Recreation Inc. Cast Study

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Project 2 – Recreation, Inc. 1. What are the inherent risks associated with Recreation’s IT environment? The lack of formal policies and procedures directly addressing IT functions is an inherent risk associated with Recreation’s IT environment. While the requests for development of new applications and changes to existing applications are supposed to be submitted to Dan before being put into place there is no actual required authorization needed for Patty to begin making the modifications or creating the application she could easily perform these actions without Dan’s approval. Also because Dan does not review the modifications and new applications until the following month there is the possibility of changes that are not appropriate or not approved being made and they wouldn’t be caught by Dan until the following month. This allows changes that could cause misstatements to be made and not realized until the following month, after they have possibly caused material misstatements. Another inherent risk associated with Recreation’s IT environment is Dan’s role as the IT Director and his limited IT experience, because his IT knowledge was developed ‘on the job’ and he spends the majority of his time dealing with CFO related issues his inexperience could result in accounting errors, such as failure to make necessary provisions. The lack of security in the computer room is also an inherent risk associated with Recreation’s IT environment; because the door is not locked anyone could easily access the servers and routers for the company. In addition the equipment is not plugged into a surge protector and while they do have an uninterruptible power supply (UPS) that provides 20 minutes of alternative power to the servers in the event that the main power supply is unavailable it does not provide and/adequate surge protection for the servers and routers.

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