Table of Contents

CH:1 AUTOMATED BUSINESS PROCESSES 2

CH:2 FINANCE AND ACCOUNTING SYSTEMS 28

CH:3(A) INFORMATION SYSTEMS 54

CH:3(B) INFORMATION SYSTEMS’ CONTROLS 72

CH:3(C) INFORMATION SYSTEMS – AUDIT 97

CH 4(A) E–COMMERCE AND M–COMMERCE 108

CH:4(B) EMERGING TECHNOLOGIES 124

CH:5 CORE BANKING SYSTEMS 145

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Ch:1 Automated Business Processes
1) What do you mean by Process?
Business Perspective
1. A Process is a co–ordinated and standardized flow of activities performed by
people or machines, involving many functions or departments, to achieve a business
objective.
2. A Process creates value for internal or external customers.
3. A Business is a collection of connected processes. These processes must be
frequently re–aligned or re–connected in order to handle changing business
environments and re–defined business objectives.
Systems Engineering Perspective
1. A Process is a sequence of events that uses inputs to produce outputs.
2. Sequences can involve many manual or machine activities, e.g. reading a file and
transforming the file to a desired output format, or taking a customer order, filling
that order, and issuing the Customer Invoice.
General Meaning
1. A Process comprises all the things done to provide the Stakeholders / Receivers,
with what they expect to receive.
2. A Process is said to be complete when the Process delivers a clear product or
service to an external stakeholder or another internal process.
3. The lifecycle of an end–to–end process is from the original trigger for the process,
and runs upto the ultimate stakeholder satisfaction.

2) Differentiate between Functional Organisation and Process Organisation.

Functional Organisation vs Process Organisation

Aspect Functional Organisation Process Organisation

Traditional View, considering an Comparatively refined view,

Viewpoint Entity as comprising of different considering an Entity as comprising
departments / functions. of inter–linked processes.
Traditional Organizations are
Sub–Parts of viewed as composed of This concept views Organizations as
Entity Departments and Functional networks or systems of processes.
Stages.

Work Unit Department Team

Key Figure Functional Executive Process Owner

Activity Every Department performs Every Process creates value for
/work done certain specified functions. internal or external customers.
(a) Focus on functional (a) Responsive to market
excellence and specialization. requirements.
Benefits (b) Easier to implement work (b) Improved communication and
balancing because workers have collaboration between different
similar skills. functional tasks.

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 (c) Clear management direction (c) Performance measurements can
on how work should be be aligned with process goals.
performed.
(d) Creates better Team Spirit in
(d) Specialists / Experts can be Employees.
employed for each function.
(a)There may be barriers to
(a) Duplication of functional
communication between
expertise.
different functions.
(b) Inconsistency of functional
(b) Poor handover between
performance between Processes.
Weaknesses functions, leading to deficient
(c) Increased operational
customer service.
complexity.
(c) Lack of end–to–end focus to
(d) Difficult to fix responsibility in
optimize organizational
certain situations.
performance.

Strategic Supports Cost Leadership Supports Differentiation

Value Strategy. Strategy.

3) Write short notes on Process Management.

Process Management views an organisation as a system of inter–linked processes which
involves concerted efforts to map, improve and adhere to Organisational processes.
Significance
1. Process Management is a functional group including (but not limited to) Operations
Management, Supply Chain Management, Finance and Accounting, Marketing, and
General Management.
2. Process Management should be implemented to ensure effective streamlining of
processes.
3. Process Orientation is at the core of BPM. So, multi–functional Processes should be
properly integrated.
4. Process Management provides a sequence of analytical tools that are essential to the
modern Project Manager, Analyst, and Management Consultant.
5. A process–oriented corporate culture is useful to adapt to changes in management at
the operational level, i.e. improvement and control of the processes essential to the
Entity’s goals.

4) What do you mean by Business Process?

(a) A Business Process is a prescribed sequence of work steps, performed in order to
produce a desired result for the Entity.
(b) A Business Process is initiated by a particular kind of event, has a well–defined
beginning and end, and is usually completed in a relatively short period.
(c)The number and type of Business Processes and how the processes are performed
vary across Entities, and is also influenced by the extent of automation.
(d) Business Process Management (BPM) is the achievement of an Entity’s objectives
through the improvement, management and control of essential business processes.

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5) Explain the different ways in which Business Processes can be classified.
Depending on the organization, industry and nature of work; business processes are
often broken up into different categories as shown in the Fig.

Categories of Business Processes

Operational Processes Supporting Processes Management Processes

a) Operational Processes (or Primary Processes)

Operational or Primary Processes deal with the core business and value
chain. These processes deliver value to the customer by helping to produce a
product or service. Operational processes represent essential business
activities that accomplish business objectives, e.g. generating revenue - Order
to Cash cycle (O2C), Procurement – Purchase to Pay (P2P) cycle.
b) Supporting Processes (or Secondary Processes)
Supporting Processes back core processes and functions within an
organization. Examples of supporting or management processes include
Accounting, Human Resource (HR) Management and workplace safety. One
key differentiator between operational and support processes is that support
processes do not provide value to customers directly. However, it should be
noted that hiring the right people for the right job has a direct impact on
the efficiency of the enterprise.

Example The main HR Process Areas are grouped into logical functional areas -
Recruitment and Staffing; Goal Setting; Training and Development;
Compensation and Benefits; Performance Management; Career Development
and Leadership Development.

c) Management Processes

Management Processes measure, monitor and control activities related to

business procedures and systems. Examples of management processes
include internal communications, governance, strategic planning,
budgeting, and infrastructure or capacity management. Like supporting
processes, management processes do not provide value directly to the
customers. However, it has a direct impact on the efficiency of the
enterprise.

6) What is Enterprise Information System? Explain its advantages?

An Enterprise Information System (EIS) may be defined as any kind of information

system which improves the functions of an enterprise business processes by
integration.
• EIS provides a technology platform that enable Entities to integrate and coordinate
their Business Processes.

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 • EIS collects data from all Business Processes– (a) Manufacturing & Production, (b)
Sales & Marketing, (c) Finance and Accounting, and (d) Human Resources and
Personnel, and stores the data in single Central Data Repository.
• By improving the performance, accuracy and efficiency of the key business
processes, the Entity is made more efficient and responsive to Customer and
Employee needs.
Advantages of using EIS includes –
a) high quality services and operational efficiency,
b) reduced Service Cycles, Product Development Cycles and Marketing Life Cycles,
c) increased business productivity and cost savings,
d) increased Customer Satisfaction,
e) smooth flow of information to proper Business Processes,
f) better coordination amongst various Business Processes,
g) dealing with large volumes of data,
h) usability at all levels of an Entity,
i) automation of Business Processes,
j) sharing of relevant information across all Functional Levels and Management
Hierarchies, etc.
7) What do you mean by Business Process Automation (BPA)? What are its
Objectives and Benefits?
Business Process Automation (BPA) refers to removing the human element from
existing business processes by automating the repetitive or standardized process
components. BPA is the automation of business processes. In BPA, Firms seek to
identify any unnecessary amount of work (repetitive and tedious work), and eliminate
inefficient labour. Business Process Automation (BPA) is a strategy to automate,
optimize and streamline business processes, and benefit the enterprise in terms of
cost, time and efforts.

 Confidentiality: To ensure that data is only available to persons who

have right to see the same;
 Integrity: To ensure that no un-authorized amendments can be made in
the data;
 Availability: To ensure that data is available when asked for; and
 Timeliness: To ensure that data is made available in at the right time.

Major benefits of automating Business Processes are as follows:

a. Quality and Consistency: Ensures that every action is performed identically
- resulting in high quality, reliable results and stakeholders will consistently
experience the same level of service.
b. Time Saving: Automation reduces the number of tasks employees would
otherwise need to do manually. It frees up time to work on items that add
genuine value to the business, allowing innovation and increasing employees’
levels of motivation.
c. Visibility: Automated processes are controlled and consistently operate
accurately within the defined timeline. It gives visibility of the process status to
the organization.
d. Improved Operational Efficiency: Automation reduces the time it takes to

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 achieve a task, the effort required to undertake it and the cost of completing it
successfully. Automation not only ensures systems run smoothly and efficiently,
but that errors are eliminated and best practices are constantly leveraged.

8) Explain the steps in Business Process Automation.

The steps to go about implementing Business Process Automation are:

(a). Step 1: Define why we plan to implement a BPA?

A list of generic reasons for going for BPA may include any or combination of the
following:
 Errors in manual processes leading to higher costs.
 Payment processes not streamlined, due to duplicate or late
payments, missing early pay discounts, and losing revenue.
 Paying for goods and services not received.
 Poor debtor management leading to high invoice aging and poor cash
flow.
 Not being able to find documents quickly during an audit or lawsuit
or not being able to find all documents.
 Lengthy or incomplete new employee or new account on-boarding.
 Unable to recruit and train new employees, but where employees are
urgently required.
 Lack of management understanding of business processes.
 Poor customer service.
(b). Step 2: Understand the rules / regulation under which enterprise
needs to comply with?
One of the most important steps in automating any business process is to
understand the rules of engagement, which include following the rules,
adhering to regulations and following document retention requirements.
This governance is established by a combination of internal corporate policies,
external industry regulations and local, state, and central laws.
It is important to understand that laws may require documents to be retained
for specified number of years and in a specified format. Entity needs to ensure
that any BPA adheres to the requirements of law.

Step 3: Document the process, we wish to automate

The following aspects need to be kept in mind while documenting the present
process:
 What documents need to be captured?
 Where do they come from?
 What format are they in: Paper, FAX, email, PDF etc.?
 Who is involved in processing of the documents?

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  What is the impact of regulations on processing of these documents?
 Can there be a better way to do the same job?
 How are exceptions in the process handled?

Step 4: Define the objectives/goals to be achieved by implementing BPA

 Measurable: Easily quantifiable in monetary terms,
 Attainable: Achievable through best efforts,
 Relevant: Entity must be in need of these, and
 Timely: Achieved within a given time frame.

Step 5: Engage the business process consultant

This is again a critical step to achieve BPA. To decide as to which company/
consultant to partner with, depends upon the following:
 Objectivity of consultant in understanding/evaluating entity situation.
 Does the consultant have experience with entity business process?
 Is the consultant experienced in resolving critical business issues?
 Whether the consultant can recommend and implementing a
combination of hardware, software and services as appropriate to
meeting enterprise BPA requirements?
 Does the consultant have the required expertise to clearly articulate
the business value of every aspect of the proposed solution?

Step 6: Calculate the RoI for project

 Savings in Employee Salary by not having to replace those due to
attrition.
 Cost of Space regained from paper, file cabinets, reduced.
 Eliminating Fines to be paid by Entity due to delays being avoided.
 Reducing the cost of audits and lawsuits.
 Lower Interest Cost and better Cash Flow management by availing early
payment discounts, avoiding duplicate payments, collecting Accounts
Receivable faster, etc.
 New Revenue Generation opportunities.
 Revenue by way of charging for instant access to records (e.g. Public
Information, Student Transcripts, Medical Records, etc.)
 Building business by providing superior levels of customer service, higher
goodwill, etc.

Step 7: Developing the BPA

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 Once the requirements have been document, ROI has been computed and top
management approval to go ahead has been received, the consultant develops
the requisite BPA. The developed BPA needs to meet the objectives for which the
same is being developed.

Step 8: Testing the BPA

Once developed, it is important to test the new process to determine how well
it works and identify where additional “exception processing” steps need to be
included. The process of testing is an iterative process, the objective being to
remove all problems during this phase.
Testing allows room for improvements prior to the official launch of the new
process, increases user adoption and decreases resistance to change.
Documenting the final version of the process will help to capture all of this hard
work, thinking and experience which can be used to train new people.

9) Explain the various types of Flowcharts?

(a) System Outline Chart
System Outline Charts merely list the Inputs, Files processed and the Outputs without
considering their sequence.

(b)System Flowchart
• A System Flowchart represents the overall view of the data flow and operations of a
system, with a diagram drawn logically, and illustrates the correct flow of data or
documents.
• It represents flow of documents, the operations or activities performed, the persons
or workstations. It also reflects the relationship between Inputs, Processing and
Outputs.
• In a Manual System, a System Flowchart may comprise several Flowcharts, prepared
separately, such as Documents Flowchart, Activity Flowchart, etc.
• In a Computer System, the System Flowchart mainly consists of – (i) sources from
which input data is prepared and the medium or devices used, (ii) the processing steps
or sequence of operations involved, and (iii) the intermediary and final outputs
prepared and the medium and devices used for their storage.

(c) Run Flowcharts

• Run Flowcharts are prepared from the Systems Flowchart and show the reference of
computer operations to be performed.
• They expand the detail of each computer box on the System Flowchart showing
Inputs, Files, and Outputs relevant to each run and the frequency of each run. (d)

(d)Program Flowchart
• Program Flowcharts are diagrammatic representation of the data processing steps to
be performed within a computer program.
• They are used to translate the elementary steps of a procedure into a program of
coded instructions for the Computer to operate effectively.
• They are used to depict the scientific, arithmetic and logical operations or steps which
must be accomplished to solve the computer application problem.

(e) Cross Functional Flowcharts

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 • These are diagrams of Business Processes, and helps in identifying the role and
responsibilities of each Department / Business Unit, for each part of the overall activity.
• The Flowchart is divided into different Units (called Swimlanes), each representing
a particular Department / Business Unit.
• All activities and processes under the control of that Department / Business Unit, are
depicted within that Swimlane. All such activities are inter–connected to form the
overall Business Process Flowchart.

10) What are the benefits of Flowcharts?

Advantages of Flowcharts
(i) Quicker grasp of relationships - The relationship between various elements
of the application program/business process must be identified. Flowchart can
help depict a lengthy procedure more easily than by describing it by means of
written notes.
(ii) Effective Analysis - The flowchart becomes a blue print of a system that can
be broken down into detailed parts for study. Problems may be identified and
new approaches may be suggested by flowcharts.
(iii) Communication - Flowcharts aid in communicating the facts of a business
problem to those whose skills are needed for arriving at the solution.
(iv) Documentation - Flowcharts serve as a good documentation which aid greatly
in future program conversions. In the event of staff changes, they serve as
training function by helping new employees in understanding the existing
programs.
(v) Efficient coding - Flowcharts act as a guide during the system analysis and
program preparation phase. Instructions coded in a programming language
may be checked against the flowchart to ensure that no steps are omitted.
(vi) Program Debugging - Flowcharts serve as an important tool during program
debugging. They help in detecting, locating and removing mistakes.
(vii) Efficient program maintenance - The maintenance of operating programs is
facilitated by flowcharts. The charts help the programmer to concentrate
attention on that part of the information flow which is to be modified.
(viii) Identifying Responsibilities - Specific business processes can be clearly
identified to functional departments thereby establishing responsibility of the
process owner.
(ix) Establishing Controls - Business process conflicts and risks can be easily
identified for recommending suitable controls.

11) What are the limitations of Flowcharts?

Limitations of Flowchart
(i) Complex logic – Flowchart becomes complex and clumsy where the problem
logic is complex. The essentials of what is done can easily be lost in the
technical details of how it is done.
(ii) Modification – If modifications to a flowchart are required, it may require
complete re-drawing.
(iii) Reproduction – Reproduction of flowcharts is often a problem because the
symbols used in flowcharts cannot be typed.
(iv) Link between conditions and actions – Sometimes it becomes difficult to

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 establish the linkage between various conditions and the actions to be taken
there upon for a condition.
(v) Standardization – Program flowcharts, although easy to follow, are not such
a natural way of expressing procedures as writing in English, nor are they
easily translated into Programming language.

12) What are the commonly used Symbols in Flowcharts?

Symbols: On a System Flowchart, each component is represented by a symbol that

visually suggests its function. A System Flowchart’s symbols represent physical
components, and the mere act of drawing one implies a physical decision.

Flow Lines: The Symbols are linked by Flow Lines. A given Flow Line might represent
– (i) a Data Flow, (ii) a Control Flow, or (ii) a Hardware Interface.

Direction: By convention, the direction of flow is from the top left to the bottom right,
and
Arrowheads must be compulsorily used when that convention is not followed. However,
Arrowheads are recommended even when the convention is followed because they help
to clarify the documentation.
Symbols used in System Flowcharts are given below –

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 BASIC FLOWCHART SHAPES

Process Decision Document Data Start 1 Start 2

Pre-defined Stored Data Internal Storage Sequential Direct Data Manual

Input
Process Data

Card Paper Tape Delay Display Manual Preparation

Operation

Parallel Mode Loop Terminator On-page Off-page Flowchart

Limit

Text

Auto Height Dynamic Line curve Control Transfer Annotation

Text Connector Connector

13) Briefly explain the steps in Flowcharting a Business Process.

1. Identify the Business Process to be documented, and its significance and relevance
in the context of the Entity’s Business Objectives and Goals.
2. Obtain a complete understanding of the Process Flow, in terms of – (a)
Business Units / Departments involved, (b)Process Owners / Data Owners, (c) Inputs
used, (d) Authorizations required at various stages, etc.
3. Prepare a Rough Diagram of the Business Process from the above, and discuss
the same with the Business Process Owner to confirm the understanding. [Note: The
Business Process Owner is responsible for ensuring that adequate controls are
implemented, to mitigate any perceived business process risks.]
4. Identify Control Weaknesses, Process Deficiencies, Duplication of Activities,
Redundant Processes, etc. and the corrective measures required to handle them.

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 5. Establish the finalized list of Activities in each Process Step, and the responsibility
levels for each activity.
6. Identify the Starting Point of the Process, i.e. trigger point or input that the Business
seeks to convert into an output. Generally, Triggers / Starting Points may be –
(a) External Events – e.g. Sales Order by a Customer, Intimation of Due Date for filing
Returns, etc.
(b) Content Arrival – i.e. arrival of a new document or similar content, e.g.
preparation and posting of Purchase Requisition by Stores Department triggers action by
the Purchase Department.
(c) Human Intervention – e.g. Rate Change request by a Supplier, Customer
Complaints for Products, etc.
7. Identify the sub–components or Steps of the Process and the appropriate Symbols
thereof – [This is called Business Processing Modelling Notation (BPMN)].

Ite Description
m
(a) Events Events require no action from the Business as such, e.g. Customer Order,
Application for Credit Limit increase, etc.

(b) Activities These are the Entity’s Responses to the Events / Inputs, e.g. checking
of credit limit, checking of stock availability at Warehouse, etc. A
Processing Step or Activity is denoted by a Rectangular Box.

(c)Decision These are Decision Steps that have two types of responses – “Yes” or
Gateways “No”, and the further path of the process is decided based on such
response. These are denoted by Diamond Shapes.

(d) Arrows The Events, Activities and Decision Gateways are linked and inter–
connected by – (a) Solid Arrows (for Activity Flows), and (b) Dashed
Arrows (for Message / Information Flows).

8. Identify the Business Unit /Department/Person, that is responsible for each Step, for
creating various “Swimlanes”.
9. Draw the Flowchart based on the above linkages and processes, and obtain Final
Approval from the Entity.

14) Write short notes on Data Flow Diagrams?

Data Flow Diagrams Data Flow Diagrams (DFD) show the flow of data or information
from one place to another. DFDs describe the processes showing how these processes link
together through data stores and how the processes relate to the users and the outside
world. It is used to – (i) document existing systems, and (ii) plan and design new systems.
DFDs may be partitioned into levels that represent increasing information flow and
functional detail. DFDs provide a mechanism for Functional Modelling as well as
Information Flow Modelling.
DFD basically provides an overview of:
a. What data a system process;
b. What transformations are performed;
c. What data are stored;
d. What results are produced and where they flow.

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 It is mainly used by technical staff for graphically communicating between systems
analysts and programmers

15) Outline the concept of Enterprise Risk Management (ERM)?

