requirements. Financial services companies that transmit credit card data are subject to PCI DSS requirements. In each case, the organization must be able to demonstrate compliance by producing an audit trail, often generated by data from event log management software.

Financial AuditA financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Operational AuditOperational Audit is a systematic review of effectiveness, efficiency and economy of operation. Operational audit is a future-oriented, systematic, and independent evaluation of organizational activities. In Operational audit financial data may be used, but the primary sources of evidence are the operational policies and achievements related to organizational objectives. Operational audit is a more comprehensive form of an Internal audit.

The Institute of Internal Auditor (IIA) defines Operational Audit as a systematic process of evaluating an organization's effectiveness, efficiency and economy of operations under management's control and reporting to appropriate persons the results of the evaluation along with recommendations for improvement.

ObjectivesTo appraise the effectiveness and efficiency of a division, activity, or operation of the entity in meeting organizational goals.

To understand the responsibilities and risks faced by an organization.

To identify, with management participation, opportunities for improving control.

To provide senior management of the organization with a detailed understanding of the Operations.

Integrated AuditsAn integrated audit combines financial and operational audit steps. An integrated audit is also performed to assess overall objectives within an organization, related to financial information and asset, safeguarding, efficiency and or internal auditors and would include compliance test of internal controls and substantive audit step.

IS AuditAn information technology audit, or information systems audit, is an examination of the management controls within an Information technology (IT) infrastructure. The evaluation of obtained evidence determines if the information systems are safeguarding assets, maintaining data integrity, and operating effectively to achieve the organization's goals or objectives. These reviews may be performed in conjunction with a financial statement audit, internal audit, or other form of attestation engagement.

The primary functions of an IT audit are to evaluate the systems that are in place to guard an organization's information. Specifically, information technology audits are used to evaluate the organization's ability to protect its information assets and to properly dispense information to authorized parties. The IT audit aims to evaluate the following:Will the organization's computer systems be available for the business at all times when required? (known as availability) Will the information in the systems be disclosed only to authorized users? (known as security and confidentiality) Will the information provided by the system always be accurate, reliable, and timely? (measures the integrity) In this way, the audit hopes to assess the risk to the company's valuable asset (its information) and establish methods of minimizing those risks.

Forensic AuditForensic audit is the activity that consists of gathering, verifying, processing, analyzing of and reporting on data in order to obtain facts and/or evidence - in a predefined context - in the area of legal/financial disputes and or irregularities (including fraud) and giving preventative advice.

The purpose of a forensic audit is to use accounting procedures to collect evidence for the prosecution or investigation of financial crimes such as theft or fraud. Forensic audits may be conducted to determine if wrongdoing occurred, or to gather materials for the case against an alleged criminal.

The following answers are incorrect:Compliance Audit - A compliance audit is a comprehensive review of an organization's adherence to regulatory guidelines. Independent accounting, security or IT consultants evaluate the strength and thoroughness of compliance preparations. Auditors review security polices, user access controls and risk management procedures over the course of a compliance audit. Compliance audit include specific tests of controls to demonstrate adherence to specific regulatory or industry standard. These audits often overlap traditional audits, but may focus on particular system or data.

Financial Audit- A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Integrated Audits - An integrated audit combines financial and operational audit steps. An integrated audit is also performed to assess overall objectives within an organization, related to financial information and asset, safeguarding, efficiency and or internal auditors and would include compliance test of internal controls and substantive audit step. -- Reference: CISA Review Manual 2014 Page number 44http://searchcompliance.techtarget.com/definition/compliance-audithttp://en.wikipedia.org/wiki/Financial_audithttp://en.wikipedia.org/wiki/Operational_auditinghttp://en.wikipedia.org/wiki/Information_technology_audithttp://www.investorwords.com/16445/forensic_audit.html

Explanation: Inherent Risk is the risk level or exposure of a process or entity to be audited without taking into account the control that management has implemented. Inherent risk exists independent of an audit and can occur because of the nature of the business.

