Complete Caselet 5 Software Programs Inc. for the Caselets [5, pages 16-17]. Write at most 4 pages on the 4 questions at the end.

## this is the information on page 16-17 and the question is below ***** Caselets: IT Governance Institute. IT Governance Using CobiT and ValIT"!, 3rd Edition. 2010.ITGovernance Using CobiT and Val ITTM: Caselets, 3rd Edition 16 2 0 1 0 I SACA . A l l r ig h t s r e s e r v e d . 5. Caselet: Software Programs Inc. Learning Objective Software Programs Inc. was selected to focus on IT audits approach to the audit of the financial statement. Introduction Hy Fenation is Director of IT Audit for Software Programs. He has been working with AuditGen PC, the external auditor, to prepare for the annual audit. Software Programs recently became a public company and is now required to include an integrated audit of the financial statements as well as the internal controls that support the financial statements. Hy has met with the engagement partner, Dalton Walton, to discuss internal audits participation in the audit of IT control and must now document a plan. Background Company Software Programs is a provider of office productivity software, including word processing, spreadsheet and presentation applications. During 2009, Software Programs initiated an initial public offering (IPO) and was required to satisfy the internal control provisions of the US Sarbanes-Oxley Act of 2002. Industry Software Programs is in the software development and sales business. This process includes the development, sales, distribution and maintenance of business software. Software Programs primary competition includes Microsoft with its Office applications and also includes OpenDocuments.org, a freeware provider of software. Key Players The key players are: Hy Fenation, Director of IT Audit, Software Programs Dalton Walton, Audit Partner, AuditGen PC Mikhail Dobrasky, Chief Financial Officer (CFO), Software Programs Francois Vert, Chief Information Officer (CIO), Software Programs Issue Dalton Walton has met with internal audit management to discuss the annual external audit of Software Programs. Software Programs operates distinct networks that are protected by firewalls: Administrative systemsThis network includes the financial systems: general ledger, receivables, payables, sales, inventory and payroll. Research and development (R&D)All applications development and testing are performed on the R&D network. Once applications have been tested, they are transferred to a production library for distribution. Web operationsThis network includes the sales and support web site, which also includes the call centre operations. Mikhail Dobrasky, CFO, provided an overview of critical operations. The highlights of this presentation are: Software is developed and tested, after which a release to manufacturing (RTM) version is produced. This version is sent to Digital Stream for production. Two versions of software are createdmedia and download. Digital Stream maintains the download version on its web site. Customers may buy a copy and download it. As these are credit card transactions, Digital Stream will process the payments, obtain the remittance from the credit card processor, and remit sales figures and payments to Software Programs on a monthly basis. Download sales revenue represents 10 percent of sales. Media versions are sent to the Software Programs distribution centre where they are placed into the finished goods inventory. Software Programs performs all sales and distribution of media from inventory and either invoices the customers directly or accepts credit card payments. Media sales revenue represents 15 percent of sales. Software Programs sells site licences to its customers using in-house, direct-sales staff. R&D has developed a complex licencing mechanism to ensure that site licence customers do not exceed their licences. Site licence revenue represents 40 percent of sales. Software Programs provides support either as a fee per incident or via support contracts. Support contracts can be for one, two or three years and include future upgrades. Per-incident support is infrequent and not material. Support contract revenue represents 35 percent of sales. Francois Vert, CIO, provided an overview of the IT architecture: The accounting system is a purchased application from PearTree Software Inc. It operates on a dedicated Linux computer with the MySQL database. PearTree uses an online entry process for receivables, payables, payroll entry, internal sales (media, licence and support sales) and inventory. Batch processes are initiated through an automated scheduler, nightly, to process invoices, process materials receiving and generate checks. Digital Stream provides a data file containing download sales, which are updated through a batch process monthly. Site licences and the licence management system operate on a separate Windows server on the administrative systems network. This application feeds the accounting system with site licence sales. All adjustments to site licence sales are also processed on this system. Support contract sales operate on the same physical equipment as site licence sales, but are processed by a separate application. Since the Software Programs software operates on Macintosh, Windows and Linux platforms, the R&D organisation maintains test environments for each platform. Software development utilises a baseline C code, with platform-dependent extensions developed for each platform. Hy Fenation, Direcctor of IT Audit, has indicated that the internal audit department has adopted the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework as its control framework and COBIT as its framework for governing and controlling IT. Decision to Be Made Hy Fenation has asked you to assist him in preparing the planning document for the audit. Questions Hy has requested you prepare the following: 1. Provide a brief description of the audit process required to satisfy the auditing of IT controls over financial reporting. Hy indicated that he believed there were six processes. 2. Based on the presentations by the Software Programs executives, perform a risk assessment of the infrastructure and applications to identify the processes that need to be included in the audit. 3. Explain to Hy the process of evaluating control design and operating effectiveness. 4. Identify the processes you believe should be included in the evaluation of control design and operating effectiveness. 5. Caselet: Software Programs Inc.