Following features in Enterprise Risk Management (ERM) provides enhanced
capabilities to enable management to operate more effectively in environments filled
with risks:
• Align risk appetite and strategy: Risk appetite is the degree of risk, on a
broad- based level that an enterprise is willing to accept in pursuit of its goals.
Management considers the entity’s risk appetite first in evaluating strategic
alternatives, then in setting objectives aligned with the selected strategy and in
developing mechanisms to manage the related risks.
• Link growth, risk and return: Entities accept risk as part of value creation and
preservation, and they expect return commensurate with the risk. ERM provides
an enhanced ability to identify and assess risks, and establish acceptable levels of
risk relative to growth and return objectives.
• Enhance risk response decisions: ERM provides the rigor to identify and select
among alternative risk responses - risk avoidance, reduction, sharing and
acceptance. ERM provides methodologies and techniques for making these
decisions.
• Minimize operational surprises and losses: Entities have enhanced capability
to identify potential events, assess risk and establish responses, thereby reducing
the occurrence of surprises and related costs or losses.
• Identify and manage cross-enterprise risks: Every entity faces a myriad of
risks affecting different parts of the enterprise. Management needs to not only
manage individual risks, but also understand interrelated impacts.
• Provide integrated responses to multiple risks: Business processes carry
many inherent risks and ERM enables integrated solutions for managing the risks.
• Seize opportunities: Management considers potential events, rather than just
risks, and by considering a full range of events, management gains an
understanding of how certain events represent opportunities.
• Rationalize capital: More robust information on an entity’s total risk allows
management to more effectively assess overall capital needs and improve capital
allocation.

16) What are the benefits of ERM?

ERM provides enhanced capability to do the following:
• Align risk appetite and strategy: Risk appetite is the degree of risk, on a
broad-based level that an enterprise (any type of entity) is willing to accept in
pursuit of its goals. Management considers the entity’s risk appetite first in
evaluating strategic alternatives, then in setting objectives aligned with the
selected strategy and in developing mechanisms to manage the related risks.
• Link growth, risk and return: Entities accept risk as part of value creation and
preservation, and they expect return commensurate with the risk. ERM provides
an enhanced ability to identify and assess risks, and establish acceptable levels
of risk relative to growth and return objectives.

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 • Enhance risk response decisions: ERM provides the rigor to identify and select
among alternative risk responses – risk avoidance, reduction, sharing and
acceptance. ERM provides methodologies and techniques for making these
decisions.
• Minimize operational surprises and losses: Entities have enhanced capability
to identify potential events, assess risk and establish responses, thereby reducing
the occurrence of surprises and related costs or losses.
• Identify and manage cross-enterprise risks: Every entity faces a myriad of
risks affecting different parts of the enterprise. Management needs to not only
manage individual risks, but also understand interrelated impacts.
• Provide integrated responses to multiple risks: Business processes carry
many inherent risks, and ERM enables integrated solutions for managing the
risks.
• Seize opportunities: Management considers potential events, rather than just
risks, and by considering a full range of events, management gains an
understanding of how certain events represent opportunities.
• Rationalize capital: More robust information on an entity’s total risk allows
management to more effectively assess overall capital needs and improve capital
allocation.

17) What are the components of ERM?

ERM framework consists of eight interrelated components that are derived from the way
management runs a business, and are integrated with the management process. These
components are as follows:
(I) Internal Environment: The internal environment encompasses the tone of
an organization, and sets the basis for how risk is viewed and addressed by an
entity’s people, including risk management philosophy and risk appetite, integrity
and ethical values, and the environment in which they operate. Management sets
a philosophy regarding risk and establishes a risk appetite. The core of any
business is its people – their individual attributes, including integrity, ethical
values and competence – and the environment in which they operate. They are
the engine that drives the entity and the foundation on which everything rests.
(II) Objective Setting: Objectives should be set before management can identify
events potentially affecting their achievement. ERM ensures that management
has a process in place to set objectives and that the chosen objectives support
and align with the entity’s mission/vision and are consistent with the entity’s risk
appetite.
(III) Event Identification: Potential events– internal and external – that might have
an impact on the entity should be identified. It includes distinguishing between
potential events that represent risks, those representing opportunities and those
that may be both. Opportunities are channeled back to management’s strategy
or objective-setting processes. Management identifies inter-relationships
between potential events and may categorize events to create and reinforce a
common risk language across the entity.
(IV) Risk Assessment: Identified risks are analyzed to form a basis for determining
how they should be managed. Risks are associated with related objectives that
may be affected. Risks are assessed on both an inherent and a residual basis,
and the assessment considers both risk likelihood and impact. A range of possible

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 results may be associated with a potential event, and management needs to
consider them together.
(V) Risk Response: Management selects an approach or set of actions to align
assessed risks with the entity’s risk tolerance and risk appetite, in the context of
the strategy and objectives. Personnel identify and evaluate possible responses
to risks, including avoiding, accepting, reducing and sharing risk.
(VI) Control Activities: Policies and procedures are established and executed to help
ensure that the risk responses that management selected, are effectively carried
out.

18) What are the various types of Risk Management Strategies that may be
adopted by an Entity?
When risks are identified and analyzed, it is not always appropriate to implement
controls to counter them. Some risks may be minor, and it may not be cost effective to
implement expensive control processes for them. Risk management strategy is
explained below:
• Tolerate/Accept the risk: One of the primary functions of management is
managing risk. Some risks may be considered minor because their impact
and probability of occurrence is low. In this case, consciously accepting the
risk as a cost of doing business is appropriate, as well as periodically reviewing
the risk to ensure its impact remains low.
• Terminate/Eliminate the risk: It is possible for a risk to be associated with
the use of a technology, supplier, or vendor. The risk can be eliminated by
replacing the technology with more robust products and by seeking more
capable suppliers and vendors.
• Transfer/Share the risk: Risk mitigation approaches can be shared with
trading partners and suppliers. A good example is outsourcing infrastructure
management. In such a case, the supplier mitigates the risks associated
with managing the IT infrastructure by being more capable and having access
to more highly skilled staff than the primary organization. Risk also may be
mitigated by transferring the cost of realized risk to an insurance provider.
• Treat/mitigate the risk: Where other options have been eliminated,
suitable controls must be devised and implemented to prevent the risk from
manifesting itself or to minimize its effects.
• Turn back: Where the probability or impact of the risk is very low, then
management may decide to ignore the risk.

19) What legal and regulatory compliances are called for in case of Business
Process Automation?
Legal, Regulatory and Compliance Requirements in relation to BPA and Risk Management
include the following –
• Directors’ Responsibility Statement in relation to Maintenance of Accounting
Records, Internal Financial Controls, [Sec.134 of Companies Act, 2013],
• Reporting Requirements of Auditors in relation to Maintenance of Accounting
Records, Internal Financial Controls, [Sec.143 of Companies Act, 2013],
• Corporate Governance Requirements under Companies Act, 2013, Compliance
with the requirements of the Information Technology Act, 2000.

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20) What are the various types of Business Risks?
Risk is any event that may result in a significant deviation from a planned objective
resulting in an unwanted negative consequence.
Business Risks: Businesses face all kinds of risks related from serious loss of profits to
even bankruptcy and are discussed below:
➢ Strategic Risk: These are the risks that would prevent an organization from
accomplishing its objectives (meeting its goals). Examples include risks
related to strategy, political, economic, regulatory, and global market
conditions; also, could include reputation risk, leadership risk, brand risk, and
changing customer needs
➢ Financial Risk: Risk that could result in a negative financial impact to the
organization (waste or loss of assets). Examples include risks from volatility
in foreign currencies, interest rates, and commodities; credit risk, liquidity risk,
and market risk.
➢ Regulatory (Compliance) Risk: Risk that could expose the organization to
fines and penalties from a regulatory agency due to non-compliance with laws
and regulations. Examples include Violation of laws or regulations governing
areas such as environmental, employee health & safety, local tax or statutory
laws etc.
➢ Operational Risk: Risk that could prevent the organization from operating in
the most effective and efficient manner or be disruptive to other operations.
Examples include risks related to the organization’s human resources,
business processes, technology, business continuity, channel effectiveness,
customer satisfaction, health and safety, environment, product/service failure,
efficiency, capacity, and change integration.
➢ Hazard Risk: Risks that are insurable, such as natural disasters; various
insurable liabilities; impairment of physical assets; terrorism etc.
➢ Residual Risk: Any risk remaining even after the counter measures are
analyzed and implemented is called Residual Risk. An organization’s
management of risk should consider these two areas: Acceptance of residual
risk and Selection of safeguards. Even when safeguards are applied, there is
probably going to be some residual risk. Residual risk must be kept at a
minimal, acceptable level.

21) What are the types of Risks in BPA?

Risk Types in BPA: BPA–related Risks include the following –
(a) Input: Risk that all input transaction data may not be accurate, complete and
authorized.

(b) Transmission: Risk that all the Files and Data transmitted may not be
processed accurately and completely, due to Network error or system failure.

(c) Processing: Risk that valid input data may not be processed properly due to
program errors or other reasons.

(d) Output: Risk that output is not complete and accurate, or risk that output is
distributed to Unauthorized Personnel.

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 (e) Access: Risk that the Entity’s Master Data and/or Transaction Data may be
changed by Unauthorized Personnel due to weak access controls.

(f) Backup: Risk that all data & programs may be lost if there is no proper backup
in the event of a disaster and the Entity’s Operations could come to a standstill, due
to lack of adequate infrastructure settings.

22) Controls in BPA may be manual, automated, or semi–automated. Explain

with example?
Types of Control: Based on the mode of implementation, Internal Controls may be –
(a) manual, (b) automated, or (c) semi–automated (partially manual and partially
automated).

Area Order to Cash (O2C) Purchase to Pay (P2P)

Verification of – Verification of whether –

(a) Credit Limits of Customers, (a) Supplier’s Invoice shows

Controls before Invoicing and Dispatch of Quantity and Price of Materials as
Goods, per the Entity’s Purchase Order,

(b) Availability of Warehouse (b) Ordered Quantity of Goods has

Stock, to meet the Customer’s been actually received by the Entity.
Order Quantity requirements.

Manual Both (a) and (b) are done by Both (a) and (b) are done by
manual processes. manual processes.

Automated Both (a) and (b) are done by Both (a) and (b) are done by
System Verification. System Verification.

(b) is done by System (b) is done by System Verification,

Semi– Verification, whereas (a) is done whereas (a) is done by Manual
Automated by Manual Processes, along with Process, along with reconciliation of
authorization of exceptions / deviations/ variations, if any.
deviations for special customers.

23) What are the purposes of Controls?

Control is defined as policies, procedures, practices and organization structure that are
designed to provide reasonable assurance that business objectives are achieved and
undesired events are prevented or detected and corrected.

Purposes of Controls: An Internal Control System –

(a) ensures the orderly and efficient conduct of an Entity’s business,

(b) promotes adherence to management policies,

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 (c) helps safeguarding the Entity’s Assets,

(d) aids in the prevention and detection of fraud and error,

(e) helps in ensuring the accuracy and completeness of the accounting records,

(f) facilitates the effectiveness and efficiency of operations,

(g) assists compliance with applicable laws and regulations,

(h) helps the reliability of internal and external Financial Reporting on timely basis.

24) Checking of Controls is required at three levels, viz. Configuration, Masters

and Transaction. Explain.

In computer systems, controls should be checked at three levels, namely Configuration,

Masters and Transaction level.
Configuration

➢ Configuration refers to the way a software system is set up.

➢ Configuration is the methodical process of defining options that are provided.
➢ When any software is installed, values for various parameters should be set up
(configured) as per policies and business process work flow and business process
rules of the enterprise.
➢ The various modules of the enterprise such as Purchase, Sales, Inventory,
Finance, User Access etc. must be configured.

➢ Configuration will define how software will function and what menu options are
displayed.
Masters

➢ Masters refer to the way various parameters are set up for all modules of software,
like Purchase, Sales, Inventory, and Finance etc.

➢ These drives how the software will process relevant transactions.

➢ The masters are set up first time during installation and these are changed
whenever the business process rules or parameters are changed. Examples are
Vendor Master, Customer Master, Material Master, Accounts Master, Employee
Master etc.

➢ Any changes to these data have to be authorized by appropriate personnel and

these are logged and captured in exception reports.

example: The Customer Master will have the credit limit of the customer. When
an invoice is raised, the system will check against the approved credit limit and if
the amount invoiced is within the credit limit, the invoice will be created if not the
invoice will be put on “credit hold” till proper approvals are obtained.
Transactions
➢ Transactions refer to the actual transactions entered through menus and functions
in the application software, through which all transactions for specific modules are

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 initiated, authorized or approved.
example: Sales transactions, Purchase transactions, Stock transfer transactions,
Journal entries and Payment transactions.

25) Write short notes on review of BPA from Risk and Control Perspectives?
Implementation or review of specific business process can be done from risk or control
perspective
(a) Risk Perspective
1. Each key sub–process or activity performed in a Business Process should be examined,
to look at existing and related control objectives and existing controls and the
residual risks after application of controls.
2. The Residual Risk should be knowingly accepted by the Management

(b) Control Perspective

For each key sub–process or activity, the Entity should consider the following –
1. What is sought to be achieved by implementing controls,
2. Whether risks are mitigated by controls which are implemented at
present,
3. What are the residual risks, and
4. Whether there is need to complement / add more controls.

26) Explain a few Risks and Control Objectives in O2C Process at Masters
Level?

Risks and Controls related to the Order to Cash (O2C) business process are as
follows:
Master Level

Risks Controls
The customer master file is not maintained The customer master file is maintained
properly and the information is not properly and the information is accurate.
accurate.

Invalid changes are made to the customer Only valid changes are made to the
master file. customer master file.

All valid changes to the customer master All valid changes to the customer master
file are not input and processed. file are input and processed.

Changes to the customer master file are Changes to the customer master file are
not accurate. accurate.

Changes to the customer master file are Changes to the customer master file are
not processed in a timely manner. processed in a timely manner.

Customer master file data is not up-to- Customer master file data is up to date
date and relevant. and relevant.

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27) Explain a few Risks and Control Objectives in O2C Process at Transactions
Level.
Risks and Controls related to the Order to Cash (O2C) business process are as
follows:
Transaction Level

Risk Control
Orders are processed exceeding Orders are processed only within
customer credit limits without approvals. approved customer credit limits.

Orders are not approved by Orders are approved by management as

management as to prices and terms of to prices and terms of sale.

Orders and cancellations of orders are Orders and cancellations of orders are
not input accurately. input accurately.

Order entry data are not transferred Order entry data are transferred
completely and accurately to the completely and accurately to the
shipping and invoicing activities. shipping and invoicing activities.
All orders received from customers are All orders received from customers are
not input and processed. input and processed.

Invalid and unauthorized orders are Only valid and authorized orders are
input and processed. input and processed.

28) Explain a few Risks and Control Objectives in P2P Process at Masters Level?
Risks and Controls related to the Order to Cash (P2P) business process are as follows:
Master Level

Risk Control
Unauthorized changes to supplier master Only valid changes are made to the
file. supplier master file.
All valid changes to the supplier master All valid changes to the supplier master
file are not input and processed. file are input and processed.
Changes to the supplier master file are not Changes to the supplier master file are
correct. accurate.
Changes to the supplier master file are Changes to the supplier master file are
delayed and not processed in a timely processed in a timely manner.
manner.
Supplier master file data is not up to date. Supplier master file data remain up to
date.
System access to maintain vendor System access to maintain vendor
masters has not been restricted to the masters has been restricted to the
authorized users. authorized users.

29) Explain a few Risks and Control Objectives in P2P Process at Transactions
Level?

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 Risks and Controls related to the Order to Cash (P2P) business process are as follows:
Transaction Level

Risk Control
Unauthorized purchase requisitions are Purchase orders are placed only for
ordered. approved requisitions.

Purchase orders are not entered Purchase orders are accurately entered.
correctly in the system.

Purchase orders issued are not input and All purchase orders issued are input and
processed. processed.

Amounts are posted in accounts payable Amounts posted to accounts payable

for goods or services not received. represent goods or services received.

Amounts posted to accounts payable are Accounts payable amounts are

not properly calculated and recorded. accurately calculated and recorded.

Amounts for goods or services received All amounts for goods or services
are not input and processed in accounts received are input and processed to
payable. accounts payable.

30) Explain a few Risks and Control Objectives in Inventory Process at Masters
Level?
Risks and Controls related to the Inventory process are as follows:
Master Level

Risk Control
Invalid changes are made to the Only valid changes are made to the
inventory management master file. inventory management master file.

Invalid changes to the inventory All valid changes to the inventory

management master file are input and management master file are input and
processed. processed.

Changes to the inventory management Changes to the inventory management

master file are not accurate. master file are accurate.

Changes to the inventory management Changes to the inventory management

master file are not promptly processed. master file are promptly processed.

Inventory management master file data Inventory management master file data
is not up to date. remain up to date.

System access to maintain inventory System access to maintain inventory

masters has not been restricted to the masters has been restricted to the
authorized users. authorized users.

31) Explain a few Risks and Control Objectives in Inventory Process at

Transactions Level?

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 Risks and Controls related to the Inventory process are as follows:
Transaction Level

Risk Control
Adjustments to inventory prices or Adjustments to inventory prices or
quantities are not recorded accurately. quantities are recorded accurately.

Raw materials are received and accepted Raw materials are received and accepted
without valid purchase orders. only if they have valid purchase orders.

Raw materials received are not recorded Raw materials received are recorded
accurately. accurately.

Raw materials received are not recorded All raw materials received are recorded.
in system.

Receipts of raw materials are not recorded Receipts of raw materials are recorded
promptly and not in the appropriate promptly and in the appropriate period.
period.
Defective raw materials are not returned Defective raw materials are returned
promptly to suppliers. promptly to suppliers.

32) What are the components of Human Resources Management Cycle?

The Human Resources (HR) Life Cycle refers to human resources management and

covers all the stages of an employee’s time within a specific enterprise and the
role the human resources department plays at each stage. Typical stage of HR
cycle includes the following:
(b) Recruiting and On-boarding: Recruiting is the process of hiring a new
employee. The role of the human resources department in this stage is to
assist in hiring. This might include placing the job ads, selecting candidates
whose resumes look promising, conducting employment interviews and
administering assessments such as personality profiles to choose the best
applicant for the position. On boarding is the process of getting the
successful applicant set up in the system as a new employee.
(c) Orientation and Career Planning: Orientation is the process by which
the employee becomes a member of the company’s work force through
learning her new job duties, establishing relationships with co-workers and
supervisors and developing a niche. Career planning is the stage at which
the employee and her supervisors work out her long-term career goals with
the company. The human resources department may make additional use of
personality profile testing at this stage to help the employee determine her
best career options with the company.
(d) Career Development: Career development opportunities are essential to
keep an employee engaged with the company over time. After an employee,
has established himself at the company and determined his long-term career
objectives, the human resources department should try to help him meet his
goals, if they’re realistic. This can include professional growth and training to
prepare the employee for more responsible positions with the company. The
company also assesses the employee’s work history and performance at this

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 stage to determine whether he has been a successful hire.
(e) Termination or Transition: Some employees will leave a company through
retirement after a long and successful career. Others will choose to move on
to other opportunities or be laid off. Whatever the reason, all employees will
eventually leave the company. The role of HR in this process is to manage the
transition by ensuring that all policies and procedures are followed, carrying
out an exit interview.

33) Explain a few Risks and Control Objectives in HR Process at Configurations

Level?
Risks and Control Objectives for Human Resource Process at Configuration Levels are as
follows:

Risk Control Objective

Employees who have left the company System access to be immediately
continue to have system access. removed when employees leave the
company.
Employees have system access in excess of Employees should be given system
their job requirements. access based on a “need to know”
basis and to perform their job function.

34) Explain a few Risks and Control Objectives in HR Process at Masters Level?
Risks and Control Objectives for Human Resource Process at Master Levels are as
follows:
Risk Control Objective
Additions to the payroll master files do not Additions to the payroll master files
represent valid employees. represent valid employees.

New employees are not added to the All new employees are added to the
payroll master files. payroll master files.

Terminated employees are not removed Terminated employees are removed

from the payroll master files. from the payroll master files.

Employees are terminated without Employees are terminated only within

following statutory requirements. statutory requirements.