For your exam you should know below information about audit risk:

Audit risk (also referred to as residual risk) refers to the risk that an auditor may issue unqualified report due to the auditor's failure to detect material misstatement either due to error or fraud. This risk is composed of inherent risk (IR), control risk (CR) and detection risk (DR), and can be calculated thus:

AR = IR x CR x dr

Inherent Risk

Auditors must determine risks when working with clients. One type of risk to be aware of is inherent risk. While assessing this level of risk, you ignore whether the client has internal controls in place (such as a secondary review of financial statements) in order to help mitigate the inherent risk. You consider the strength of the internal controls when assessing the client’s control risk. Your job when assessing inherent risk is to evaluate how susceptible the financial statement assertions are to material misstatement given the nature of the client’s business. A few key factors can increase inherent risk.

Environment and external factors: Here are some examples of environment and external factors that can lead to high inherent risk:

Rapid change: A business whose inventory becomes obsolete quickly experiences high inherent

risk.

Expiring patents: Any business in the pharmaceutical industry also has inherently risky environment and external factors. Drug patents eventually expire, which means the company faces competition from other manufacturers marketing the same drug under a generic label.

State of the economy: The general level of economic growth is another external factor affecting all businesses.

Availability of financing: Another external factor is interest rates and the associated availability of financing. If your client is having problems meeting its short-term cash payments, available loans with low interest rates may mean the difference between your client staying in business or having to close its doors.

Prior-period misstatements: If a company has made mistakes in prior years that weren’t material (meaning they weren’t significant enough to have to change), those errors still exist in the financial statements. You have to aggregate prior-period misstatements with current year misstatements to see if you need to ask the client to adjust the account for the total misstatement.

You may think an understatement in one year compensates for an overstatement in another year. In auditing, this assumption isn’t true. Say you work a cash register and one night the register comes up $20 short. The next week, you somehow came up $20 over my draw count. The $20 differences are added together to represent the total amount of your mistakes which is $40 and not zero. Zero would indicate no mistakes at all had occurred.

Susceptibility to theft or fraud: If a certain asset is susceptible to theft or fraud, the account or balance level may be considered inherently risky. For example, if a client has a lot of customers who pay in cash, the balance sheet cash account is going to have risk associated with theft or fraud because of the fact that cash is more easily diverted than customer checks or credit card payments.

Looking at industry statistics relating to inventory theft, you may also decide to consider the inventory account as inherently risky. Small inventory items can further increase the risk of this account valuation being incorrect because those items are easier to conceal (and therefore easier to steal).

Control Risk

Control risk has been defined under International Standards of Auditing (ISAs) as following:

The risk that a misstatement that could occur in an assertion about a class of transaction, account balance or disclosure and that could be material, either individually or when aggregated with other misstatements, will not be prevented, or detected and corrected, on a timely basis by the entity’s internal control.

In simple words control risk is the probability that a material misstatement exists in an assertion

because that misstatement was not either prevented from entering entity’s financial information or it was not detected and corrected by the internal control system of the entity.

It is the responsibility of the management and those charged with governance to implement internal control system and maintain it appropriately which includes managing control risk.

There can be many reasons for control risk to arise and why it cannot be eliminated absolutely. But some of them are as follows:

Cost-benefit constraints

Circumvention of controls

Inappropriate design of controls

Inappropriate application of controls

Lack of control environment and accountability

Novel situations

Outdated controls

Inappropriate segregation of duties

Detection Risk

Detection Risk is the risk that the auditors fail to detect a material misstatement in the financial statements.

An auditor must apply audit procedures to detect material misstatements in the financial statements whether due to fraud or error. Misapplication or omission of critical audit procedures may result in a material misstatement remaining undetected by the auditor. Some detection risk is always present due to the inherent limitations of the audit such as the use of sampling for the selection of transactions.

Detection risk can be reduced by auditors by increasing the number of sampled transactions for detailed testing.

The following answers are incorrect:

Control Risk - The risk that material error exist that would not be prevented or detected on timely basis by the system of internal controls.

Detection risk - The risk that material errors or misstatements that have occurred will not be detected by an IS auditor.

