The Canada Revenue Agency developed a new computer system for processing provincial income tax returns of individuals and corporations. The system features direct data input and inquiry capabilities. Identification of taxpayers is provided by using the Social Insurance Numbers of individuals and federal identification numbers for corporations. The new system serves three primary purposes:
• Data is inputted into the system directly from tax returns through CRT terminals located at the central headquarters of the Canada Revenue Agency.
• The returns are processed using the main computer facilities at central headquarters. The processing includes (1) verifying mathematical accuracy; (2) auditing the reasonableness of deductions, tax due, and so forth through the use of edit routines (these routines also include a comparison of the current year’s data with prior years’ data); (3) identifying returns that should be considered for audit by revenue agents of the department; and (4) issuing refund cheques to taxpayers.
• Inquiry service is provided to taxpayers on request through the assistance of Canada Revenue Agency personnel at five regional offices. A total of 50 CRT terminals will be placed at the regional offices.
A taxpayer can determine the status of his or her return or get information from the last 3 years’ returns by calling or visiting one of the department’s regional offices. The agency is concerned about data security during input and processing over and above protection against natural hazards such as fires or floods. This includes protection against the loss or damage of data during data input or processing and the improper input or processing of data. In addition, the agency and the federal privacy commissioner have discussed the general problem of data confidentiality that may arise from the nature and operation of the new system. Both parties want to have all potential problems identified before the system is fully developed and implemented so that the proper controls can be incorporated into the new system.

Requirements
1. Describe the potential confidentiality problems that could arise in each of the following three areas of processing, and recommend the corrective action(s) to solve the problems: 

(a) Data input

(b) Processing of returns

(c) Data inquiry.
2. The Canada Revenue Agency wants to incorporate controls to provide data security against the loss, damage, or improper input or use of data during data input and processing. Identify the potential problems (outside of natural hazards such as fires or floods) for which the agency should develop controls, and recommend possible control procedures for each problem identified.(CMA Adapted)