Deletions from the payroll master files do Deletions from the payroll master files
not represent valid terminations. represent valid terminations.

Invalid changes are made to the payroll Only valid changes are made to the
master files. payroll master files.

35) What are the components of Fixed Assets Management Cycle?

Fixed Assets process ensures that all the fixed assets of the enterprise are tracked for
the purposes of financial accounting, preventive maintenance, and theft deterrence. Fixed
assets process ensures that all fixed assets are tracked and fixed asset record maintains
details of location, quantity, condition, and maintenance and depreciation status.
Components of Fixed asset Management Cycle:

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 ➢ Procuring an asset: An asset is most often entered into the accounting system;
when the invoice for the asset is entered; into the accounts payable; or purchasing
module of the system.
➢ Registering or Adding an asset: Most of the information needed to set up the
asset for depreciation is available at the time the invoice is entered. Information
entered at this stage could include; acquisition date, placed-in-service date,
description, asset type, cost basis, depreciable basis etc.
➢ Adjusting the Assets: Adjustments to existing asset information is often needed
to be made. Events may occur that can change the depreciable basis of an asset.
Further, there may be improvements or repairs made to asset that either adds
value to the asset or extend its economic life.
➢ Transferring the Assets: A fixed asset maybe sold or transferred to another
subsidiary, reporting entity, or department within the company. These inter-
company and intra-company transfers may result in changes that impact the
asset’s depreciable basis, depreciation, or other asset data. This needs to be
reflected accurately in the fixed assets management system..
➢ Depreciating the Assets: The decline in an asset’s economic and physical value
is called depreciation. Depreciation is an expense which should be periodically
accounted on a company’s books, and allocated to the accounting periods, to
match income and expenses. Sometimes, the revaluation of an asset, may also
result in appreciation of its value
➢ Disposing the Assets: When a fixed asset is no longer in use, becomes obsolete,
is beyond repair; the asset is typically disposed. When an asset is taken out of
service, depreciation cannot be charged on it. There are multiple types of
disposals, such as abandonments, sales, and trade-ins. Any difference between
the book value, and realized value, is reported as a gain or loss

36) Explain a few Risks and Control Objectives in Fixed Assets Process at Masters
Level?
Risks and Control Objectives for Fixed Asset Management Process at Master Levels are
as follows:
Risk Control Objective
Invalid changes are made to the fixed Only valid changes are made to the
asset register and/or master file. fixed asset register and/or master
file.
Valid changes to the fixed asset register All valid changes to the fixed asset
and/or master file are not input and register and/or master file are input
processed. and processed.

Changes to the fixed asset register Changes to the fixed asset register
and/or master file are not accurate. and/or master file are accurate.

Fixed asset register and/or master file Fixed asset register and/or master
data are not kept up to date. file data remain up to date.

System access to fixed asset master file System access to fixed asset master
/ system configuration is not restricted to file / system configuration is
the authorized users. restricted to the authorized users.

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 System configuration pertaining to System configuration pertaining to
definition of the depreciation base, definition of the depreciation base,
depreciation rate, life of asset and depreciation rate, life of asset and
accounting of transactions has not been accounting of transactions has been
correctly defined. correctly defined.

37) Explain a few Risks and Control Objectives in Fixed Assets Process at
Transactions Level?
Risks and Control Objectives for Fixed Asset Management Process at Transaction Levels
are as follows:
Risk Control Objective
Fixed asset acquisitions are not Fixed asset acquisitions are
accurately recorded. accurately recorded.

Fixed asset acquisitions are not recorded Fixed asset acquisitions are recorded
in the appropriate period. in the appropriate period.

Fixed asset acquisitions are not All fixed asset acquisitions are
recorded. recorded.

Depreciation charges are not accurately Depreciation charges are

calculated and recorded. accurately calculated and recorded.

Depreciation charges are not recorded in All depreciation charges are recorded
the appropriate period. in the appropriate period.

Fixed asset disposals/transfers are not All fixed asset disposals/transfers are
recorded. recorded.

38) What are the components of the General Ledger Cycle?

Components of General Ledger Cycle:
(a) General Ledger (GL) Process is the process of recording the transactions in the
system to finally generating the reports from financial transactions entered in the
System.
(b) Inputs to GL Process are the financial transactions. Outputs include various
types of Financial Reports to Internal and External Users, viz. Financial Statements,
Ratios, Funds Flow Statement, Common Size Statements, etc.
(c) GL Process Flow includes – (i) Data Input, (ii) Transaction Review, (iii)
Transaction Approval, (iv) Transaction Posting, and (v) Report Generation.

39) Explain a few Risks and Control Objectives in General Ledger Process
at Configuration Level?

Risks and Control Objectives for General Ledger at Configuration Levels are as follows:

Risk Control Objective

Unauthorized general ledger entries Access to general ledger entries
could be passed. is appropriate and authorized.

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 System functionality does not exist to System functionality exists to
segregate the posting and approval segregate the posting and approval
functions. functions.

Interrelated balance sheets and income Interrelated balance sheets and

statement accounts do not undergo income statement accounts undergo
automated reconciliations to confirm automated reconciliations to confirm
accuracy of such accounts. accuracy of such accounts.

Systems do not generate reports of all Systems generate reports of all

recurring
recurring and non-recurring journal and nonrecurring journal entries for
entries for review by management for review by management for accuracy.
accuracy.
Non-standard journal entries are not All non-standard journal entries
tracked and are inappropriate. are tracked and are appropriate.

40) Explain a few Risks and Control Objectives in General Ledger Process at
Masters Level?
Risks and Control Objectives for General Ledger at Master Levels are as follows:

Risk Control Objective

General ledger master file change reports General ledger master file change
are not generated by the system and are reports are generated by the system
not reviewed as necessary by an and reviewed as necessary by an
individual who does not input the individual who does not input the
changes. changes.

A standard chart of accounts has not A standard chart of accounts has

been approved by management and is been approved by management and
not utilized within all entities of the is not utilized within all entities of the
corporation. corporation.

41) Explain a few Risks and Control Objectives in General Ledger Process at
transactions Level?
Risks and Control Objectives for General Ledger at Transaction Levels are as follows:

Risk Control Objective

General ledger balances are not General ledger balances reconcile to
reconciled to sub ledger balances and sub ledger balances and such
such reconciliation are not reviewed for reconciliation are reviewed for
accuracy and not approved by accuracy and approved by
supervisory personnel. supervisory personnel.

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 Interrelated balance sheets and income Interrelated balance sheets and
statement accounts do not undergo income statement accounts undergo
automated reconciliation to confirm automated reconciliation to confirm
accuracy of such accounts. accuracy of such accounts.

Account codes and transaction amounts Account codes and transaction

are not accurate and not complete, and amounts are accurate and complete,
exceptions are not reported. with exceptions reported.

A report of all journal entries completed A report of all journal entries

as part of the closing process is not completed as part of the closing
reviewed by management to confirm the process is reviewed by management
completeness and appropriateness of all to confirm the completeness and
recorded entries. appropriateness of all recorded
entries.
Entries booked in the close process are Entries booked in the close process
not complete and accurate. are complete and accurate.

42) What are the advantages of Cyber Laws?

Following are the few advantages of Cyber Laws:
1) The implications for the e-businesses would be that email would now be a valid
and legal form of communication in India that can be duly produced and approved
in a court of law.
2) Companies shall now be able to carry out electronic commerce using the legal
infrastructure provided by the Act.
3) Digital signatures have been given legal validity and sanction in the Act.
4) The Act throws open the doors for the entry of corporate companies in the
business of being Certifying Authorities for issuing Digital Signatures Certificates.
5) The Act now allows Government to issue notification on the web thus heralding
e-governance.
6) The Act enables the companies to file any form, application or any other
document with any office, authority, body or agency owned or controlled by the
appropriate Government in electronic form by means of such electronic form as
may be prescribed by the appropriate Government.
7) The IT Act also addresses the important issues of security, which are so critical
to the success of electronic transactions.
8) The Act has given a legal definition to the concept of secure digital signatures
that would be required to have been passed through a system of a security
procedure, as stipulated by the Government at a later date.

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Ch:2 Finance and Accounting Systems
(1) Write short notes on “Finance and Accounting System”?
An Accounting Information System is a system of collecting, storing and processing
financial and accounting data that are used by decision makers. An Accounting
Information System is generally a computer–based method for tracking accounting
activity in conjunction with information technology resources. Basic Objective& Process
of an Accounting System is – (a) Record Inputs / Transactions, (b) Process Data, (c)
Produce Outputs / Reports for Internal and External Users.

(2) How can Business Entities be classified for application of a Financial

and Accounting System?
There are three different nature and types of businesses that are operated with the
purpose of earning profit. Each type of business has distinctive features.

• Trading Business – Trading simply means buying and selling goods without
any modifications, as it is. Hence inventory accounting is a major aspect in this
case. Purchase and sales transactions cover major portion of accounting. This
industry requires accounting as well as inventory modules.

• Manufacturing Business – This type of business includes all aspects of

trading business plus additional aspect of manufacturing. Manufacturing is
simply buying raw material, changing its form and selling it as a part of trading.
Here also, inventory accounting plays a major role. This type of industry
requires accounting and complete inventory along with manufacturing module.

• Service Business – This type of business does not have any inventory. It is
selling of skills/knowledge/Efforts/time. Eg: Doctors, Architects, Chartered
Accountants, are the professionals into service business. There may be other
type of business into service, i.e. courier business, security service, etc. This
industry does not require inventory module.

(3) What are the types of Accounting Vouchers? Explain from a Software
Perspective?
A Voucher Number or a Document Number is a unique identity of any
voucher/document. A voucher may be identified or searched using its unique voucher
number. Let us understand some peculiarities about voucher numbering.
• Voucher number must be unique.
• Every voucher type shall have a separate numbering series
• A voucher number may have prefix or suffix or both, e.g.
ICPL/2034/17-18. In this case “ICPL” is the prefix, “17-18” is the suffix
and “2034” is the actual number of the voucher.
• All vouchers must be numbered serially, i.e. 1,2,3,4,5,6 and so on.
• All vouchers are recorded in chronological order and hence voucher
recorded earlier must have an earlier number, i.e. if voucher number
for a payment voucher having date as 15thApril 2017 is 112, voucher
number for all the vouchers recorded after this date shall be more than

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 112 only.

(4) Explain the “Accounting Process” Cycle from a Software

Perspective?
Accounting or Book Keeping Cycle covers the business processes involved in
recording and processing accounting events of an Entity. It begins when a
Transaction or Financial Event occurs and ends with its inclusion in the Financial
Statements. The flow of accounting from the angle of software, involves the following
stages –

Transaction Voucher Recording Balancing

Posting
Input/Source into journals
Document

Financial Trial
Statement Balance

Human Intervention Generally, these activities are handled by the

Involvement system

Note: Sometimes, certain transactions may be generated by the System itself, e.g.
Depreciation, Interest, etc. In certain situations, there may be additional processes
from Trial Balance to Financial Statements, viz.
• Trial Balance is first prepared without adjustments,
• Adjustments are made after due approval,
• Adjusted Trial Balance is prepared,
• Closing Entries are passed after finalization of Trial Balance. This is used for
Financial Statements

(5) How are Accounting Ledgers from a Software Perspective?

In accounting, there are three types of ledger accounts, i.e. Personal, Real and
Nominal. But as far as Financial and Accounting Systems are concerned, ledgers may
be classified in two types only. Ledger having Debit Balance and ledger having Credit
Balance.

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 Ledgers

Debit Balance Credit Balance

Asset Expense Income Liability

Profit & Loss Account

Balance Sheet

(6) What are the types of Accounting Vouchers? Explain from a Software
Perspective?
Voucher is a place where transactions are recorded. It is a data input form for
inputting transaction data. In accounting, there may be different types of
transactions; hence we use different voucher types for recording of different
transactions. Generally following types of Accounting vouchers are used in accounting
systems as shown
Module - Accounting

Sl. Voucher Use

No. Type
1 Contra For recording of four types of transactions as under.

a. Cash deposit in bank

b. Cash withdrawal from bank
c. Cash transfer from one location to another.
d. Fund transfer from our one bank account to our own
another bank account.
2 Payment For recording of all types of payments. Whenever the money is
going out of business by any mode (cash/bank).

3 Receipt For recording of all types of receipts. Whenever money is being

received into business from outside by any mode (cash/bank).

4 Journal For recording of all non-cash/bank transactions. E.g.

Depreciation, Provision, Write-off, Write-back, discount
given/received, Purchase/Sale of fixed assets on credit, etc.

5 Sales For recording all types of trading sales by any mode

(cash/bank/credit).

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 6 Purchase For recording all types of trading purchase by any mode
(cash/bank/credit).

7 Credit Note For making changes/corrections in already recorded

sales/purchase transactions.

8 Debit Note For making changes/corrections in already recorded

sales/purchase transactions.

9 Memorandum For recording of transaction which will be in the system but will
not affect the trial balance.

(7) Differentiate between Master Data and Non–Master Data, in the

context of Accounting System?

Point Master Data Non–Master Data

It is non–permanent
Meaning It is relatively perman ent
data, which is expected
d a t a , which, once created,
to change frequently.
is not expected to change
(also known as
frequently.
Transaction Data)
Master Data may comprise –
Details in each
Types (a) Accounting Master, (b)
transaction, which differ
Inventory Master, (c) Payroll
from one another is
Master, (d) Statutory Master,
called Transaction Data.
etc.
Significance Transaction Data, by its
All Business Process
very nature, is not
Modules must use common
common, and is different
Master Data.
for each transaction.
Transaction Data is
Data specifically keyed–in by
Input Master Data is generally not the User in each
typed by the User, it is transaction data entry.
selected from the available Sometimes, to permit
list of Masters (to ensure standardization or to
proper recording, and avoid wrong item
standardization). selection, Transaction
Data can also be selected
from a list.
Master Data Entry is done Transaction Data is
Changes to Data less frequently (e.g. entered by User. It is
annually, or when there is a authorised/ approved by
need to update). Changes to higher level Manager.
Master Data should be Changes to data may be
properly authorised and made by higher level

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 checked by higher level Manager, or by passing
Manager. another rectification
entry.

(8) What are the types of Master Data in the context of Accounting System?
Types of Master Data in the context of Accounting System
a. Accounting Master Data – This includes names of ledgers, groups, cost
centers, accounting voucher types, etc.
E.g. Capital Ledger is created once and not expected to change frequently.
Similarly, all other ledgers like, sales, purchase, expenses and income
ledgers are created once and not expected to change again and again.
Opening balance carried forward from previous year to next year is also a
part of master data and not expected to change.

b. Inventory Master Data – This includes stock items, stock groups,

godowns, inventory voucher types, etc. Stock item is something which
bought and sold for business purpose, trading goods.

E.g. If a person is into the business of dealing in white goods, stock items
shall be Television, Fridge, Air Conditioner, etc. For a person running a
medicine shop, all types of medicines shall be stock items for him/her.
c. Payroll Master Data – Payroll is another area connecting with Accounting
Systems. Payroll is a system for calculation of salary and recoding of
transactions relating to employees. Master data in case of payroll can be
names of employees, group of employees, salary structure, pay heads, etc.
These data are not expected to change frequently.

E.g. Employee created in the system will remain as it is for a longer period
of time, his/her salary structure may change but not frequently, pay heads
associated with his/her salary structure will be relatively permanent.

d. Statutory Master Data – This is a master data relating to statute/law. It

may be different for different type of taxes. We don’t have any control on
this data as statutory changes are made by Government and not by us. In
case of change in tax rates, forms, categories, we need to update/change
our master data.

E.g. Goods and Service Tax (GST), Nature of Payments for Tax Deducted at
Source (TDS), etc. This data also shall be relatively permanent.

(9) Differentiate between Front–End and Back–End, in the context of

Accounting System?
Differences between front and back end is as follows:
Point Front End Back End

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 It is part of the overall Software It is a part of the overall Software
Meaning which actually interacts with which does not directly interact with
the User who is using the the User, but interacts with Front
Software. End only.

Purpose It is meant for handling requests It is meant for storing and handling
from Users. the data.

Data It handles processed data. It handles Raw Data and processes

it.
Front–End speaks in the language Back–End speaks in technical
Language understood by the User and also language not directly understood by
understands technical language the User. Thus, it interacts only with
It is meant for Back–End.
presenting It is meant for handling data, and
spoken by the the Front–End which translates for
Presentation information in proper format and not “presentation” of data to the
the User.
structure, use of different colors, User.
bold, italic letters, Tables, Charts
etc.

Front–End Software guides a User Back–End Software is not intended

User Interface to the desired report or feature. to improve “User Experience”. It is
The User Interface of the Front– intended to handle the data
End is intuitive, i.e. minimum use processing requests effectively and
of help should be sought by User. communicate the same to the Front–
End.

(10) Differentiate between Installed Applications and Web Applications, in

the context of Accounting System?
Differences between Installed and web application is as follows
Particulars Installed Applications Web Applications
These are Software Programs These are installed on a Web Server
Meaning installed on the Hard Disc of the and accessed using a Browser and
User’s Computer. Internet Connection.

This has to be installed on every Software is not installed on every

Installation Computer in an Entity. This may Computer, but in only one Computer,
be a time–consuming exercise. i.e. a Web Server. Installation on
each User Computer is not required.

Maintenance and Updating of Maintenance and Updating of

Maintenance Software is required on each Software is only on the Web
Computer, and takes time and Browser, and is less time consuming.
efforts.

Software User can access the Software only User can access the Software 24 x 7
Access from the Computer where it is without Hardware Restrictions, i.e.

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 installed. It cannot be used from anywhere, anytime, using a Browser
any Computer. and Internet.
Data is physically stored in the Data is stored on a Web Server, and
Data Storage Hard Disc of the User’s Server not in the User’s Server Computer.
Computer. So, User has full So, User will not have any control
control over the data. over the data.
User can establish proper Physical Since Software and Data is
Data Access Controls also, and ensure maintained on a Web Server, there is
Security that only Authorised Users have a need for more Logical Access
access to the system and data. Controls to prevent unauthorized
access.

Installed Applications have more Web Applications are generally

flexibility and controls than Web applicable to all Users, and cannot
Flexibility
Applications, as it is very easy to have the flexibility of Desktop
write Desktop Applications that Applications.
take advantage of the User’s
Hardware.

(11) Write short notes on ERP. Explain?

An Enterprise Resource Planning (ERP) System is a fully integrated business
management system covering functional areas of an Enterprise like Logistics,
Production, Finance, Accounting and Human Resources. ERP organizes and
integrates operation processes and information flows to make optimum use
of resources such as men, material, money and machinery. ERP aims at one
database, one application and one user interface for the entire Enterprise.
It takes information from every function and that assists employees and Managers
to plan, monitor and control the entire business. For a software system to be
considered ERP, it must provide an organization with functionality for two or more
systems. Some well–known ERPs today include SAP, Oracle, MFG Pro, MS Axapta,
Baan, E–Applications, System 21, Prism, etc.

(12) Differentiate between Non–Integrated and Integrated System, in the

context of Accounting System?

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 Point Non–Integrated System Integrated System (ERP System)
Meaning A Non–Integrated System is An Integrated System is a system
a system of maintaining data of maintaining data in a Entity–wide
in a decentralized way. centralized manner.
Database Each Department shall There is a Central Database, to
maintain its own data which access is permitted
separately, and have a separate appropriately to different
Database. departments.
Communi- Each Department communicates Each Department / User is allowed
cation relevant data generated by it to access to the Central Database,
the other Departments, which based on pre–defined rights and
have to process that data privileges.
separately.
Tracking There are multiple modes of Every communication (any mode)
communication like phone call, between Departments is tracked and
SMS, Email, WhatsApp or documented, leading to better
personal meeting, etc. There is no control.
documentation.
Advantages • Reduced Risk of Data Loss, • Single Point Data Entry &
• Higher data security (on need Capture,
to know basis) • Better Data Communication
between Users.
Disadvan- • Communication Gaps,
tages • Mismatch of Data across • Risk of Data Loss (being
Departments, centralized),
• Duplication of Processes on • Risk of Unauthorised Access to
same data. Data.