Overall audit risk - The probability that information or financial report may contain material errors

and that the auditor may not detect an error that has occurred. An objective in formulating the audit approach is to limit the audit risk in the area under security so the overall audit risk is at sufficiently low level at the completion of the examination. -- Reference: CISA review manual 2014 page number 50

http://en.wikipedia.org/wiki/Audit_risk

http://www.dummies.com/how-to/content/how-to-assess-inherent-risk-in-an-audit.html

http://pakaccountants.com/what-is-control-risk/

http://accounting-simplified.com/audit/risk-assessment/audit-risk.html

Data owners, who should be from the business, are responsible for understanding the data's meaning, context, and sensitivity. They make critical decisions about who should have access and how the data should be classified. When IT custodians are made owners, these decisions may be made based on technical criteria alone, without the necessary business context. This can lead to inappropriate access, incorrect classification, and a failure to protect data according to its business value and risk.

Explanation: Analyzing resources of a system is one standard for locating covert channels because the basis of a covert channel is a shared resource.

The following properties must hold for a storage channel to exist:

1. Both sending and receiving process must have access to the same attribute of a shared object.

2. The sending process must be able to modify the attribute of the shared object.

3. The receiving process must be able to reference that attribute of the shared object.

4. A mechanism for initiating both processes and properly sequencing their respective accesses to the shared resource must exist.

Note: Similar properties for timing channel can be listed

The following answers are incorrect:

All other answers were not directly related to discovery of Covert Channels. -- Reference: Acerbic Publications, Acerbic Publications (Test Series) - CRC Press LLC, Page No. 225

http://www.cs.ucsb.edu/~sherwood/cs290/papers/covert-kemmerer.pdf

http://www.cs.utexas.edu/~byoung/cs361/lecture16.pdf

http://www.cs.utexas.edu/~byoung/cs361/lecture16.pdf

Explanation: The Urgent Pointer is used when some information has to reach the server ASAP. When the TCP/IP stack at the other end sees a packet using the Urgent Pointer set, it is duty bound to stop all ongoing activities and immediately send this packet up the stack for immediate processing. Since the packet is plucked out of the processing queue and acted upon immediately, it is known as an Out Of Band (OOB)packet and the data is called Out Of Band (OOB) data.

The Urgent Pointer is usually used in Telnet, where an immediate response (e.g. the echoing of characters) is desirable.

Covert Channels are not directly synonymous with backdoors. A covert channel is simply using a communication protocol in a way it was not intended to be used or sending data without going through the proper access control mechanisms or channels. For example, in a Mandatory Access Control systems a user at secret has found a way to communicate information to a user at Confidential without going through the normal channels.

In this case the Urgent bit could be used for a few reasons:1. It could be to attempt a Denial of service where the host receiving a packet with the Urgent bit set will give immediate attention to the request and will be in wait state until the urgent message is receive, if the sender does not send the urgent message then it will simply sit there doing nothing until it times out. Some of the TCP/IP stacks used to have a 600 seconds time out, which means that for 10 minutes nobody could use the port. By sending thousands of packet with the URGENT flag set, it would create a very effective denial of service attack.2. It could be used as a client server application to transmit data back and forward without going through the proper channels. It would be slow but it is possible to use reserved fields and bits to transmit data outside the normal communication channels.

The other answers are incorrect -- Reference: http://www.fas.org/irp/nsa/rainbow/tg030.htm document covering the subject of covert channelsand also see:http://gray-world.net/papers.shtml which is a large collection of documents on Covert Channels

Explanation: Risk mitigation is the practice of the elimination of, or the significant decrease in the level of risk presented.

For your exam you should know below information about risk assessment and treatment:

A risk assessment, which is a tool for risk management, is a method of identifying vulnerabilities and threats and assessing the possible impacts to determine where to implement security controls. A risk assessment is carried out, and the results are analyzed. Risk analysis is used to ensure that security is cost-effective, relevant, timely, and responsive to threats. Security can be quite complex, even for well-versed security professionals, and it is easy to apply too much security, not enough security, or the wrong security controls, and to spend too much money in the process without attaining the necessary objectives. Risk analysis helps companies prioritize their risks and shows management the amount of resources that should be applied to protecting against those risks in a sensible manner.

A risk analysis has four main goals:

Identify assets and their value to the organization.

Identify vulnerabilities and threats.

Quantify the probability and business impact of these potential threats.

Provide an economic balance between the impact of the threat and the cost of the countermeasure.

