Why is an external IT audit so important?

Author: Richard McBarnet
Chief Executive Officer, Lumina Technologies

Internal Audit Vs External Audit

To put it bluntly, you don’t know what you don’t know. Therefore, if you do not have an adequate understanding of IT and cybersecurity, how can you be certain that your IT and cybersecurity is appropriate for your business and that your business is safe? This is why an external IT audit is essential.

In our experience, a company’s board members typically do not give much thought to their company’s IT until there is a security breach. Law firms are the number one target for financial fraud. For example, one of our clients, a law firm, was targeted as a result of the IT systems of one of its clients having been compromised. The law firm was asked to transfer £65,000 of funds, but when it came to light this was fraudulent, all traces of the correspondence disappeared from the client’s computer system, which showed the hacker had control of their system.

All too often, I find that directors and board members are unaware of what is happening with their company’s IT. Often, they are nervous of taking on the responsibility for IT because they do not understand it and find it too complex. But given that they are accountable for these areas, and the high risks associated, it surprises me that they do not take this on.

What an IT audit discloses

I have often struggled to pin down law firms’ managers to talk about the technology and infrastructure risks, and how their business could be compromised. Yet an audit will expose those risks and identify the threats your business might face, enabling us to advise on ways of preventing any potential future issues.

Different types of IT audit

Technical audit – the basic level which shows what IT assets you have, if they are still under warranty and how they are performing.
Security audit – this audit looks at all levels of exposure and risk. A security audit needs to be done at least annually. It also involves a visit from an auditor who will assess the human side of cybersecurity.
Operational audit – this is the most detailed audit, and it looks at your IT operation as a whole to assess its maturity, fitness for purpose, and whether or not it delivers and supports the business’s strategy. While an operational audit will cover cybersecurity risks, it is actually designed to get an understanding of how users work and how they can do their job properly. Operational audits only need to be carried out once every two to three years and will drive your strategic planning and your IT road map.

What we look for in an audit

Business owners often don’t understand what can happen and tend to be blasé about it. Time and again I expose poor practices such as totally inappropriate hardware, licencing compliance issues, massive cyber exposure, data exposure, and lack of adequate backups.

Recently I undertook an audit for an architectural practice. I asked the IT manager for a list of the company’s assets. They emailed me a spreadsheet listing the assets with the administrator access passwords in the next column. This immediately raised concern, so I investigated further and discovered that the spreadsheet had been stored on the file server and was available to everyone in the organisation. It was not password protected or in a restricted area. This definitely posed a cyber risk.

The same organisation has a centralised data storage system, which means that all its data sits on the one server. While the company bosses were aware that the data was being replicated off-site they did not know that because their network speed was so poor, when the replication was running it slowed the entire system down. IT had taken the decision that they would only run the replication at the weekend.

However, there was so much backlogged data that the replication was still running into Monday afternoon, interrupting work on Monday mornings. And by not running the replication until the weekend, the company risked losing the entire week’s data. This was a huge risk that the business’s directors were completely unaware of.

In another audit for a manufacturing company, I asked the incumbent IT company for access to the IT firewall. They refused access and simply told me it was secure. If we had accepted them at their word and something had gone wrong, we would have taken a massive reputational hit. Because, in fact, when I did eventually get access, I discovered a hacker had been trying to gain access to the company’s internal database which had been externally published through the firewall; the database was being attacked 24/7 by brute force attacks originating from China trying to guess the password – at a rate of over five guesses per second!

As an independent external auditor there is no conflict of interest

Audits are all about identifying issues and risks, but should also serve to educate businesses. Unlike most IT auditors, we will tell clients what the problems are as well as making recommendations as to how they can fix them. We believe that an external auditor must be totally objective, which means we work as an independent auditor removing any risk of conflict of interest by leaving it to the client to independently implement our recommendations.

Prevention is better than cure

Unfortunately the reality is that whenever someone approaches us to undertake an audit, they already know they’ve got a problem. Something’s happened to show that something has gone wrong or there is a nagging suspicion that things are not right, so they’re generally expecting bad news.

Thankfully more business owners and directors are becoming aware that IT audits are worthwhile exercises that need to be done on a regular basis. Indeed, IT cybersecurity risks need to be treated in the same way that your company treats a fire risk, such as putting preventative measures in place that minimise risks, carrying out regular fire alarm tests, and holding regular fire drills so your staff know what to do in the event of a fire.

What I strive to achieve with business audits is to expose the weaknesses within the business and give clients tools to start equipping themselves with better safety measures and more productive systems. As an example, one of our clients had concerns that their company’s financial data was not adequately secured.

I confirmed their fears because although the company had generic IT security, there was no security segregation of the company’s financial data. They wanted to engage an external consultant to look at their financial data and were quoted £65k from one of the “big four”. Whilst having the kudos of the big name may be important to the business, in reality a much more pragmatic and detailed audit can be achieved at a far more affordable cost.

It is becoming more critical that companies have clean bills of health when it comes to IT and cybersecurity. As I said in my introduction, you don’t know what you don’t know. An IT audit will expose deficiencies in technology, software, and human practices and will prevent your company from sleepwalking into disaster.