(13) List the features of ERP

An ERP System is an integration of various organization processes. Its features include
–
➢ Manufacturing: Some of the functions include engineering, capacity, workflow
management, quality control, bills of material, manufacturing process, etc.
➢ Financials: Accounts payable, accounts receivable, fixed assets, general
ledger and cash management, etc.
➢ Human Resources: Benefits, training, payroll, time and attendance, etc.
➢ Supply Chain Management: Inventory, supply chain planning, supplier

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 scheduling, claim processing, order entry, purchasing, etc.
➢ Projects: Costing, billing, activity management, time and expense, etc.
➢ Customer Relationship Management (CRM): CRM is a term applied to
processes implemented by a company to handle its contact with its customers.
CRM software is used to support these processes, storing information on current
and prospective customers. Information in the system can be accessed and
entered by employees in different departments, such as sales, marketing,
customer service, training, professional development, performance
management, human resource development, and compensation.
➢ Data Warehouse: Usually this is a module that can be accessed by an
organization’s customers, suppliers and employees. Data warehouse is a
repository of an organization’s electronically stored data. Data warehouses are
designed to facilitate reporting and analysis. An expanded definition for data
warehousing includes business intelligence tools, tools to extract, transform,
and load data into the repository, and tools to manage and retrieve metadata

(14) What are the advantages of ERP?

Benefits of an ERP System
 Information integration: The reason ERP systems are called integrated is
because they possess the ability to automatically update data between
related business functions and components.
For example - one needs to only update the status of an order at one place
in the order-processing system; and all the other components will
automatically get updated.
 Reduction of lead-time: The elapsed time between placing an order and
receiving it is known as the Lead-time. The ERP Systems by virtue of their
integrated nature with many modules like Finance, Manufacturing, Material
Management Module etc.; the use of the latest technologies like EFT
(Electronic Fund Transfer), EDI (Electronic Data Interchange) reduce the lead
times.
 On-time Shipment: Since the different functions involved in the timely
delivery of the finished goods to the customers- purchasing, material
management production, production planning, plant maintenance, sales and
distribution – are integrated and the procedures automated; the chances of
errors are minimal and the production efficiency is high. Thus, the ERP
system ensures on-time delivery of goods to the customers.
 Reduction in Cycle Time: Cycle time is the time between placement of the
order and delivery of the product. In an ERP System; all the data, updated
to the minute, is available in the centralized database and all the procedures
are automated, almost all these activities are done without human
intervention. This efficiency of the ERP systems helps in reducing the cycle
time
 Increased Flexibility: ERP Systems help the companies to remain flexible
by making the company information available across the departmental
barriers and automating most of the processes and procedures, thus enabling
the company to react quickly to the changing market conditions.
 Better Customer Satisfaction: Customer satisfaction means meeting or

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 exceeding customers ‘requirements for a product or service. With the help of
web-enabled ERP systems, customers can place the order, track the status of
the order and make the payment sitting at home. Since all the details of the
product and the customer are available to the person at the technical support
department also, the company will be able to better support the customer.

(15) ERP is not free from limitations?

Limitations of ERP
 An ERP System may provide current status only, and may not provide past
data / trends, etc. Managers also require past data for effective decision–
making.
 Methods used in ERP applications are not integrated with other organizational
or divisional systems.
 ERP Systems may not include external intelligence, and may provide only
internal operational data.
 ERP Systems may be too time–consuming and costly for certain organizations.

(16) What are the major Modules that are integrated in an ERP System?
Modules in an ERP
An ERP System maintains in a Single Database, the data needed for a variety of
business functions (or Software Modules) such as Manufacturing, Supply Chain
Management, Financials, Projects, Human Resources and Customer Relationship
Management. So, the Software Modules in an ERP can include –
 Supply Chain Management (SCM) – Inventory, Supply Chain Planning, Supplier
Scheduling, Claim Processing, Order
 Entry, Purchasing, etc.
 Manufacturing– Production Planning, Engineering, Capacity, Workflow
Management, Quality Control, Bills of Material, Manufacturing Process, etc.
 Customer Relationship Management (CRM) – Enquiry Handling, Targeted
Marketing, Quotation, Order
 Management, Delivery Management, Customer Service, Receivables Follow up,
etc.
 Projects – Costing, Billing, Activity Management, Time and Expense, etc.
 Human Resources – Employee Benefits, Training, Payroll, Time and
Attendance, etc.
 Financials – Accounts Payable, Accounts Receivable, Fixed Assets, General
Ledger, Cash Management, etc.

(17) Write short notes on Risks and Controls in an ERP System?

Aspect Risk Control Required
Data is stored centrally and all Access Rights should be
Data Access Departments access that Central defined very carefully.
Data. This creates a possibility of Access should be given on
access to non–relevant data. “Need to know” and
“Need to do” basis only.

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 There is only one set of data. If There should be strong
Data Safety
this data is lost, the entire physical control, along with
business may come to a effective Data Backup
standstill. Arrangements.
As the size of the Central Hardware should be
Operation Databases increases, it reduces upgraded regularly to
Speed the speed of operation. increase speed. Redundant
Data should be removed
using techniques like Data
Warehousing.
Since the overall system is All processes must be
Change in integrated, a small change in documented properly while
Process process for one Department designing the ERP, so as to
may require lot of time, efforts avoid any changes that are
and cost. costly to implement later.
In case of Staff Turnover, it is There should be proper Staff
increasingly difficult to maintain Training System, Helpdesk /
Staff Turnover the system, due to its Operation Manuals, Backup
complexity and integration. Plans for Staff Turnover, etc.

Due to Single Server and Central There should be proper DRP

Database, in case of failure of and BCP Plans, including
system, the whole business may Secondary Server, Offsite
System Failure
get affected badly. Backup, alternate Hardware
/ Internet arrangements,
etc.

(18) Write a short note on risk and corresponding control related to People
issues.
Aspect Risk associated Control required
Change Change will occur in the Proper training of the users
management employee’s job profile in terms of with well documented
some jobs becoming irrelevant manuals. Practical hands on
and some new jobs created. training of the ERP System
should be provided so that
the transition from old system
to ERP system is smooth and
hassle free.
Training Since the greater part of the Training is a project-
raining takes place towards the managed activity and shall be
end of the ERP implementation imparted to the users in an
cycle, management may curtail organization by the skilled
the training due to increase in the consultants and
overall cost budget. representatives of the

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 hardware and package
vendors
Staff As the overall system is This can be controlled and
turnover integrated and connected with minimized by allocation of
each other department, it employees to tasks matching
becomes complicated and difficult their skill-set; fixing of
to understand. Employee turnover compensation package and
– qualified and skilled personnel other benefits accordingly-
leaving the company - during the thus keeping the employees
implementation and transition happy and content and
phases can affect the schedules minimizing the staff turnover
and result in delayed
implementation and cost overrun.
Top ERP implementation will fail if the The ERP implementation shall
management top management does not be started only after the top
support provide the support and grant management is fully
permission for the availability of convinced and assure of
the huge resources that are providing the full support.
required during the transition
Consultants These are experts in the The consultants should be
implementation of the ERP assigned a liaison officer - a
package and might not be familiar senior manager – who can
with the internal workings and familiarize them with the
organizational culture. company and its working.

(19) Write a short note on risk and corresponding control related to Process risk.
Aspect Risk associated Control required
Program There could be a possibility of an This requires bridging the
Management information gap between day-to- information gap between
day program management traditional ERP-based
activities and ERP-enabled functions and high value
functions like materials and operational management
procurement planning, logistics functions, such applications
and manufacturing. can provide reliable real-
time information linkages to
enable high-quality decision
making.
Business BPR means not just change – This requires overhauling of
Process but dramatic change and organizational structures,
Reengineering dramatic improvements. management systems, job
(BPR) descriptions, performance
measurements, skill
development., training and
use of IT.

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 (20) Write a short note on risk and corresponding control related to Technology
risk.
Aspect Risk associated Control required
Software ERP systems offer a myriad of Care should be taken to
Functionality features and functions, however, incorporate the features that
not all organizations require are required by the
those many features. organization and supporting
Implementing all the additional features and
functionality and features just for functionality that might be
the sake of it can be disastrous required at a future date.
for an
organization.
Technological With the advent of more efficient This requires critical choice
Obsolescence technologies every day, the ERP of technology, architecture
system also becomes obsolete as of the product, ease of
time goes on. enhancements, ease of
upgrading, quality of
vendor support.
Enhancement ERP Systems are not upgraded Care must be taken while
and Upgrades and kept up-to- date. Patches selecting the vendor and
and upgrades are not installed upgrade/support contracts
and the tools are underutilized. should be signed to minimize
the risks.
Application These processes focus on the By bringing to the light the
Portfolio selection of new business sheer number of applications
Management applications and the projects in the current portfolio, IT
required delivering them. organizations can begin to
reduce duplication and
complexity.

(21) Write a short note on risk and corresponding control related to Technology
risk.
Aspect Risk associated Control required
Lengthy ERP projects are lengthy that Care must be taken to keep
implementation takes anywhere between 1 to 4 the momentum high and
time years depending upon the size enthusiasm live amongst
of the organization. Due to the employees, so as to
technological developments minimize the risk.
happening every day, the
business and technological
environment during the start
and completion of the project
will never be the same.
Employee turnover is another
problem.

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 Insufficient The budget for ERP It is necessary to allocate
Funding implementation is generally necessary funds for the ERP
allocated without consulting implementation project and
experts and then then allocate some more for
implementation is stopped contingencies.
along the way, due to lack of
funds.
Data Safety As there is only one set of data, Back up arrangement needs
if this data is lost, whole to be very strong. Also,
business may come to stand strict physical control is
still. needed for data.
Speed of As data is maintained centrally, This can be controlled by
Operation gradually the data size becomes removing redundant data,
more and more and it may using techniques like data
reduce the speed of operation. warehousing and updating
hardware on a continuous
basis.
System Failure As everybody is connected to a This can be controlled and
single system and central minimized by having proper
database, in case of failure of and updated back up of
system, the whole business data as well as alternate
may come to stand still may get hardware / internet
affected badly. arrangements. In case of
failure of primary
system,
secondary system may be
used.
Data Access Data is stored centrally and all Access rights need to be
the departments access the defined very carefully and
central data. This creates a to be given on “Need to
possibility of access to non- know” and Need to do”
relevant data. basis only.

(22) Outline the Audit Approach in relation to an ERP System?

Auditing aspects in case of any ERP system can be summarized as under:

(i) Auditing of Data

• Physical Safety – Ensuring physical control over data.

• Access Control – Ensuring access to the system is given on “need to know”

(a junior accountant need not view Profit & Loss Account of the business) and
“need to do basis” (HR executive need not record a Purchase Order).

(ii) Auditing of Processes

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 • Functional Audit – This includes testing of different functions / features in
the system and testing of the overall process or part of process in the system
and its comparison with actual process. It is quite possible that all the aspect
present in the actual process may not be integrated in the ERP system. There
may be some manual intervention.

• Input Validations – This stand for checking of rules for input of data into the
system. E.g. a transaction of cash sales on sales counter must not be recorded
in a date other than today (not a future date or a back date), amount field
must not be zero, stock item field shall not be empty, etc. Input validations
shall change according to each data input form.

(23) Write short notes on the Finance and Accounting (FA) Module of an ERP
System?
Financial Accounting Module
This module is the most important module of the overall ERP System and it connects
all the modules to each other. Every module is somehow connected with module.
Following are the key features of this module:
 Tracking of flow of financial data across the organization in a controlled
manner and integrating all the information for effective strategic
decision making.
 Creation of Organizational Structure (Defining Company, Company
Codes, business Areas, Functional Areas, Credit Control, Assignment
of Company Codes to Credit Controls).
 Financial Accounting Global Settings (Maintenance of Fiscal Year,
Posting Periods, defining Document types, posting keys, Number
ranges for documents).
 General Ledger Accounting (Creation of Chart of Accounts, Account
groups, defining data transfer rules, creation of General Ledger
Account).
 Tax Configuration & Creation and Maintenance of House of Banks.
 Account Payables (Creation of Vendor Master data and vendor-
related finance attributes like account groups and payment terms).
 Account Receivables (Creation of Customer Master data and
customer- related finance attributes like account groups and
payment terms.
 Asset Accounting.
 Integration with Sales and Distribution and Materials Management.

(24) Write short notes on the Controlling (CO) Module of an ERP

System?
Controlling Module
This module helps in analysing the actual figures with the planned data and

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 in planning business strategies. Two kinds of elements are managed in
Controlling Module −Cost Elements and Revenue Elements. These elements
are stored in the Financial Accounting module.
Key features of this module are as under:
i. Cost Element Accounting: It provides overview of the costs and revenues
that occur in an organization. They are the basis for cost accounting and
enable the user the ability to display costs for each of the accounts that have
been assigned to the cost element. Examples of accounts that can be
assigned are Cost Centers, Internal Orders, WBS (work breakdown
structures).
ii. Cost Centre Accounting: Cost Centers can be created for such functional
areas as Marketing, Purchasing, Human Resources, Finance, Facilities,
Information Systems, Administrative Support, Legal, Shipping/Receiving, or
even Quality. Using Cost Centre Accounting are that the managers can set
budget/cost Centre targets; Cost allocation methods;
Assessments/Distribution of costs to other cost objects etc.

iii. Activity-Based-Accounting: This analysis cross-departmental business

processes and allows for a process-oriented and cross- functional view of the
cost centers.
iv. Internal Orders: Internal Orders provide a means of tracking costs of a
specific job, service, or task. These are used as a method to collect those
costs and business transactions related to the task. This level of monitoring
can be very detailed but allows

(25) Write short notes on the Sales and Distribution (SD) Module of an ERP
System?
Sales and Distribution Module: Sales and Distribution is used by organizations to
support sales and distribution activities of products and services, starting from
enquiry to order and then ending with delivery.
Key features of Sales and Distribution Module are discussed as under:
 Setting up Organization Structure: Creation of new company, company
codes, sales organization, distribution channels, divisions, business area,
plants, sales area, maintaining sales offices, storage location;
 Assigning Organizational Units: Assignment of individual components
created in the above activities with each other per design like company code
to company, sales organization to company code, distribution channel to
sales organization, etc.;
 Defining Pricing Components: Defining condition tables, condition types,
condition sequences;
 Setting up sales document types, billing types, and tax-related components;
and
 Setting up Customer master data records and configuration.

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 (26) Write short notes on the Human Resources (HR) Module of an ERP
System?
Human Resource Module
This module enhances the work process and data management within HR
department of enterprises. Right from hiring a person to evaluating one’s
performance, managing promotions, compensations, handling payroll and other
related activities of an HR is processed using this module.
 The module starts with the employee and workmen master.
 Employees being a part of a department so there will be provision of
department and designation master. The job of this module is to record the
regular attendance of every employee.
 Usage of magnetic card or finger print recognition devices will help to
improve the attendance system and provide an overall security in terms of
discarding proxy attendance.
 Moreover, if the attendance related information can be digitized then the
major portion of monthly salary can be automated. But the authority
should study the feasibility of this kind of system.
 This module will also deal with the financial entries like advance or loan to
employees.
 From Holiday master provided with the module, the user could feed all
possible holidays at the beginning of a year, so leave related information can
be automated. This module will generate monthly wage sheet from which the
salary payment can be made and respective accounts will be updated.
 All figures will be protected under password. Only authorized person will be
eligible to access information from this module.

(27) Write short notes on the Production Planning (PP) Module of an ERP
System.
Production Planning Module:
Process: Production Planning (PP) Module involves the following processes –
• Issue of Raw Material from Stores Department to Production Departments,
• Conversion of Raw Materials into WIP,
• Conversion of WIP into Finished Goods, (including handling out–
sourced processes, components, etc.) Primary Packing of Finished
Goods,
• Transfer of Packed Finished Goods into Warehouse.

Key Features: PP Module –

• includes software designed specifically for Production Planning and

Management,
• consists of Master Data, System Configuration and Transactions, to accomplish
Planned Procedure for Production,
• collaborates with other Business Processes like Sales and Operations
Planning, Distribution Resource Planning,

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 • Material Requirements Planning, Product Cost Planning, etc.

(28) Write short notes on the Materials Management (MM) Module of an ERP
System?
Material Management (MM) Module involves the following processes /activities –
➢ Purchase Requisition: Production Department (or Stores Department)
sends a request to Purchase Department for purchase of the Raw Materials
required for production.
➢ Scrutiny: Purchase Department evaluates the Requisition with current stock
position and Purchase Order pending position, and decides about accepting
or rejecting the requisition.
➢ Quotation: If the Requisition is accepted, Purchase Department seeks
Quotations from prospective Vendors for supply of Raw Materials.
➢ Analysis of Quotations: Quotations received from Vendors are compared and
evaluated, on various aspects.
➢ Purchase Order: Terms of Purchase are informed to the selected Vendors
through the Purchase Order (PO), which provides details of –(i) Description
of items to be purchased, (ii) Quantity, (iii) Price, (iv) Time of Delivery, (v)
Place of Delivery, (vi) Payment Terms, (vii) Special Instructions, if any, etc.
➢ Material Receipt: Materials are received as per PO, after proper inspection
thereof. A Material Receipt Note (MRN)or Goods Receipt Note (GRN) is prepared
to increase the Stock Balance, after receipt of materials.
➢ Issue of Materials: Material received by Stores Department is issued to
Production Departments as per requirement. A Bill of Materials (BOM) or
Stores Requisition Note (SRN) is prepared for this purpose.
➢ Purchase Invoice: Invoice received from Vendor is recorded in the Books,
resulting in a Liability (Payable) to the Vendor towards goods purchased.
➢ Payment to Vendor: Payment is made to Vendor based on Purchase Invoice,
after verifying with GRN and PO.

(29) Write short notes on the Quality Management (QM) Module of an ERP
System?
Quality Management Module
This module helps an organization to accelerate their business by adopting a
structured and functional way of managing quality in different processes.
QM Process includes the following activities –
➢ Setting Master Data and Standards for quality management,
➢ Setting Quality Targets,
➢ Preparing a Quality Management Plan,
➢ Establishing measurement norms for Quality Targets,
➢ Creating a Reporting System for measuring actual quality achieved,
compliance levels, etc.
➢ Identifying Quality Issues and improvements and changes to be made
(including Training, Re–design, etc.),

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 ➢ Initiating Change Requests, in case of any change is needed in the product /
design / process, and
➢ Ensuring ongoing compliance with the overall level of quality achieved.

Key features of QM Module –

➢ helps to manage quality in production across processes in an Entity.

➢ seeks to adopt a structured and functional way of managing quality in
different processes,
➢ collaborates in procurement and sales, production, planning, inspection,
notification, control, audit, etc.

(30) Write short notes on the Plant Maintenance (PM) Module of an ERP
System?
Plant Maintenance (PM) is a functional module which handles the maintaining of
equipment and enables efficient planning of production and generation schedules.
Process: PM Process includes the following –
(a) Creating Masters in respect of –(i) Various items of Machinery and their Spare
Parts, (ii) Maintenance Data, (iii) Schedule of Preventive Maintenance,
(b) Monitoring whether the Maintenance activities are actually performed as per
Planned Schedules,
(c) Organizing Special / Break–down Maintenance to handle outages, etc.
Key Features: PM Module –
(a) handles the maintaining of equipment and enables efficient planning of
production and generation schedules,
(b) ensures cost–efficient maintenance methods, viz. Risk–Based
Maintenance or Preventive Maintenance,
(c) provides comprehensive Outage Planning, and powerful work order
management,
(d) creates various Reports including – (i) PM Reminders, (ii) Monthly PMs,
(iii) Maintenance Histories, (iv) PM Schedules, (v) Plant/ Equipment Masters,
etc.