Treating Risk

Risk Mitigation

Risk mitigation is the practice of the elimination of, or the significant decrease in the level of risk presented. Examples of risk mitigation can be seen in everyday life and are readily apparent in the information technology world. Risk Mitigation involves applying appropriate control to reduce risk. For example, to lessen the risk of exposing personal and financial information that is highly sensitive and confidential organizations put countermeasures in place, such as firewalls, intrusion detection/prevention systems, and other mechanisms, to deter malicious outsiders from accessing this highly sensitive information. In the underage driver example, risk mitigation could take the form of driver education for the youth or establishing a policy not allowing the young driver to use a cell phone while driving, or not letting youth of a certain age have more than one friend in the car as a passenger at any given time.

Risk Transfer

Risk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way. The family is evaluating whether to permit an underage driver to use the family car. The family decides that it is important for the youth to be mobile, so it transfers the financial risk of a youth being in an accident to the insurance company, which provides the family with auto insurance.

It is important to note that the transfer of risk may be accompanied by a cost. This is certainly true for the insurance example presented earlier, and can be seen in other insurance instances, such as liability insurance for a vendor or the insurance taken out by companies to protect against hardware and software theft or destruction. This may also be true if an organization must purchase and implement security controls in order to make their organization less desirable to attack. It is important to remember that not all risk can be transferred. While financial risk is simple to transfer through insurance, reputational risk may almost never be fully transferred.

Risk Avoidance

Risk avoidance is the practice of coming up with alternatives so that the risk in question is not realized. For example, have you ever heard a friend, or parents of a friend, complain about the costs of insuring an underage driver? How about the risks that many of these children face as they become mobile? Some of these families will decide that the child in question will not be allowed to drive the family car, but will rather wait until he or she is of legal age (i.e., 18 years of age) before committing to owning, insuring, and driving a motor vehicle.

In this case, the family has chosen to avoid the risks (and any associated benefits) associated with an underage driver, such as poor driving performance or the cost of insurance for the child. Although this choice may be available for some situations, it is not available for all. Imagine a global retailer who, knowing the risks associated with doing business on the Internet, decides to avoid the practice. This decision will likely cost the company a significant amount of its revenue (if, indeed, the company has products or services that consumers wish to purchase). In addition, the decision may require the company to build or lease a site in each of the locations, globally, for which it wishes to continue business. This could have a catastrophic effect on the company’s ability to continue business operations

Risk Acceptance

In some cases, it may be prudent for an organization to simply accept the risk that is presented in certain scenarios. Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way.

For example, an executive may be confronted with risks identified during the course of a risk assessment for their organization. These risks have been prioritized by high, medium, and low impact to the organization. The executive notes that in order to mitigate or transfer the low-level risks, significant costs could be involved. Mitigation might involve the hiring of additional highly skilled personnel and the purchase of new hardware, software, and office equipment, while transference of the risk to an insurance company would require premium payments. The

executive then further notes that minimal impact to the organization would occur if any of the reported low-level threats were realized. Therefore, he or she (rightly) concludes that it is wiser for the organization to forgo the costs and accept the risk. In the young driver example, risk acceptance could be based on the observation that the youngster has demonstrated the responsibility and maturity to warrant the parent’s trust in his or her judgment.

The following answers are incorrect:

Risk Transfer - Risk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way.

Risk Avoidance - Risk avoidance is the practice of coming up with alternatives so that the risk in question is not realized.

Risk Acceptance - Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way. -- Reference: CISA Review Manual 2014 Page number 51

Official ISC2 guide to CISSP CBK 3rd edition page number 383,384 and 385

Explanation: Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way.

For your exam you should know below information about risk assessment and treatment:A risk assessment, which is a tool for risk management, is a method of identifying vulnerabilities and threats and assessing the possible impacts to determine where to implement security controls. A risk assessment is carried out, and the results are analyzed. Risk analysis is used to ensure that security is cost-effective, relevant, timely, and responsive to threats. Security can be quite complex, even for well-versed security professionals, and it is easy to apply too much security, not enough security, or the wrong security controls, and to spend too much money in the process without attaining the necessary objectives. Risk analysis helps companies prioritize their risks and showsmanagement the amount of resources that should be applied to protecting against those risks in a sensible manner.

A risk analysis has four main goals:Identify assets and their value to the organization.

Identify vulnerabilities and threats.

Quantify the probability and business impact of these potential threats.