(31) Write short notes on the Project Systems (PS) Module of an ERP
System?
PS Module is an Integrated Project Management Tool used for planning and managing
projects. Project Management Tools include – (a)Cost and Planning Budget, (b)
Project Scheduling, (c) Requisitioning of Materials and Services, etc. Project Systems
Activities include – (a) Handling Project Requests, (b) Project Planning and
Sanction, (c) Project. Budgeting, (d) Project Monitoring, (e) Project Implementation,
and (f) Project Completion / Sign–off.
In Project System, each process has a defined set of tasks to be performed known
as process flow in Project Lifecycle. When a project request is received, a project
is created and it undergoes the following steps in project process flow/ lifecycle.

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 (32) Write short notes on Supply Chain Management (SCM) in relation to an ERP
System?
A Supply Chain is a network of autonomous or semi-autonomous business entities
collectively responsible for procurement, manufacturing, and distribution activities
associated with one or more families of related products. In other words, a supply
chain is a network of facilities that procure raw materials, transform them into
intermediate goods and then finished products, and then finally deliver the
products to customers through a distribution system or a chain. In Supply Chain
Management System, any product which is manufactured in a company, first
reaches directly from manufacturer to distributors where manufacturer sells the
product to the distributor with some profit of margin. Distributors supply that
product to retailer with his/her profit and then finally customers receive that product
from retailer.

(33) Write short notes on Customer Relationship Management (CRM) in

relation to an ERP System?

Customer Relationship Management (CRM): CRM is a system which aims at

improving the relationship with existing customers, finding new prospective
customers, and winning back former customers. This system can be brought into
effect with software which helps in collecting, organizing, and managing the
customer information. Key benefits of a CRM module are as under.
➢ Improved customer relations: One of the prime benefits of using a CRM is
obtaining better customer satisfaction. Better services can be provided to
customers through improved understanding of their issues and this in turn
helps in increasing customer loyalty and decreasing customer agitation. In
this way, continuous feedback from the customers regarding the products and
services can be received.

➢ Increase customer revenues: By using a CRM strategy for any business,

the revenue of the company can be increased. Using the data collected,
marketing campaigns can be popularized in a more effective way. With the
help of CRM software, it can be ensured that the product promotions reach a
different and brand-new set of customers, and not the ones who had already
purchased the product, and thus effectively increase the customer revenue.
➢ Maximize up-selling and cross-selling: A CRM system allows up-selling
which is the practice of giving customers premium products that fall in the same
category of their purchase. The strategy also facilitates cross selling which is
the practice of offering complementary products to customers. This is done
by interacting with the customers and getting an idea about their wants,
needs, and patterns of purchase. The details thus obtained will be stored in a
central database, which is accessible to all company executives.

➢ Better internal communication: Following a CRM strategy helps in building

up better communication within the company. The sharing of customer data
between different departments will enable them to work as a team. This is
better than functioning as an isolated entity, as it will help in increasing the

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 company’s profitability and enabling better service to customers.
➢ Optimize marketing: CRM enables to understand the customer needs and
behavior in a better way, thereby allowing any enterprise to identify the correct
time to market its product to the customers. CRM will also give an idea about
the most profitable customer groups, and by using this information, similar
prospective groups, at the right time will be targeted

(34) Explain the concept of “Integration” amongst various Modules in an ERP

System?
Module Description

Finance & A/cg ➢ Integration takes place in areas like Material Valuation,
(FA) Vendor Payments, Material Costing, etc.
And Controlling ➢ If any Inventory Posting is done, GL Accounts
(CO) (Suppliers) are updated online by the System.
➢ Transport (Logistics) Invoice Verification will create
Vendor Liability in Vendor A/c immediately on posting
the document.
Production ➢ Integration takes place in areas like Material
Planning (PP) Requirement Planning, Receipts/Issues against
Production Orders, Availability Check for Stocks, etc.
➢ Material Requirement Planning isgenerates planned
Orders or Purchase Requisitions which can be converted
to Purchase Orders/Contracts, based on Stocks,
expected Receipts, expected Issues.
Sales ➢ Integration takes place in areas like Delivery,
&Distribution Availability Check, Stock Transfer Requirements, etc.
(SD) ➢ When a Sales Order is created, it can initiate a dynamic
Availability Check of Stocks on hand.

Quality ➢ Integration with QM takes place for Quality Inspection

Management at Goods Receipt, WIP Inspection, etc.
(QM) ➢ In the case of a goods movement, the system
determines whether the material is subject to an
Inspection Operation. If so, a corresponding activity is
initiated for the movement in the Quality Management
System.
Plant ➢ Material/Service Requirement as mentioned in the
Maintenance Maintenance Order, leads to generation of Purchase
(PM) Requisition (PR) for Maintenance.
➢ This PR will be converted to Purchase Order (PO) by MM
Module.

(35) Write short notes on “Reports” in the context of Finance and Accounting
Systems?
Reports: A Report is a presentation of information in proper and meaningful way.
So, Reporting System is a system of regular reporting on the pre–decided aspects.

Examples of Reports in Finance and Accounting Systems:

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 (a) Financial Statements, i.e. Balance Sheet, Profit and Loss Statement and
Cash Flow Statement,

(b) Information in respect of Management Discussion & Analysis (MD&A)

section the Annual Report, which discusses how Management have prepared
the financial statement, their interpretation of the Company’s performance, the
industry in which they operate, to provide critical guidance on where the
Company is heading.

(c) Information in respect of Corporate Social Responsibility Report, where

applicable,

(d) Periodic Internal Management Reports – (i) Variance Reports, (ii) Budget vs
Actual, (iii) Year to Date reports, etc. used for internal evaluation and control
function.

(36) What are the features of MIS Reports? How should information be
presented in MIS Reports?
Meaning: A MIS Report is a tool that Managers use to evaluate Business
Processes and Operations. MIS Reports generated by the Entity’s IT Systems, are
used by Business Managers at all levels of an Entity, to help them evaluate their
business’ daily activities or problems that arise, make decisions, and track progress
Features of MIS Reports: MIS Reports can be –
➢ auto–generated by the IT System on periodic basis (e.g. Daily Stock
Report), or generated on–demand basis,
➢ generated by the specific Manager at his end, or can be generated by a
specialized MIS Department, if any,
➢ customized to provide relevant information in user–friendly fashion,
including Spreadsheets, etc.
➢ made specific to each Functional Unit / Division, e.g. Production, Despatch,
Sales, Accounts, HR, etc.

Information in MIS Reports: To be useful, Information in a MIS Report should

have the following features –

❖ Timeliness: The information should be available at the right time for the
Decision Maker / Manager,
❖ Adequacy: The information should be adequate to meet the requirements of the
Decision Maker / Manager,
❖ Purposive: The basic purpose of a MIS Report is to inform, evaluate,
persuade and organize. MIS Information must be purposeful, when it is given
to a Manager in the Entity.
❖ Frequency: The frequency with which the MIS Report is transmitted or
received affects its value. Frequency is related to both the – (a) level of
management, and (b) operational need.
❖ Relevant: MIS Reports need to be specific to the business area they address.
A Report that includes unnecessary information might be ignored.
❖ Structured: Information in an MIS Report should be understandable to the
Manager using it.

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 ❖ Accurate: MIS Reports should be correct and accurate, to the extent required
for supporting effective decisions.

(37) Explain the concept of Data Analytics, and the steps involved therein?
Data Analytics: It is the process of examining data sets to draw conclusions about
the information they contain, increasingly with the aid of specialized systems and
software. Data Analytics predominantly refers to an assortment of applications, from
basic Business Intelligence (BI), Reporting and Online Analytical Processing (OLAP)
to various forms of advanced analytics.
Steps in Data Analytics:
(a) Data Collection
Identification of the information required for an analytics application.
Assembling the required information. Combining the data using Data Integration
Routines, and transforming into a common format. Loading the Data into an
Analytics System.
(b)Data Organizing
Finding and fixing data quality problems. Running Data Profiling and Data
Cleansing jobs to ensure consistency of information. Manipulating and
organizing the data for the planned analytics use. Applying Data Governance
Policies to ensure that the data is being used properly.
(c) Modelling and Training
Building of an analytical model, by a Data Scientist, using predictive modeling tools
or other analytics software and programming languages (e.g. Python, Scala, R and
SQL). Running the model against a partial data set to test its accuracy. Revising
and running the model again and again, until it functions as intended.
(d)Data Analytics
The Model is run in Production Mode against the full data set, to address a specific
information need or on an ongoing basis as the data is updated.
(e) Reporting
Communicating the results generated by Analytical Models to Executives and End–
Users to aid in their decision–making it can be made easier to understand and quick
to grasp by creating Charts and Infographics using Data Visualization Techniques.

(38) What do you understand by Business Intelligence? Explain its features?

Business Intelligence (BI) is a technology-driven process for analyzing data and
presenting actionable information to help corporate executives, business managers
and other end users make more informed business decisions.
BI encompasses a wide variety of tools, applications and methodologies that enable
organizations to collect data from internal systems and external sources, prepare it
for analysis, develop and run queries against the data, and create reports,
dashboards and data visualizations to make the analytical results available to
corporate decision makers as well as operational workers.
Features of business intelligence are:

• BI uses both historical information as well as new data from various source systems.
• BI can support both strategic and tactical decision–making processes.

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 • BI can be used by Data Analysts and similar IT Professionals, as also by Executives
and Workers, who can run BI using self–service BI and data discovery tools.
• Separate BI Applications can be bought from different Vendors, or a unified BI
Platform from one Vendor.
• BI Programs can incorporate advanced analytics tools, like Data Mining, Predictive
Analytics, Text Mining, Statistical Analysis and Big Data Analytics.

(39) Write short notes on Business Reporting?

Business Reporting or Enterprise Reporting is the public reporting of operating
and financial data by a business enterprise or the regular provision of information
to decision-makers within an organization to support them in their work.

Organizations conduct a wide range of reporting, including financial and regulatory

reporting; Environmental, Social, and Governance (ESG) reporting (or sustainability
reporting); and, increasingly, integrated reporting.

Organizations communicate with their stakeholders about:

 mission, vision, objectives, and strategy;

 governance arrangements and risk management;
 trade-offs between the shorter- and longer-term strategies; and
 financial, social, and environmental performance (how they have fared against
their objectives in practice).

Significance of Business Reporting:

Effective and transparent Business Reporting –
• allows Entities to present a cohesive explanation of their business,
• helps Entities communicate with internal and external Stakeholders, including
Customers, Employees, Shareholders, Creditors, and Regulators,
• provides the backbone of strong and sustainable Entities, Financial Markets, and
Economies,
• provides data for Stakeholders to assess an Entity’s performance and make
informed decisions of the Entity’s
• capacity to create and preserve value (Note: Value = Monetary, Social,
Environmental and Economic Value),
• reduces the risk for lenders and may lower the cost of capital,
• promotes better internal decision–making.

(40) Explain the concept of XBRL Reporting?

eXtensible Business Reporting Language (XBRL) is an open international
standard for digital business reporting that provides a language in which reporting
terms can be authoritatively defined. XBRL lets reporting information move
between organizations rapidly, accurately and digitally. XBRL is a standard-based

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 way to communicate and exchange business information between business
systems. Important features of XBRL are as follows:
a. Clear Definitions: XBRL allows the creation of reusable, authoritative
definitions, called taxonomies, that capture the meaning contained in all the
reporting terms used in a business report, as well as the relationships
between all the terms.
b. Testable Business Rules: XBRL allows the creation of business rules that
constrain what can be reported. for example, these business rules can be
used to stop poor quality information being sent to a regulator or third party,
by being run by the preparer while the report is in draft; stop poor quality
information being accepted by a regulator or third party, by being run at the
point that the information is being received.
c. Multi-lingual Support: XBRL allows concept definitions to be prepared in
as many languages as necessary. This means that it’s possible to display a
range of reports in a different language to the one that they were prepared
in, without any additional work.
d. Strong Software Support: XBRL is supported by a very wide range of
software from vendors large and small, allowing a very wide range of
stakeholders to work with the standard.

(41) Can the same software be used for Accounting and Tax Compliance also?
Explain?
Regulatory compliance and accounting systems are closely connected with each
other. Most of the regulatory compliance requires accounting data and accounting
data comes from accounting systems. E.g. Income tax returns are prepared based
on accounting data only. There may be two approaches for making compliances
requiring accounting data.

a. Using same software for accounting and tax compliance; and

b. Using different software for accounting and tax compliance.

Software is needed for tax compliances as almost all the tax compliance today
is through electronic mode only. If separate software is used for accounting and
tax compliance, we need to put data in tax compliance software either manually
or electronically.
Sl. Particular Accounting & Tax Only Tax Compliance
No s Compliance Software Software

1 Ease of Less – as this is integrated More – as this is used only for

software system of accounting and tax one single purpose, i.e. tax
operation compliance, everything compliance, it is less
connected with other and making complicated and bound to be
changes at one place easy.
may affect other aspects also.

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 2 Feature Less – as this system is not an More – as this is an exclusive
s and exclusive system for tax and specifically designed
facilities compliance, it may have limited system for tax compliance,
features for tax compliance. naturally more features and
facilities shall exist in this
system.
3 Time and Less – as this is an integrated More – as this is a separate
efforts system, time required to transfer software, data from
required data to compliance software is accounting software need to
zero. put in this for preparation of
returns. This may
take extra time and efforts.
4 Accuracy More – As this is an integrated Less – as there are two
system and hence accounting separate systems,
data and tax compliance data reconciliation with accounting
shall always be same. No need to data is needed, and possibility
transfer data to compliance of mismatch of data is always
software and reconcile the data. there.

(42) Explain MAC and DAC in RBAC

Role Based Access Control (RBAC)

Mandatory Access Control Discretionary Access Control

(MAC) (DAC)

Only users or
devices with
the required
A central The owner of
information Offers
authority a protected
security Used in individuals
regulates system or
clearance can Government complete
access rights resource sets
access and Military control over
based on policies
protected institutions the resources
multiple levels defining who
resources but they own.
of security can access it.
cannot
alter/share
the resources.

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Ch:3(a) Information Systems
(1)Define a System and give examples. Explain Business Enterprise as a System.
System is a set of inter–related and interacting elements that operate collectively to
accomplish some common purpose or goal, accepting Inputs and producing outputs in an
ordered transformation process. A System is described by specifying – (a) its parts, (b)
the way in which they are related, and (c) the goals which they are expected to achieve.
Examples: Human Body, Business Enterprise, Computer System, etc.

A System

Input Processing Output

Men, Money Business Products,

Methods Processes, i.e. Services,
Machinery Purchase & Profits,
Materials Production, Sales Goodwill,
& Marketing, Customer
Finance & care
Accounts,
Research &
Development
Business Enterprise as a system

(2)Enumerate the characteristics of a Computer Based Information System

CBIS is a combination of People, IT and Business Processes that helps management in
taking important decisions to carry out the business successfully.
CBIS consist of the following elements / components -

Item Description
1. People The end–objective of the CBIS is to be useful to people. People
cover all type of persons, within and outside the Entity.
2. Hardware (a) Hardware consists of Physical Components including
Computer System, i.e. CPU, and all of its support equipment, i.e.
peripherals e.g. Input Devices, Storage Devices, and
Communications Devices. It includes Server or Smart Terminals
with different configurations and Processors, etc.
(b) Hardware Resources refer to – (i) Machines – Computers,
Video Monitors, Magnetic Disk Drives, Printers, Optical Scanners,
and (ii) Media – Floppy Disks, Magnetic tape, Optical Disks, Plastic
Cards, Paper Forms, etc.
3. Software (a) Software consists of Computer Programs and their User
Documentation or Manuals.
(b) Programs are machine–readable instructions that direct the
CBIS Hardware to produce useful information from data.
(c) Software includes – (i) different types of Operating Systems
like UNIX, LINUX, WINDOWS, etc. (ii)Application Software

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 (computer programs designed to perform specific tasks), and
(iii) Utility Software (e.g. Tools).
(d) Software Resources refer to – (i) Programs – Operating
System Programs, Spreadsheet Programs, Word Processing
Programs, Payroll Programs, and (ii) Procedures – Data Entry
Procedures, Error Correction Procedures, Pay check Distribution
Procedures, etc.
4. Data (a)Data are facts that are used by programs to produce useful
information. Like Programs, Data are generally stored in
machine–readable form on disk or tape until the Computer needs
them.
(b)Data may be alphanumeric, text, image, video, audio and other
forms.
(c)In a CBIS, Data is organized in terms of a Database
Management System (DBMS).
5. Network Network means the Communication Media – Internet, Intranet,
Extranet, etc.

(3)Write short notes on “Information System”.

Information System (IS) is a combination of people, hardware, software,
communication devices, network and data resources that processes data and
information for a specific purpose.
• The system needs inputs from user which will then be processed using technology
devices such as computers, and produce output that will be sent to another user or
other system via a network and a feedback method that controls the operation.
• The main aim and purpose of each Information System is to convert the data into
information which is useful and meaningful.
• An Information System is an arrangement of a number of elements that provides
effective information for-
 Decision Making, and /or
 Control of some operations of an organization.
• Components: An Information System comprises of People, Hardware, Software,
Data and Network for communication support.
• An Information System model comprises of following steps:
 Input: Data is collected from an organization or from external environments
and converted into suitable format required for processing.
 Process: A process is a series of steps undertaken to achieve desired outcome
or goal. Information Systems are becoming more and more integrated with
organizational processes, bringing more productivity and better control to those
processes.
 Output: Then information is stored for future use or communicated to user after
application of respective procedure on it.

(4)What are the basic activities of an “Information System Model”?

An Information System Model involves the following steps. These basic activities of an
Information System help Entities in making decisions, control operations, analyse
problems and create new products or services

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 1. Input: Data is collected from internal and external environments of an Entity,
and converted into a suitable format required for processing,

2. Processing: Data is converted into information (i.e. more meaningful form)

obtained after manipulation of these collected data.

3. Storage and Output: Information is stored for future use or communicated to

User after application of specified procedures thereon.

4. Feedback: Feedback represents output that is returned to appropriate members

of the Enterprise, to help them to evaluate at the input stage.

(5)Write short notes on Information Processing Cycle.

Information Management: To manage information effectively, every Enterprise has to –

1. Identify its information needs,

2. Acquire / Obtain that information from various sources,
3. Organize that information in a meaningful way,
4. Ensure information quality, and
5. Provide Software Tools for Users to access the required information.

The above activities may be referred to as the Information Processing Cycle.

(6)Differentiate between a Manual Information Processing and Computer–

Based Information Processing.
Differences between a Manual Information Processing and Computer Based
Information Processing

Point Manual Information Computer–Based

Processing Information
Processing (CBIS)

Concept These are the systems where These are systems where
the level of manual Computers are used at every
intervention is very high, with stage of transaction
little or no room for Computer processing. Human
Processing. intervention is very limited, or
sometimes even Nil.

Input Recording details in various Entering data into computer,

Register maintained in paper sometimes online real time
form. basis.

Process Summarize the Information Performing various arithmetic

using various / logical operations on the
arithmetic/logical processes. data.

Output Presentation of information Presentation of information to

to Users and Management Users and Management using
in the form of Statements and various tools, like pictures,
Reports. graphs, reports, etc.

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 Storage Records stored in paper form, Records are stored in digital
occupying huge space, and form, occupy less space, and
sometimes retained for a can be stored for any time
certain period only. period in some cases.

Examples Teaching, Valuation of Exam Valuation of Exam in Multiple

Papers, Medical Treatment Choice Questions through
like Surgery, etc. Character Recognition, Filing
of Income Tax Returns in e–
form, etc.

Merits Scope for handling Huge abilities for processing

exceptions, suitable for small data, storage, immediate
volume of data, etc. feedback, timely, accurate,
fast and reliable info, etc.

(7)What are the components of a Computer–Based Information System? Explain

briefly.
CBIS is a combination of People, IT and Business Processes that helps management in
taking important decisions to carry out the business successfully. CBIS consists of the
following elements / components -

Item Description
People The end–objective of the CBIS is to be useful to people. People
cover all type of persons, within and outside the Entity.

Hardware (a) Hardware consists of Physical Components including Computer

System, i.e. CPU, and all of its support equipment, i.e. peripherals
e.g. Input Devices, Storage Devices, and Communications
Devices. It includes Server or Smart Terminals with different
configurations and Processors, etc.

(b) Hardware Resources refer to – (i) Machines – Computers,

Video Monitors, Magnetic Disk Drives, Printers, Optical Scanners,
and (ii) Media – Floppy Disks, Magnetic tape, Optical Disks, Plastic
Cards, Paper Forms, etc.

Software (a) Software consists of Computer Programs and their User

Documentation or Manuals.

(b) Programs are machine–readable instructions that direct the

CBIS Hardware to produce useful information from data.

(c) Software includes – (i) different types of Operating Systems

like UNIX, LINUX, WINDOWS, etc. (ii)Application Software
(computer programs designed to perform specific tasks), and (iii)
Utility Software (e.g. Tools).

(d) Software Resources refer to – (i) Programs – Operating

System Programs, Spreadsheet Programs, Word Processing

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 Programs, Payroll Programs, and (ii) Procedures – Data Entry
Procedures, Error Correction Procedures, Pay check Distribution
Procedures, etc.

Data a) Data are facts that are used by programs to produce useful
information. Like Programs, Data are generally stored in machine–
readable form on disk or tape until the Computer needs them.
b) Data may be alphanumeric, text, image, video, audio and other
forms.
c) In a CBIS, Data is organized in terms of a Database Management
System (DBMS).

Network Network means the Communication Media – Internet, Intranet,

Extranet, etc.

(8)Write short notes on “People” as a component of a Computer–Based

Information System.
“People” as a component of a Computer–Based Information System:
• People constitute the most important elements in almost all Computer–Based
Information Systems (CBIS).
• Both Internal Users (Management, Staff, System Users) and External Users
(Government, Vendors, Customers, etc.) may require information provided by the
CBIS, and constitute the “People” Component of the CBIS.
• Within the Entity, People include System Users and Information System Personnel,
i.e. all the people who manage, run, program and maintain the system.
• Internal Users may be at all levels of the Entity’s hierarchy, – (a) End Users – the
persons who can use Hardware and Software for retrieving the desired information,
(b) Programmers, (c) System Analysts, & (d) Database Administrators.
• All persons, from the Helpdesk to the System Programmers and up to the Chief
Information Officer (CIO), all persons are an integral part of the CBIS.
• Role of People is significant in terms of “Innovation”, i.e. using Technology
productively to increase efficiency and improve an Entity’s competitive advantage.

(9)Explain the following terms in the context of “Hardware” in a CBIS – (a)

Input Devices, (b) Processing Devices, (c) Storage Devices, (d) Output
Devices
Hardware is the tangible portion of our computer systems; something we can touch
and see. It basically consists of devices that perform the functions of input, processing,
data storage and output activities of the computer.
(a) Input devices: There are devices through which the user interact with the
systems. Input devices include -
d) Device e) Type of Input
f) Keyboards g) Text–based input
h) Mouse and other Pointing Devices i) Position–based input
j) Scanners & Bar Code / MICR Readers, Webcams k) Image–based input
l) Microphone Voice–based input

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 Stylus/ Touch Screen Screen Touch input

(b) Processing Devices: Processing Devices refer to computer chips that contain
the Central Processing Unit (CPU or Microprocessor) and Main Memory.
• CPU is the actual hardware that interprets and executes the program
(software) instructions and coordinates how all the other hardware devices
work together.
• CPU is built on a small flake of silicon and can contain the equivalent of
several million transistors. Transistors can be viewed as switches which could
be” on” or “off”, i.e. taking a value of 1 or 0 respectively.
• CPU is the brain of the computer, and its main function is to execute programs
stored in memory.
• CPU consists of three functional units –
I. Control Unit (CU): CU controls the flow of data and instruction to
and from memory, interprets the instruction and controls which tasks
to execute and when.
II. Arithmetic and Logical Unit (ALU): ALU performs various
arithmetic operations (e.g. addition, subtraction, multiplication,
division, etc.), and logical operations (e.g. comparison of numbers:
Equal to, Greater than, Less than, etc.)
III. Registers: These are high speed memory units within CPU for storing
small amount of data (mostly 32 or 64 bits).

Registers could be –

 Accumulators: They can keep running totals of arithmetic values.

 Address Registers: They can store memory addresses which tell the
CPU as to where in the memory an instruction is located.
 Storage Registers: They temporarily store data that is being sent to or
coming from the system memory.
 Miscellaneous: These are used for several functions for general
purpose.

(c) Data Storage Devices: These refer to the memory where data and programs
are stored. Some of the types of memory techniques / devices are –
Type Description
Registers are internal memory within CPU, which are very
Internal Memory fast, but very small.
a) Primary Memory (Main Memory) is used by CPU for
execution of programs
b) In Main Memory, any location can be accessed in any
order (in contrast with sequential order).
Primary Memory c) Main Memory is not used for storing data, and is
generally small in terms of storage capacity.
d) Main Memory is primarily of two types – RAM and ROM
a) Cache is a smaller, faster memory, which stores copies
of the data from the most frequently used Main Memory
locations, so that Processor/Registers can access it more
Cache Memory
rapidly than Main Memory.

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 b) Cache is the property of locality of reference, which

allows improving substantially the effective memory

access time in a computer system.
c) Cache Memory is used to bridge the huge speed
difference between Registers and Primary Memory
a) Virtual Memory is an allocation of hard disk space to
help RAM.
b) It is not a separate device as such, but an imaginary
memory area supported by some Operating Systems
(e.g. Windows) in conjunction with the hardware.
c) If a Computer lacks the RAM needed to run a program
or operation, Windows OS moves data from RAM to a
Virtual Memory space (in the Hard Disk) called a Paging File.
d) Moving data to and from the Paging File frees up RAM,
and the Program / Operation can now be completed
by combining the Computer’s RAM with temporary
space on the Hard Disk
a) Secondary Memory is available in bigger sizes to store
programs and data.
b) Secondary Storage is accessible by the CPU, only
through Input / Output Channels. The CPU then
transfers the desired data using intermediate area in
Primary Storage.
c) Some commonly used Secondary Storage are: USB
Pen Drives, Floppy Drive, Hard Drive, CD, DVD, Blue
Secondary Ray Disks and Smart Cards.
Memory d) Features of Secondary Memory devices are –
• non–volatility (contents are permanent in nature,
and not lost if switched off),
• greater capacity (available in larger size),
• greater economy (low cost when compared to
Registers and RAMs),
• slow speed (slower when compared to Registers or
Primary Storage), and
• portability (can be used across various devices /
computers).

(d) Output Devices: These are devices through which the Computer provides
output / information to the User / Decision–maker. Output may be classified
into the following types –
 Textual Output –characters that are used to create words, sentences, and
paragraphs.
 Graphical Outputs – drawings, charts, photographs, and animation, which
provide digital representations of non–text information.
 Tactile Output – e.g. Raised Line Drawings which may be useful for visually
challenged persons.
 Audio Output – music, speech, or any other sound.
 Video Output – Images played back at speeds to provide the appearance of
full motion.

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 (10) Differentiate between RAM and ROM

Differences between RAM and ROM

Random Access Memory (RAM) Read Only Memory (ROM)

Volatile in nature means Information Non-volatile in nature (contents remain
is lost as soon as power is turned off. intact even in absence of power).
Purpose is to hold program and data Used to store small amount of
while they are in use. information for quick reference by CPU.
Information can be read as well as Information can be read not modified.
modified.
Responsible for storing the Generally used by manufacturers to
instructions and data that the store data and programs like translators
computer is using at that present that is used repeatedly.
moment.

(11) What are the activities and functions of System Software and
Operating Systems? System Software is the Computer Software that is designed
to operate the computer hardware, and to give and maintain a platform for running
Application Software. Computer Operating Systems is one of the widely used System
Software.

Meaning of Operating Systems (OS):

a) OS is a set of computer programs that manages computer hardware resources

and acts as an interface with computer applications programs.
b) Application Programs require an Operating System to function, which provides
a convenient environment to Users for executing their programs.
c) Windows, Linux, UNIX, etc. are some widely used Operating Systems.

Functions / Activities:

• Hardware Functions: OS acts as an Intermediary between the Application

Program and the Hardware. Application Programs obtain input from Keyboards,
retrieve data from Disks & display output on Monitors, using the OS.
• User Interfaces’ provides User Interface – (a) Command Based User
Interface, i.e. text commands in DOS Systems, and (b) Graphic User Interface
(GUI) using icons & menus.
• Hardware Independence: OS provides Application Program Interfaces (API),
which can be used by Application Developers to create application software for
all types of Hardware. Thus, OS gives us Hardware independence.
• Memory Management: OS manage as to how memory is accessed and
maximize available memory & storage. OS also provides Virtual Memory (Virtual
RAM) by carving an area of hard disk to supplement the functional memory
capacity of RAM.
• Task Management: Task Management feature of Operating system helps in
allocating resources to make optimum utilization of resources. This facilitates –
(a) one User working on various applications (i.e. multi–tasking), and also (b)
multiple User to use the system (i.e. timesharing)
• Networking Capability: OS provides systems with features & capabilities to
help connect Computer Networks, both Intranet and Internet.

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 • Logical Access Security: OS provide logical security by establishing a
procedure for identification & authentication using a User ID and Password. It
also creates logs on User Access.
• File Management: OS keeps a track of where each file is stored and who can
access it, based on which it provides the file retrieval.

(12) What is a DBMS? Explain its significance.

DBMS may be defined as a software that aid in organizing, controlling and using the
data needed by the application programme. They provide the facility to create and
maintain a well-organized database.

Significance:

a) DBMS is a tool to integrate the information flow within an Entity.

b) DBMS highlights the importance of data as a resource in the Entity, and as
something that has to be carefully managed.
c) DBMS provide the facility to create and maintain a well–organized database.
d) DBMS is the Software that aid in organizing, controlling and using the data
needed by the Application Programme, Applications access the DBMS, which then
accesses the data.
(13) What are the various activities performed using DBMS?
Data Base Management System (DBMS) is a computer program which organizes data
in a database, providing information storage, organisation, and retrieval capacities,
including simultaneous access to multiple databases through a shared field.

DBMS helps us do various operations on the files, viz. –

a. Adding new files to Database,

b. Deleting existing files from Database,
c. Inserting data in existing files,
d. Modifying data in existing files,
e. Deleting data in existing files, and
f. Retrieving or querying data from existing files.

(14) Explain the concept of “Hierarchy of Database”.

Database is a collection of facts (data) in files, and is similar to an electronic filing
cabinet, i.e. a collection of computerized data files. A Database Model is a type of
data model that determines the logical structure of a database and fundamentally
determines in which manner data can be stored, organized and manipulated.

Hierarchy of database is as under:

Hierarchy Description Example

Database This is a collection of History of Income Tax Return
Files details of Assesses
File This is a collection of Income Details of one Financial
Records Years of an Assessee
Record This is a collection of Name, Residential Status,
Fields Income Tax PAN of Assessee

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 Field This is a collection of 10–Digit Income Tax
Characters Permanent Account Number
(PAN)
Characters These are a collection of Each Digit / Alphabet in Income
Bits Tax PAN

(15) Explain the various types of “Record Relationships” in a Database.

When designing the Database to make it easy for the end user to use the database
for different purposes, the following relationships are to be considered –

Relationship Example
One : One In a Multi–Speciality Hospital, the Doctor sees a
patient and writes a prescription for that patient.
One : Many A Doctor sees many patients and writes prescriptions
for each person separately
Many : One Many Specialist Doctors see a single patient.
Many : Many The Billing Section of the Hospital processes the bills
of different patients from different doctors.
(16) List a few merits and demerits of DBMS.

Merits of DBMS: -

 Permitting Data Sharing: One of the principle advantages of a DBMS is that

the same information can be made available to different users.
 Minimizing Data Redundancy: In a DBMS, duplication of information or
redundancy is, if not eliminated, carefully controlled or reduced i.e. there is no
need to repeat the same data repeatedly. Minimizing redundancy reduces
significantly the cost of storing information on storage devices.
 Integrity can be maintained: Data integrity is maintained by having accurate,
consistent, and up-to-date data. Updates and changes to the data only must be
made in one place in DBMS ensuring Integrity.
 Program and File consistency: Using a DBMS, file formats and programs are
standardized. The level of consistency across files and programs makes it easier
to manage data when multiple programmers are involved as the same rules and
guidelines apply across all types of data.
 User-friendly: DBMS makes the data access and manipulation easier for the
user. DBMS also reduces the reliance of users on computer experts to meet their
data needs.
 Improved security: DBMS allows multiple users to access the same data
resources in a controlled manner by defining the security constraints. Some
sources of information should be protected or secured and only viewed by select
individuals. Using passwords, DBMS can be used to restrict data access to only
those who should see it.
 Achieving program/data independence: In a DBMS, data does not reside in
applications but data bases program & data are independent of each other.
 Faster Application Development: In the case of deployment of DBMS,
application development becomes fast. The data is already therein databases,

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 application developer has to think of only the logic required to retrieve the data
in the way a user need.

Demerits of a DBMS: -

 Cost: Implementing a DBMS system in terms of both system and user-training

can be expensive and time-consuming, especially in large enterprises. Training
requirements alone can be quite costly.
 Security: Even with safeguards in place, it may be possible for some
unauthorized users to access the database. If one gets access to database, then
it could be an all or nothing proposition.

(17) Differentiate between Hierarchical and Network Database Models.

Differentiation between Hierarchical and Network Database Models as follows:

Hierarchical database Model:

a) Here, the records are logically organized into a hierarchy of relationships and
involve an inverted tree structure.
b) The Tree is composed of a hierarchy of Nodes, the uppermost node is called the
Root (Top Parent Record).
c) A Node which has other dependent nodes is called Parent while the dependent
nodes are called as Children.
d) With the exception of the Root, every Node is related to a Node at a higher level
called its Parent.
e) No Child Record can have more than one Parent Record. However, each Parent
Record can have multiple lower level (Child) records.

Network Database Model:

a) Network Model is a modification of the Hierarchical Model, and permits multiple–

branches from one or more Nodes.
b) The Child–Parent relationship of the Hierarchical Model is replaced by Owner–
Member Relationship under the Network Model.
c) The Records are viewed in Sets. Each Set has an Owner Record and one or more
Member Records.
d) Each Record can be a Member of one or more Parent Set at the same time. This
means that each Node (Child or Member Record) may have several Parents (or
Owner Records).
e) Network Model is useful for all relationship types – one–to–one, one–to–many,
many–to–one and many–to–many.
f) Network Databases implement the set relationships users Pointers that directly
address the location of a record on disk. This gives excellent retrieval
performance, at the expense of operations such as database loading and
reorganization.
g) Network Model is able to represent redundancy in data more efficiently than in
the Hierarchical Model.

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 (18) Explain the following concepts in the context of Database – (a) Big Data,
(b) Data Warehouse, (c) Data Mining.

(a) Big data: Big Data refers to massive and huge data sets, that traditional
Database–Management tools do not have the processing power to analyse them.
Storing, analysing, processing and interpreting such data requires the best tools
and techniques based on advanced technology. Examples: Details of Cash Deposits
and Withdrawals in the Banking System during a period, Item– wise Details of
Sweets sold by an Entity during a festival season, etc.

(b) Data warehouse: Data from an Entity’s Database(s) that support its day–to–day
operations are extracted periodically and sent to a Data Warehouse [i.e. a “Master
Database”] for storage and analysis. A Data Warehouse should be designed so that
it meets the following criteria –

(i) It uses Non–Operational data, i.e. data which is not required for day–to–day
operations.
(ii) It is updated on scheduled basis, i.e. current data from an Entity’s Active /
Operational Databases are pulled into the Data Warehouse on a regular,
scheduled basis.
(iii) It contains time–variant data, i.e. whenever data is loaded into the Data
Warehouse, it receives a time stamp, which allows for comparisons between
different time periods.
(iv) It uses standardised data, drawn from multiple Database(s) in the Entity. If the
data format is not the same amongst these Databases, it is first converted into
a standard format using Extraction–Transformation–Load (ETL) Process.

A Data Warehouse may be designed using two approaches –

(i) Bottom–Up Approach builds small Data Warehouses, called Data Marts, to
solve specific business problems initially. All these Data Marts are then integrated
into a larger Data Warehouse.
(ii) Top–Down Approach leads to the creation of an Entity–wide Data Warehouse
and subsequent creation of smaller Data Marts from the bigger Warehouses, to
address specific business needs.

(c) Data mining: Data Mining is the process of analysing data to find previously
unknown trends, patterns, and associations to make decisions. Data Mining is
achieved through automated means, in extremely voluminous and large data sets,
such as a Data Warehouse. Data Mining may be approached from two angles –

(i) Analysing data without any such previous assumption / pre–supposition.

(ii) Analysing data to understand whether a particular hypothetical assumption
about people behaviour / data is correct,

Examples: Income Tax Department mines data of higher amounts of Cash Deposits
/ Withdrawals in the Banking System, to identify potential taxpayers.

Data Mining involves –

(i) Selecting Relevant / Target Data from Databases,

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 (ii) Integrating all the Target Data into a Data Warehouse,
(iii) Using Mining Tools and Techniques to identify Data Patterns,
(iv) Evaluating and interpreting the data patterns, to support Business Knowledge
and Strategies.

(19) What is a Computer Network? What are its conceptual types?

Computer Network is a collection of computers and other hardware, inter–connected
by communication channels that allow sharing of resources and information.
Computer Networks can be conceptualized into two types –
(i) Connection oriented networks: Here, a connection is first established and
then data exchanged. This is similar to operation of telephone networks.
(ii) Connectionless networks: Here, there is no prior connection made before data
exchanges. Data being exchanged has a complete contact information of
Recipient, and at each intermediate destination, it is decided how to proceed
further, similar to Postal Networks.

(20) Explain the benefits of Computer Networks.

The following are the important benefits of a computer network:
(i) Distributed nature of information: There would be many situations where
information must be distributed geographically. E.g. in the case of Banking
Company, accounting information of various customers could be distributed
across various branches but to make Consolidated Balance Sheet at the year-
end, it would need networking to access information from all its branches.
(ii) Resource Sharing: Data could be stored at a central location and can be shared
across different systems. Even resource sharing could be in terms of sharing
peripherals like printers, which are normally shared by many systems. E.g. In
the case of a CBS, Bank data is stored at a Central Data Centre and could be
accessed by all branches as well as ATMs.
(iii) Computational Power: The computational power of most of the applications
would increase drastically if the processing is distributed amongst computer
systems. For example: processing in an ATM machine in a bank is distributed
between ATM machine and the central Computer System in a Bank, thus reducing
load on both.
(iv) Reliability: Many critical applications should be available 24x7, if such
applications are run across different systems which are distributed across
network then the reliability of the application would be high. E.g. In a city, there
could be multiple ATM machines so that if one ATM fails, one could withdraw
money from another ATM.
(v) User communication: Networks allow users to communicate using e-mail,
newsgroups, video conferencing, etc.

(21) Outline the significance of Telecommunications in Computer

Networks. Significance of Telecommunications in Computer Networks:
(i) Time compression: Telecommunications enable a firm to transmit raw data and
information quickly and accurately between remote sites.

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 (ii) Overcoming geographical dispersion: Telecommunications enable an
organization with geographically remote sites to function, to a degree, as though
these sites were a single unit. The firm can then reap benefits of scale and scope
which would otherwise be unobtainable.
(iii) Restructuring business relationships: Telecommunications make it
possible to create systems which restructure the interactions of people within a
firm as well as a firm’s relationships with its customers. Operational efficiency
may be raised by eliminating intermediaries from various business processes.

(22) Write short notes on Segregation of Duties (SoD) in the context of

IT.

SoD Concept seeks to ensure that a single individual does not possess excess privileges,
that could result in unauthorized/harmful activities like fraud or the manipulation or
exposure of sensitive data.

Example: In the area of Payment Processing, the activities of – (i) Creation of Vendor
Code, (ii)Authorisation of Vendor’s Bills, and (iii) Printing of Cheques are handled by
separate individuals.