Provide an economic balance between the impact of the threat and the cost of the countermeasure.

Treating RiskRisk MitigationRisk mitigation is the practice of the elimination of, or the significant decrease in the level of risk presented. Examples of risk mitigation can be seen in everyday life and are readily apparent in the information technology world. Risk Mitigation involves applying appropriate control to reduce risk. For example, to lessen the risk of exposing personal and financial information that is highly sensitive and confidential organizations put countermeasures in place, such as firewalls, intrusiondetection/prevention systems, and other mechanisms, to deter malicious outsiders from accessing this highly sensitive information. In the underage driver example, risk mitigation could take the form of driver education for the youth or establishing a policy not allowing the young driver to use a cell phone while driving, or not letting youth of a certain age have more than one friend in the car as a passenger at any given time.

Risk TransferRisk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way. The family is evaluating whether to permit an underage driver to use the family car. The family decides that it is important for the youth to be mobile, so it transfers the financial risk of a youth being in an accident to the insurance company, which provides the family with auto insurance.

It is important to note that the transfer of risk may be accompanied by a cost. This is certainly true for the insurance example presented earlier, and can be seen in other insurance instances, such as liability insurance for a vendor or the insurance taken out by companies to protect against hardware and software theft or destruction. This may also be true if an organization must purchase and implement security controls in order to make their organization less desirable to attack. It is important to remember that not all risk can be transferred. While financial risk is simple to transfer through insurance, reputational risk may almost never be fully transferred.

Risk AvoidanceRisk avoidance is the practice of coming up with alternatives so that the risk in question is not realized. For example, have you ever heard a friend, or parents of a friend, complain about the costs of insuring an underage driver? How about the risks that many of these children face as they become mobile? Some of these families will decide that the child in question will not be allowed to drive the family car, but will rather wait until he or she is of legal age (i.e., 18 years of age) before committing to owning, insuring, and driving a motor vehicle.

In this case, the family has chosen to avoid the risks (and any associated benefits) associated with an underage driver, such as poor driving performance or the cost of insurance for the child. Although this choice may be available for some situations, it is not available for all. Imagine a global retailer who, knowing the risks associated with doing business on the Internet, decides to avoid the practice. This decision will likely cost the company a significant amount of its revenue (if, indeed, the company has products or services that consumers wish to purchase). In addition, the decision may require the company to build or lease a site in each of the locations, globally, for which it wishes to continue business. This could have a catastrophic effect on the company’s ability to continue business operationsRisk AcceptanceIn some cases, it may be prudent for an organization to simply accept the risk that is presented in certain scenarios. Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk inanother way.

For example, an executive may be confronted with risks identified during the course of a risk assessment for their organization. These risks have been prioritized by high, medium, and low impact to the organization. The executive notes that in order to mitigate or transfer the low-level risks, significant costs could be involved. Mitigation might involve the hiring of additional highly skilled personnel and the purchase of new hardware, software, and office equipment, while transference of the risk to an insurance company would require premium payments. The executive then further notes that minimal impact to the organization would occur if any of the reported low-level threats were realized. Therefore, he or she (rightly) concludes that it is wiser for the organization to forgo the costs and accept the risk. In the young driver example, risk acceptance could be based on the observation that the youngster has demonstrated the responsibility and maturity to warrant the parent’s trust in his or her judgment.

The following answers are incorrect:Risk Transfer - Risk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way.

Risk Avoidance - Risk avoidance is the practice of coming up with alternatives so that the risk in question is not realized.

Risk Mitigation -Risk mitigation is the practice of the elimination of, or the significant decrease in the level of risk presented. -- Reference: CISA Review Manual 2014 Page number 51andOfficial ISC2 guide to CISSP CBK 3rd edition page number 534-539

Explanation: Risk avoidance is the practice of coming up with alternatives so that the risk in question is not realized.

For your exam you should know below information about risk assessment and treatment:

A risk assessment, which is a tool for risk management, is a method of identifying vulnerabilities and threats and assessing the possible impacts to determine where to implement security controls. A risk assessment is carried out, and the results are analyzed. Risk analysis is used to ensure that security is cost-effective, relevant, timely, and responsive to threats. Security can be quite complex, even for well-versed security professionals, and it is easy to apply too much security, not enough security, or the wrong security controls, and to spend too much money in the process without attaining the necessary objectives. Risk analysis helps companies prioritize their risks and shows management the amount of resources that should be applied to protecting against those risks in a sensible manner.