SoD Controls –

 are in the nature of Preventive and Detective Controls place to manage segregation
of duties matters.
 can be manual or even automated, depending on the nature of transaction,
situation, and sometimes require manual intervention in an automated control.

(23) Write short notes on Roles and Responsibilities in the

context of IT.
Several roles and responsibilities fall upon all individuals throughout the organization.
a) Executive management: The most senior managers and executives in an
organization are responsible for developing the organization’s mission, objectives,
and goals, as well as policy. Executives are responsible for enacting security policy,
which defines (among other things) the protection of assets.
b) Owner: An owner is an individual (usually but not necessarily a manager) who is
the designated owner-steward of an asset. Depending upon the organization’s
security policy, an owner may be responsible for the maintenance and integrity of
the asset, as well as for deciding who is permitted to access the asset. If the asset
is information, the owner may be responsible for determining who may access and
make changes to the information.
c) Manager: A manager is, in the general sense, responsible for obtaining policies and
procedures and making them available to their staff members. They should also, to
some extent, be responsible for their staff members’ behaviour.
d) User: Users are individuals (at any level of the organization) who use assets in the
performance of their job duties. Each user is responsible for how he or she uses the
asset, and does not permit others to access the asset in his or her name. Users are
responsible for performing their duties lawfully and for conforming to organization
policies.

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 These generic roles and responsibilities should apply across the organization chart to
include every person in the organization.

(24) What is a Job Title? What is its significance?

Job Title is a label that is assigned to a job description. It denotes a position in the
organization that has a given set of responsibilities, and which requires a certain level
and focus of education and prior experience.

Significance of job titles:

(i) Recruiting: When the organization needs to find someone to fill an open position,
the use of standard job titles will help prospective candidates more easily find
positions that match their criteria.
(ii) Compensation base lining: Because of the chronic shortage of talented IT
workers, organizations are forced to be more competitive when trying to attract new
workers. To remain competitive, many organizations periodically undertake a
regional compensation analysis to better understand the levels of compensation
paid to IT workers in other organizations. The use of standard job titles makes the
task of comparing compensation far easier.
(iii) Career advancement: When an organization uses job titles that are consistent in
the industry, IT workers have a better understanding of the functions of positions
within their own organizations and can more easily plan how they can advance. The
remainder of this section includes many IT job titles with a short description (not a
full job description by any measure) of the function of that position.

(25) Give a few examples of Job Titles and Job Descriptions in IT in the
following areas (a) Executive Management, (b) Systems Management, (c)
Software Management, (d)Data Management, (e) Network Management, (f)
Security Management, (g) Operations Management, (h) Service Desk.
a) Executive Management: Executive managers are the chief leaders and policymakers
in an organization. They set objectives and work directly with the organization’s most
senior management to help make decisions affecting the future strategy of the
organization.
(i) CIO (Chief Information Officer): This is the title of the top most leaders in
a larger IT organization.
(ii) CTO (Chief Technical Officer): This position is usually responsible for an
organization’s overall technology strategy. Depending upon the purpose of the
organization, this position may be separate from IT.
(iii) CSO (Chief Security Officer): This position is responsible for all aspects of
security, including information security, physical security, and possibly
executive protection (protecting the safety of senior executives).
(iv) CISO (Chief Information Security Officer): This position is responsible for
all aspects of data-related security. This usually includes incident management,
disaster recovery, vulnerability management, and compliance.
(v) CPO (Chief Privacy Officer): This position is responsible for the protection
and use of personal information. This position is found in organizations that
collect and store sensitive information for large numbers of persons.

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 b) Systems Management: Positions in systems management are responsible for
architecture, design, building, and maintenance of servers and operating systems. This
may include desktop operating systems as well.
(i) Systems Architect: This position is responsible for the overall architecture of
systems (usually servers), both in terms of the internal architecture of a
system, as well as the relationship between systems. This position is usually
also responsible for the design of services such as authentication, e-mail, and
time synchronization.
(ii) Systems Engineer: This position is responsible for designing, building, and
maintaining servers and server operating systems.
(iii) Storage Engineer: This position is responsible for designing, building, and
maintaining storage subsystems.
(iv) Systems Administrator: This position is responsible for performing
maintenance and configuration operations on systems.

c) Software Development: Positions in software development are involved in the

design, development, and testing of software applications.
(i) Systems Architect: This position is usually responsible for the overall
information systems architecture in the organization. This may or may not
include overall data architecture as well as interfaces to external organizations.
(ii) Systems Analyst: A systems analyst is involved with the design of
applications, including changes in an application’s original design. This position
may develop technical requirements, program design, and software test plans.
In cases where organizations license applications developed by other
companies, systems analysts design interfaces to other applications.
(iii) Software Developer and Programmer: This position develops application
software. Depending upon the level of experience, persons in this position may
also design programs or applications. In organizations that utilize purchased
application software, developers often create custom interfaces, application
customizations, and custom reports.
(iv) Software Tester: This position tests changes in programs made by software
developers.

d) Data Management: Positions in data management are responsible for developing and
implementing database designs and for maintaining databases.
(i) Database Architect: This position develops logical and physical designs of
data models for applications. With sufficient experience, this person may also
design an organization’s overall data architecture.
(ii) Database Administrator (DBA): This position builds and maintains
databases designed by the database architect and those databases that are
included as a part of purchased applications. The DBA monitors databases,
tunes them for performance and efficiency, and troubleshoots problems.
(iii) Database Analyst: This position performs tasks that are junior to the database
administrator, carrying out routine data maintenance and monitoring tasks.

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 e) Network Management: Positions in network management are responsible for
designing, building, monitoring, and maintaining voice and data communications
networks, including connections to outside business partners and the Internet.
(i) Network Architect: This position designs data and (increasingly) voice
networks and designs changes and upgrades to the network as needed to meet
new organization objectives.
(ii) Network Engineer: This position builds and maintains network devices such
as routers, switches, firewalls, and gateways.
(iii) Network Administrator: This position performs routine tasks in the network
such as making minor configuration changes and monitoring event logs.
(iv) Telecom Engineer: Positions in this role work with telecommunications
technologies such as data circuits, phone systems, and voice email systems.

f) Security Operations: Positions in security operations are responsible for designing,

building, and monitoring security systems and security controls, to ensure the
confidentiality, integrity, and availability of information systems.
(i) Security Architect: This position is responsible for the design of security
controls and systems such as authentication, audit logging, intrusion detection
systems, intrusion prevention systems, and firewalls.
(ii) Security Engineer: This position is responsible for designing, building, and
maintaining security services and systems that are designed by the security
architect.
(iii) Security Analyst: This position is responsible for examining logs from
firewalls, intrusion detection systems, and audit logs from systems and
applications. This position may also be responsible for issuing security
advisories to others in IT.
(iv) User Account Management: This position is responsible for accepting
approved requests for user access management changes and performing the
necessary changes at the network, system, database, or application level. Often
this position is carried out by personnel in network and systems management
functions; only in larger organizations is user account management performed
in security or even in a separate user access department.
(v) Security Auditor: This position is responsible for performing internal audits of
IT controls to ensure that they are being operated properly.

g) General Operations: Positions in operations are responsible for day-to-day

operational tasks that may include networks, servers, databases, and applications.
(i) Operations Manager: This position is responsible for overall operations that
are carried out by others. Responsibilities will include establishing operations
shift schedules.
(ii) Operations Analyst: This position may be responsible for the development
of operational procedures; examining the health of networks, systems, and
databases; setting and monitoring the operations schedule; and maintaining
operations records.
(iii) Controls Analyst: This position is responsible for monitoring batch jobs, data
entry work, and other tasks to make sure that they are operating correctly.

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 (iv) Systems Operator: This position is responsible for monitoring systems and
networks, performing backup tasks, running batch jobs, printing reports, and
other operational tasks.
(v) Data Entry: This position is responsible for keying batches of data from hard
copy sources.
(vi) Media Librarian: This position is responsible for maintaining and tracking the
use and whereabouts of backup tapes and other media.

h) Service Desk: Positions at the service desk are responsible for providing front line
support services to IT and IT’s customers.
(i) Help desk Analyst: This position is responsible for providing front line user
support services to personnel in the organization.
(ii) Technical Support Analyst: This position is responsible for providing
technical support services to other IT personnel, and perhaps also to IT
customers.

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Ch:3(b) Information Systems’ Controls
(1) Outline the need for IS Controls and IS Audit.
The need for control and audit of computer–based information systems are brought out
as under –
(i) Information = Asset: Information is an enterprise’s most valuable asset. So, its
protection from unauthorized use, from both within and outside the entity, is an IT
priority.
(ii) Incorrect Decision Making: Management and Operational Controls by Managers
involve detection, investigations and correction of out–of–control processes. These
decisions require accurate data to make quality decision rules.
(iii) Value of IT Resources: IT Resources, viz. Hardware, Software and Personnel,
are critical resources of an organization, which has a credible impact on its
infrastructure and business competitiveness.
(iv) Costs of Data Loss: Loss of Data is a critical matter, and affects the organisation’s
ability to adapt and survive in a changing environment.
(v) Cost of Computer Abuse: Unauthorised access to computer systems, computer
viruses, unauthorized physical access to computer facilities and unauthorized copies
of sensitive data, can lead to destruction of IT Assets.
(vi) Costs of Computer Error: In a CIS Environment where many critical processes
are performed through computers, data error during entry or process would cause
a substantial damage.
(vii) Maintenance of Privacy: Data collected in a business process contains details
about an individual on medical, educational, employment, residential and other
details. There is a risk of loss of privacy of such personal information.
(viii) Controlled evolution of Computer Use: Use of Technology and reliability of
complex computer systems cannot be guaranteed and the consequences of using
unreliable systems can be destructive.

(2) List some critical control aspects, which are lacking in a computerized
environment
Some of the critical control lacking in a computerized environment are as follows:
(i) Lack of management understanding of IS risks and related controls;
(ii) Absence or inadequate IS control framework;
(iii) Absence of weak general controls and IS controls;
(iv) Lack of awareness and knowledge of IS risks and controls amongst the business
users and even IT staff;
(v) Complexity of implementation of controls in distributed
computing environments and extended enterprises;
(vi) Lack of control features or their implementation in highly technology driven
environments; and
(vii) Inappropriate technology implementations or inadequate security functionality in
technologies implemented.

(3) Explain the meaning of the terms – (a) Control, (b) Control Objectives, in the
context of IT.

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 Control is defined as the policies, procedures and practices of enterprise structure, that
are designed to provide reasonable assurance that –

(a) business objectives will be achieved, and

(b) undesirable events are prevented or detected and corrected.

The major Control Objectives are –

(i) Authorization: All transactions are approved by responsible personnel in

accordance with their specific or general authority before the transaction is
recorded.
(ii) Completeness: No valid transactions should be omitted from the accounting
records.
(iii) Accuracy: All valid transactions are accurate, consistent with the originating
transaction data, and information is recorded in a timely manner.
(iv) Validity: All recorded transactions fairly represent the economic events that
actually occurred, are lawful in nature, and have been executed in accordance with
Management's general authorization
(v) Physical Safeguards and Security: Access to physical assets and information
systems are controlled and properly restricted to authorized personnel.
(vi) Error Handling: Errors detected at any stage of processing receive prompts
corrective action and are reported to the appropriate level of Management.
(vii) Segregation of Duties: Duties are assigned to individuals such that no one
individual can control both the recording function and the procedures relative to
processing a transaction.

(4) What are the different ways in which IT Controls can be classified?

Categories of controls

Based on Based on Based on Based on

functional objectives of nature of IS functions
nature controls resources

• Internal • Preventive Controls • Environmental • Managerial

Accounting Controls Controls
Controls
• Detective Controls
• Physical Access • Application
• Operational • Corrective Controls
Controls Controls
Controls • Compensatory
controls
• Logical Access
• Administrative Controls
Controls

(5) Briefly explain the classification of IT Controls based on Objectives Controls

based on objectives.

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 1) Preventive controls: Preventive controls prevent errors, omissions or security
incidents from occurring. In other words, Preventive Controls are those inputs,
which are designed to prevent an error, omission or malicious act occurring. Some
of the examples of Preventive Controls are as follows:
a) Employing qualified personnel for certain jobs.
b) Training and re–training of staff.
c) Segregation of duties and authorization of transactions.
d) Access Control, e.g. use of Passwords
e) Documentation.
f) Validation and Edit Checks in the application.
g) Firewalls.
h) Anti–Virus Software
2) Detective controls: These controls are designed to detect errors, omissions or
malicious acts that occur and report the occurrence. In other words, Detective
Controls detect errors or incidents that elude preventive controls. Detective
controls can also include monitoring and analysis to uncover activities or events
that exceed authorized limits or violate known patterns in data that may indicate
improper manipulation. The main characteristics of such controls are given as
follows:
a) Clear understanding of lawful activities so that anything which deviates from
these is reported as unlawful, malicious, etc.;
b) An established mechanism to refer the reported unlawful activities to the
appropriate person or group;
c) Interaction with the preventive control to prevent such acts from occurring
d) Surprise checks by supervisor.
3) Corrective controls: Corrective controls are designed to reduce the impact or
correct an error once it has been detected. It is desirable to correct errors,
omissions, or incidents once they have been detected. They vary from simple
correction of data-entry errors, to identifying and removing unauthorized users or
software from systems or networks, to recovery from incidents, disruptions, or
disasters. The main characteristics of the corrective controls are as follows:
a) Minimizing the impact of the threat;
b) Identifying the cause of the problem;
c) Providing Remedy to the problems discovered by detective controls;
d) Getting feedback from preventive and detective controls;
e) Correcting error arising from a problem; and
f) Modifying the processing systems to minimize future occurrences of the
incidents.

(6) Briefly explain the classification of IT Controls based on Nature of IS Resources.

Based on the nature of IS Resources to which they are applied, Controls are
classified as under –
1) Environmental Controls: Controls relating to housing IT Resources, e.g. Power,
Air–Conditioning, UPS, Smoke Detectors, Fire–Extinguishers, Dehumidifiers, etc.
2) Physical Access Controls: Controls relating to physical security of the tangible
IS Resources and intangible resources stored on tangible media, etc. Such controls
include Access Control Doors, Security Guards, Door Alarms, restricted entry to
secure areas, visitor logged access, video monitoring, etc.

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 3) Logical Access Controls: Controls relating to logical access to information
resources, e.g. Operating Systems Controls, Application Software Boundary
Controls, Networking Controls, Access to Database Objects, Encryption Controls,
etc.

(7) Write short notes on the General Considerations in Protection from

Environmental Exposures / Risks.

Environmental Controls: These are the controls relating to IT environment such as

power, air-conditioning, Uninterrupted Power Supply (UPS), smoke detection, fire-
extinguishers, dehumidifiers etc.

Fire: It is a major threat to the physical security of a computer installation. Some of

the controls are as follows:
 Both automatic and manual fire alarms may be placed at strategic locations and
a control panel may be installed to clearly indicate this.
 Besides the control panel, master switches may be installed for power and
automatic fire suppression system. Different fire suppression techniques like Dry-
pipe sprinkling systems, water-based systems, halon etc., depending upon the
situation may be used.
 Manual fire extinguishers can be placed at strategic locations.
 Fireproof Walls; Floors and Ceilings surrounding the Computer Room and Fire-
Resistant Office Materials such as waste-baskets, curtains, desks, and cabinets
should be used.
Electrical Exposures: These include risk of damages that may be caused due
electrical faults. These include non-availability of electricity, spikes (temporary very
high voltages), fluctuations of voltage and other such risk.
 The risk of damage due to power spikes can be reduced using Electrical Surge
Protectors that are typically built into the Un-interruptible Power System (UPS).
 Voltage regulators and circuit breakers protect the hardware from temporary
increase or decrease of power.
 Emergency Power-Off Switch: When the need arises for an immediate power shut
down during situations like a computer room fire or an emergency evacuation,
an emergency power-off switch at the strategic locations would serve the
purpose. They should be easily accessible and yet secured from unauthorized
people.
Water Damage: Water damage to a computer installation can be the outcome of water
pipes burst. Water damage may also result from other resources such as cyclones,
tornadoes, floods etc.
 Wherever possible have waterproof ceilings, walls and floors;
 Ensure an adequate positive drainage system exists;
 Install alarms at strategic points within the installation;
 Water proofing; and
 Water leakage Alarms.
Pollution Damage and others: The major pollutant in a computer installation is dust.
Dust caught between the surfaces of magnetic tape / disk and the reading and writing
heads may cause either permanent damage to data or read/ write errors.

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 Some of the controls are as follows:
 Power Leads from Two Substations: Electrical power lines that are exposed to
many environmental dangers such as water, fire, lightning, cutting due to
careless digging etc. To avoid these types of events, redundant power links
should feed into the facility. Interruption of one power supply does not adversely
affect electrical supply.
 Prohibitions against Eating, Drinking and Smoking within the Information
Processing Facility: These activities should be prohibited from the information
processing facility. This prohibition should be clear, e.g. a sign on the entry door.

(8)What are the special precautions to be taken for Protection of IT Systems from
Fire?

Following are the special precautions to be taken for Protection of IT Systems from
Fire: -

 Both automatic and manual fire alarms may be placed at strategic locations and a
control panel may be installed to clearly indicate this.
 Besides the control panel, master switches may be installed for power and
automatic fire suppression system. Different fire suppression techniques like Dry -
pipe sprinkling systems, water based systems, halon etc., depending upon the
situation may be used.
 Manual fire extinguishers can be placed at strategic locations.
 Fireproof Walls; Floors and Ceilings surrounding the Computer Room and Fire
Resistant Office Materials such as waste-baskets, curtains, desks, and cabinets
should be used.
 Fire exits should be clearly marked. When a fire alarm is activated, a signal may
be sent automatically to permanently manned station.
 All staff members should know how to use the system. The procedures to be
followed during an emergency should be properly documented are Fire Alarms,
Extinguishers, Sprinklers, Instructions / Fire Brigade Nos., Smoke detectors, and
Carbon dioxide based fire extinguishers.
 Less Wood and plastic should be in computer rooms.
 Use a gas based fire suppression system

(9)What are the special precautions to be taken for Protection of IT Systems from
Electric Shock / Spike, etc?

Following are the special precautions to be taken for Protection of IT Systems from
Electric Shock / Spike: -

 The risk of damage due to power spikes can be reduced using Electrical Surge
Protectors that are typically built into the Un-interruptible Power System (UPS).
 Un-interruptible Power System (UPS)/Generator: In case of a power failure, the
UPS provides the back up by providing electrical power from the battery to the
computer for a certain span of time. Depending on the sophistication of the UPS,
electrical power supply could continue to flow for days or for just a few minutes to

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 permit an orderly computer shutdown.
 Voltage regulators and circuit breakers protect the hardware from temporary
increase or decrease of power.
 Emergency Power-Off Switch: When the need arises for an immediate power shut
down during situations like a computer room fire or an emergency evacuation , an
emergency power-off switch at the strategic locations would serve the purpose.
They should be easily accessible and yet secured from unauthorized people.

(10) Outline the various categories of Physical Access Control

Techniques?

Controlling Physical Access

1) Perimeter Fencing: Fencing at the boundary of the facility will enhance the
security mechanism.
2) Video Cameras:
a. Cameras should be placed at specific locations and monitored by security
guards.
b. Refined video cameras can be activated by motion.
c. Video supervision recording must be retained for possible future playback /
evidence purposes.
3) Controlled Visitor Access:
a. Visitors may be Friends, Maintenance Personnel, Computer Vendors,
Consultants & External Auditors.
b. A responsible employee should escort all visitors to the employee whom the
Visitor intends to meet.
4) Controlled Single Entry Point: All incoming personnel should use controlled only
a Single-Entry Point. This controlled entry point should be monitored by a
Receptionist and Security Guards. Multiple entry points increase the chances of
unauthorized entry. Unnecessary or unused entry points should be eliminated or
dead–locked.
5) Security Guards:
a. Extra security can be provided by appointing guards aided with video cameras
and locked doors.
b. Guards supplied by an external agency should be made to sign a bond, in
order to protect the organisation from loss.
6) Dead Man Doors:
a. These consist a pair of doors, that are generally found in entries to facilities
like computer rooms and document stations.
b. The first entry door must close and lock, for the second door to operate, and
only one person will be permitted in the holding area.
c. Only a single person is permitted to enter at a given point of time. This will
reduce the risk of piggybacking, i.e. when an unauthorized person follows an
authorized person through a secured entry.
7) Alarm System:
a. Illegal entry can be avoided by linking an alarm system at places like –
i. inactive entry point motion detectors, and
ii. reverse flows of enter only or exit only doors, so as to avoid illegal entry
/ exit.