A risk analysis has four main goals:

Identify assets and their value to the organization.

Identify vulnerabilities and threats.

Quantify the probability and business impact of these potential threats.

Provide an economic balance between the impact of the threat and the cost

of the countermeasure.

Treating Risk

Risk Mitigation

Risk mitigation is the practice of the elimination of, or the significant decrease in the level of risk

presented. Examples of risk mitigation can be seen in everyday life and are readily apparent in the information technology world. Risk Mitigation involves applying appropriate control to reduce risk. For example, to lessen the risk of exposing personal and financial information that is highly sensitive and confidential organizations put countermeasures in place, such as firewalls, intrusion detection/prevention systems, and other mechanisms, to deter malicious outsiders from accessing this highly sensitive information. In the underage driver example, risk mitigation could take the form of driver education for the youth or establishing a policy not allowing the young driver to use a cell phone while driving, or not letting youth of a certain age have more than one friend in the car as a passenger at any given time.

Risk Transfer

Risk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way. The family is evaluating whether to permit an underage driver to use the family car. The family decides that it is important for the youth to be mobile, so it transfers the financial risk of a youth being in an accident to the insurance company, which provides the family with auto insurance.

It is important to note that the transfer of risk may be accompanied by a cost. This is certainly true for the insurance example presented earlier, and can be seen in other insurance instances, such as liability insurance for a vendor or the insurance taken out by companies to protect against hardware and software theft or destruction. This may also be true if an organization must purchase and implement security controls in order to make their organization less desirable to attack. It is important to remember that not all risk can be transferred. While financial risk is simple to transfer through insurance, reputational risk may almost never be fully transferred.

Risk Avoidance

Risk avoidance is the practice of coming up with alternatives so that the risk in question is not realized. For example, have you ever heard a friend, or parents of a friend, complain about the costs of insuring an underage driver? How about the risks that many of these children face as they become mobile? Some of these families will decide that the child in question will not be allowed to drive the family car, but will rather wait until he or she is of legal age (i.e., 18 years of age) before committing to owning, insuring, and driving a motor vehicle.

In this case, the family has chosen to avoid the risks (and any associated benefits) associated with an underage driver, such as poor driving performance or the cost of insurance for the child. Although this choice may be available for some situations, it is not available for all. Imagine a global retailer who, knowing the risks associated with doing business on the Internet, decides to avoid the practice. This decision will likely cost the company a significant amount of its revenue (if, indeed, the company has products or services that consumers wish to purchase). In addition, the decision may require the company to build or lease a site in each of the locations, globally, for which it wishes to continue business. This could have a catastrophic effect on the company’s ability to continue business operations

Risk Acceptance

In some cases, it may be prudent for an organization to simply accept the risk that is presented in certain scenarios. Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way.

For example, an executive may be confronted with risks identified during the course of a risk assessment for their organization. These risks have been prioritized by high, medium, and low impact to the organization. The executive notes that in order to mitigate or transfer the low-level risks, significant costs could be involved. Mitigation might involve the hiring of additional highly skilled personnel and the purchase of new hardware, software, and office equipment, while transference of the risk to an insurance company would require premium payments. The executive then further notes that minimal impact to the organization would occur if any of the reported low-level threats were realized. Therefore, he or she (rightly) concludes that it is wiser for the organization to forgo the costs and accept the risk. In the young driver example, risk acceptance could be based on the observation that the youngster has demonstrated the responsibility and maturity to warrant the parent’s trust in his or her judgment.

The following answers are incorrect:

Risk Transfer - Risk transfer is the practice of passing on the risk in question to another entity, such as an insurance company. Let us look at one of the examples that were presented above in a different way.

Risk Acceptance - Risk acceptance is the practice of accepting certain risk(s), typically based on a business decision that may also weigh the cost versus the benefit of dealing with the risk in another way.

Risk Mitigation -Risk mitigation is the practice of the elimination of, or the significant decrease in the level of risk presented -- Reference: CISA Review Manual 2014 Page number 51

and

Official ISC2 guide to CISSP CBK 3rd edition page number 534-536