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 b. Security personnel should be able to hear the alarm when activated.
8) Non–exposure of Sensitive Facilities:
a. There should be no explicit indication (e.g. presence of windows or directional
signs), hinting the presence of facilities like computer rooms.
b. Only the general location of the Information Processing Facility (IPF) should
be identifiable.
9) Computer Terminal Locks: These locks ensure that a node / device / terminal
is not turned on or used by unauthorized persons.
10) Indemnity Bonds:
a. All service contract personnel, (e.g. cleaning / maintenance staff, off–site
storage service staff, etc.) should be asked to sign a bond, i.e. Bonded
Personnel.
b. This may not be a measure to improve physical security as such, but this can
limit the financial exposure of the organisation, to a certain extent.
11) Out of hours of Employees:
a. Employees who are out of office for a longer duration, during the office hours,
should be monitored carefully.
b. Their movements must be noted and reported to the concerned officials
frequently.
12) Secured Report/Document Distribution Cart: Secured Carts / Trays, such
as Mail Carts / Trays, must be covered and locked and should always be attended.

(11) What are the various kinds of Locks on Doors, in the context of Physical
Access Control?
Kinds of Locks on Doors
(i) Cipher locks (Combination Door Locks) - Cipher locks are used in low security
situations or when many entrances and exits must be usable all the time. To enter,
a person presses a four-digit number, and the door will unlock for a predetermined
period, usually ten to thirty seconds.
(ii) Bolting Door Locks – A special metal key is used to gain entry when the lock is a
bolting door lock. To avoid illegal entry, the keys should not be duplicated.
(iii) Electronic Door Locks – A magnetic or embedded chip-based plastics card key or
token may be entered a reader to gain access in these systems.

(12) Write short notes on “Physical Identification Media”, in the context of

Physical Access Control.
Physical Identification Medium: These are discussed below: -
(i) Personal Identification Numbers (PIN): A secret number will be assigned to the
individual, in conjunction with some means of identifying the individual, serves to
verify the authenticity of the individual. The visitor will be asked to log on by
inserting a card in some device and then enter their PIN via a PIN keypad for
authentication. His/her entry will be matched with the PIN number available in the
security database.
(ii) Plastic Cards: These cards are used for identification purposes. Customers should
safeguard their card so that it does not fall into unauthorized hands.
(iii) Identification Badges: Special identification badges can be issued to personnel
as well as visitors. For easy identification purposes, their colour of the badge can
be changed. Sophisticated photo IDs can also be utilized as electronic card keys.

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 (13) Write short notes on “Logging on Utilities”, in the context of Physical
Access Control.
Logging on Facilities: These are given as under: -
(i) Manual Logging: All visitors should be prompted to sign a visitor’s log indicating
their name, company represented, their purpose of visit, and person to see. Logging
may happen at both fronts - reception and entrance to the computer room. A valid
and acceptable identification such as a driver’s license, business card or vendor
identification tag may also be asked for before allowing entry inside the company.
(ii) Electronic Logging: This feature is a combination of electronic and biometric
security systems. The users logging can be monitored and the unsuccessful
attempts being highlighted.

(14) What are the various means of “Controlling Physical Access”, in the
context of Physical Access Control?

Other means of Controlling Physical Access: Other important means of controlling

physical access are given as follows:

(i) Video Cameras: Cameras should be placed at specific locations and monitored by
security guards. Refined video cameras can be activated by motion. The video
supervision recording must be retained for possible future play back.
(ii) Security Guards: Extra security can be provided by appointing guards aided with
CCTV feeds. Guards supplied by an external agency should be made to sign a bond
to protect the organization from loss.
(iii) Controlled Visitor Access: A responsible employee should escort all visitors.
Visitors may be friends, maintenance personnel, computer vendors, consultants and
external auditors.
(iv) Bonded Personnel: All service contract personnel, such as cleaning people and
off-site storage services, should be asked to sign a bond. This may not be a measure
to improve physical security but to a certain extent can limit the financial exposure
of the organization.
(v) Dead Man Doors: These systems encompass a pair of doors that are typically found
in entries to facilities such as computer rooms and document stations. The first
entry door must close and lock, for the second door to operate, with the only one
person permitted in the holding area.
(vi) Non–exposure of Sensitive Facilities: There should be no explicit indication such
as presence of windows of directional signs hinting the presence of facilities such as
computer rooms. Only the general location of the information processing facility
should be identifiable.
(vii) Computer Terminal Locks: These locks ensure that the device to the desk is not
turned on or disengaged by unauthorized persons.
(viii) Controlled Single Entry Point: All incoming personnel can use controlled Single-
Entry Point. A controlled entry point is monitored by a receptionist. Multiple entry
points increase the chances of unauthorized entry. Unnecessary or unused entry
points should be eliminated or deadlocked.
(ix) Alarm System: Illegal entry can be avoided by linking alarm system to inactive
entry point and the reverse flows of enter or exit only doors, to avoid illegal entry.
Security personnel should be able to hear the alarm when activated.

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 (x) Perimeter Fencing: Fencing at boundary of the facility may also enhance the
security mechanism.
(xi) Control of out of hours of employee-employees: Employees who are out of
office for a longer duration during the office hours should be monitored carefully.
Their movements must be noted and reported to the concerned officials frequently.
(xii) Secured Report/Document Distribution Cart: Secured carts, such as mail carts,
must be covered and locked and should always be attended.

(15) Outline the various categories of issues arising in relation to Logical

Access Control. The issues that may arise in relation to Logical Access Systems/
Controls are –

Technical Asynchronous Attacks Computer Crime Exposures

Exposures
a) Data Diddling a) Data Leakage a) Financial Loss
b) Bombs b) Wire–tapping b) Legal battles
c) Loss of credibility and
c) Trojan Horse c) Piggybacking
competitive edge
d) Shutdown of
d) Blackmail/ Industrial
d) Worms Computer/ Denial of
Espionage
Service attack
e) Disclosure of
e) Rounding down
confidential, sensitive or
f) Salami
f) embarrassing information
Techniques
g) Trap Doors g) Sabotage
h) Spoofing

(16) Explain the various kinds of “Technical Exposures/Threats”, in the

context of Logical Access Control.
Technical Exposures include unauthorized implementation or modification of data and
software. The following are the major technical exposures –
1. Data Diddling:
a. Meaning: Data Diddling involves the change of data before, during or after it
is entered into the system in order to delete, alter or add key system data.
b. Risk: Data Diddling is of high risk, since it occurs before computer security
can protect data.
c. Low Expertise: Only a limited technical knowledge is required for data
diddling.

2. Bombs:
a. Meaning: Bomb is a piece of bad code in a program, deliberately planted by
an insider or supplier of a program. Bombs cause a destructive process, e.g.
disruption of computer system, modification of data, destruction of stored
data, etc.
b. Risk: The Bombs explode when the conditions of explosion get fulfilled,
causing the damage immediately.

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 c. No infection: Generally, Bombs cannot infect other programs. Since Bombs do
not circulate by infecting other programs, chances of a widespread epidemic
are comparatively less.
3. Trojan Horse:
a. Meaning: Trojan Horse is an illicit coding contained in a legitimate program,
and causes an illegitimate action. So, these are malicious unauthorised
instructions / programs that are hidden under any authorized and properly
functioning program. Trojan Horse is similar to Bombs, but a computer clock
/ particular circumstances do not necessarily activate it.
b. Risk: A Trojan Horse may –
• Change or steal the password, or
• May modify records in protected files, or
• May allow illicit users to use the systems.
4. Worms:
a. Meaning: Worms are standalone programs, but hidden in a host program.
They can be detected easily in comparison to Trojans and Computer Viruses.
b. Risks:
• Worms can help to sabotage systems.
• A Worm actively transmits / copies itself directly to other systems on
the network.
• Worms do not usually live long, but they are destructive when they are
alive.
5. Rounding Down or Rounding off:
a. In this case, the computer rounds down all interest (or similar) calculations to
small fractions of a denomination, and transfers all these small fractions in an
account controlled by the perpetrator.
b. It is difficult to detect because the rounding off is only a small fraction in each
transaction.
6. Salami Techniques:
a. This involves slicing of small amounts of money from a computerized
transaction or account.
b. Salami Technique is slightly different from a rounding technique in the sense
only last few digits are rounded off here.
7. Trap Doors:
a. Here, the perpetrator enters the system through a back door that bypasses
normal system controls, and perpetrates a fraud.
b. They exist out of an authorized program and allow insertion of specific logic,
(e.g. program interrupts) that permit a review of data. They also permit
insertion of unauthorized logic.
8. Spoofing:
a. A Spoofing Attack involves forging one’s source address. One machine is used
to impersonate the other in spoofing technique.
b. A perpetrator duplicates the logon procedure, captures the user’s password,
attempts for a system crash and makes the user login again. The perpetrator
makes the User think that he is interacting with the operating system. But it
is only the second time the User actually logs into the system.
c. Spoofing occurs only after a particular machine has been identified as
vulnerable.

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 (17) Explain the various kinds of “Asynchronous Attacks”, in the context
of Logical Access Control.
Asynchronous Attack occur in many environments where data can be moved
synchronously across telecommunication lines. Data that is waiting to be transmitted
are liable to unauthorized access called Asynchronous Attack. These attacks are hard
to detect because they are usually very small pin like insertions and are of following
types:
(i) Data Leakage: This involves leaking information out of the computer by means of
dumping files to paper or stealing computer reports and tape.
(ii) Subversive Attacks: These can provide intruders with important information
about messages being transmitted and the intruder may attempt to violate the
integrity of some components in the sub-system.
(iii) Wire- Tapping: This involves spying on information being transmitted over
communication network.
(iv) Piggybacking: This is the act of following an authorized person through a secured
door or electronically attaching to an authorized telecommunication link that
intercepts and alters transmissions. This involves intercepting communication
between the operating system and the user and modifying them or substituting new
messages.

(18) Logical Access violation can be done by many persons. Explain.

Logical Access Violators are often the same people who exploit physical exposures,
although the skills needed to exploit logical exposures are more technical and
complex. They are mainly as follows:
(i) Hackers: Hackers try their best to overcome restrictions to prove their ability.
Ethical hackers most likely never try to misuse the computer intentionally;
(ii) Employees (authorized or unauthorized);
(iii) IS Personnel: They have easiest to access to computerized information since they
come across to information during discharging their duties. Segregation of duties
and supervision help to reduce the logical access violations;
(iv) Former Employees: should be cautious of former employees who have left the
organization on unfavourable terms;
(v) End Users; Interested or Educated Outsiders; Competitors; Foreigners; Organized
Criminals; Crackers; Part-time and Temporary Personnel; Vendors and consultants;
and Accidental Ignorant – Violation done unknowingly.
(19) Explain the Logical Access Control Measures under “User Access
Management”.
User Access Management: This is an important factor that involves following:
(i) User Registration: Information about every user is documented. Some questions
like why and who is the user granted the access; has the data owner approved the
access, and has the user accepted the responsibility? etc. are answered. The de-
registration process is also equally important.
(ii) Privilege management: Access privileges are to be aligned with job requirements
and responsibilities and are to be minimal w.r.t their job functions. For example, an
operator at the order counter shall have direct access to order processing activity
of the application system.

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 (iii) User password management: Passwords are usually the default screening point
for access to systems. Allocations, storage, revocation, and reissue of password are
password management functions. Educating users is a critical component about
passwords, and making them responsible for their password.
(iv) Review of user access rights: A user’s need for accessing information changes
with time and requires a periodic review of access rights to check anomalies in the
user’s current job profile, and the privileges granted earlier.

(20) Explain the Logical Access Control Measures under “User

Responsibilities”.
User Responsibilities: User awareness and responsibility are also important factors
and are as follows:
(i) Password use: Mandatory use of strong passwords to maintain confidentiality.
(ii) Unattended user equipment: Users should ensure that none of the equipment
under their responsibility is ever left unprotected. They should also secure their PCs
with a password and should not leave it accessible to others.

(21) Explain the Logical Access Control Measures under “Network Access”.
Network Access Control: An Internet connection exposes an organization to the
harmful elements of the outside world. The protection can be achieved through the
following means:
(i) Policy on use of network services: An enterprise wide policy applicable to
internet service requirements aligned with the business need for using the
Internet services is the first step. Selection of appropriate services and approval
to access them should be part of this policy.
(ii) Enforced path: Based on risk assessment, it is necessary to specify the exact
path or route connecting the networks; e.g. internet access by employees will be
routed through a firewall and proxy.
(iii) Segregation of networks: Based on the sensitive information handling
function; say a VPN connection between a branch office and the head- office,
this network is to be isolated from the internet usage service
(iv) Network connection and routing control: The traffic between networks
should be restricted, based on identification of source and authentication access
policies implemented across the enterprise network facility.
(v) Security of network services: The techniques of authentication and
authorization policy should be implemented across the organization’s network.
(vi) Firewall: A Firewall is a system that enforces access control between two
networks. To accomplish this, all traffic between the external network and the
organization’s Intranet must pass through the firewall that will allow only
authorized traffic between the organization and the outside to pass through it.
The firewall must be immune to penetrate from both outside and inside the
organization. In addition to insulating the organization’s network from external
networks, firewalls can be used to insulate portions of the organization’s Intranet
from internal access also.
(vii) Encryption: Encryption is the conversion of data into a secret code for storage
in databases and transmission over networks. The sender uses an encryption
algorithm with a key to convert the original message called the Clear text into

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 Cipher text. This is decrypted at the receiving end. Two general approaches are
used for encryption viz. private key and public key encryption.
(viii) Call Back Devices: It is based on the principle that the key to network security
is to keep the intruder off the Intranet rather than imposing security measure
after the criminal has connected to the intranet. The call- back device requires
the user to enter a password and then the system breaks the connection. If the
caller is authorized, the call back device dials the caller’s number to establish a
new connection. This limits access only from authorized terminals or telephone
numbers and prevents an intruder masquerading as a legitimate user. This also
helps to avoid the call forwarding and man-in-the middle attack.

(22) Explain the Logical Access Control Measures under “Operating System
Access”.
Operating System Access Control: Operating System(O/S) is the computer control
program that allows users and their applications to share and access common
computer resources, such as processor, main memory, database and printers. Hence,
protecting operating system access is extremely crucial and can be achieved using
following steps:

(i) Automated terminal identification: This will help to ensure that a specified
session could only be initiated from a certain location or computer terminal.
(ii) Terminal log-in procedures: A log-in procedure is the first line of defense
against unauthorized access as it does not provide unnecessary help or
information, which could be misused by an intruder. When the user initiates the
log-on process by entering user-id and password, the system compares the ID
and password to a database of valid users and accordingly authorizes the log-in.
(iii) Access Token: If the log on attempt is successful, the Operating System creates
an access token that contains key information about the user including user-id,
password, user group and privileges granted to the user. The information in the
access token is used to approve all actions attempted by the user during the
session.
(iv) Access Control List: This list contains information that defines the access
privileges for all valid users of the resource. When a user attempts to access a
resource, the system compasses his or her user-id and privileges contained in
the access token with those contained in the access control list. If there is a
match, the user is granted access.
(v) Discretionary Access Control: The system administrator usually determines;
who is granted access to specific resources and maintains the access control list.
However, in distributed systems, resources may be controlled by the end-user.
Resource owners in this setting may be granted discretionary access control,
which allows them to grant access privileges to other users. For example, the
controller who is owner of the general ledger grants read only privilege to the
budgeting department while accounts payable manager is granted both read and
write permission to the ledger.
(vi) User identification and authentication: The users must be identified and
authenticated in a foolproof manner. Depending on risk assessment, more
stringent methods like Biometric Authentication or Cryptographic means like
Digital Certificates should be employed.

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 (vii) Password management system: An operating system could enforce selection
of good passwords. Internal storage of password should use one-way hashing
algorithms and the password file should not be accessible to users.
(viii) Use of system utilities: System utilities are the programs that help to manage
critical functions of the operating system e.g. addition or deletion of users.
Obviously, this utility should not be accessible to a general user. Use and access
to these utilities should be strictly controlled and logged.
(ix) Duress alarm to safeguard users: If users are forced to execute some
instruction under threat, the system should provide a means to alert the
authorities.
(x) Terminal time out: Log out the user if the terminal is inactive for a defined
period. This will prevent misuse in absence of the legitimate user.
(xi) Limitation of connection time: Define the available time slot. Do not allow
any transaction beyond this time. For example, no computer access after 8.00
p.m. and before 8.00 a.m. or on a Saturday or Sunday.

(23) Explain the Logical Access Control Measures under “Application and
Monitoring System Access”.
Application and Monitoring System Access Control: Some steps are as follows:
(i) Information Access restriction: The access to information is prevented by
application specific menu interfaces, which limit access to system function. A user
can access only to those items, s/he is authorized to access. Controls are
implemented on the access rights of users. For example - read, write, delete, and
execute. And ensure that sensitive output is sent only to authorized terminals and
locations.
(ii) Sensitive System isolation: Based on the critical constitution of a system in an
enterprise, it may even be necessary to run the system in an isolated environment.
Monitoring system access and use is a detective control, to check if preventive
controls discussed so far are working. If not, this control will detect and report any
unauthorized activities.
(iii) Event logging: In Computer systems, it is easy and viable to maintain extensive
logs for all types of events. It is necessary to review if logging is enabled and the
logs are archived properly. An intruder may penetrate the system by trying different
passwords and user ID combinations. All incoming and outgoing requests along with
attempted access should be recorded in a transaction log. The log should record the
user ID, the time of the access and the terminal location from where the request has
been originated.
(iv) Monitor System use: Based on the risk assessment, a constant monitoring of some
critical systems is essential. Define the details of types of accesses, operations,
events and alerts that will be monitored. The extent of detail and the frequency of
the review would be based on criticality of operation and risk factors. The log files
are to be reviewed periodically and attention should be given to any gaps in these
logs.
(v) Clock Synchronization: Event logs maintained across an enterprise network plays
a significant role in correlating an event and generating report on it. Hence, the need
for synchronizing clock time across the network as per a standard time is mandatory.

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 (24) What are the sub–systems under Management Controls?
Management Controls are adopted by the Management of an Enterprise are to ensure
that the information systems function correctly and that they meet the strategic
business objectives. Management Controls may be further analysed into the following
sub–systems: -

Controls Scope: Controls in this area cover –

(a) Top Management and Top Management’s role in planning. organizing.

Information Systems leading and controlling the IS Function. Role of Top
Management Controls Management in long–run policy decision–making and
in translating long–run policies into short–run goals
and objectives.

(b) System Development Contingency Perspective on models of the IS

Management Controls Development Process that Auditors can use as a
basis for evidence collection and evaluation

(c) Programming Major Phases in the Program Development Life Cycle

Management Controls and the important controls that should be exercised
in each phase.

(d) Data Administration / Role of Database Administrator and the controls to

Resource Management be exercised in each phase.
Controls

(e) Quality Assurance Major functions that QA Management should perform

Management Controls to ensure that the development. implementation.
operation. and maintenance of IS, conform to
Quality Standards.

(f) Security Administration Major Functions performed by Security

/ Management Controls Administrators to identify major threats to the IS
functions, and to design, implement, operate, and
maintain controls that reduce expected losses from
these threats to an acceptable level.

(g) Operations Major Functions performed by Operations

Management Controls Management to ensure the day–to–day operations of
the IS function are well controlled.

(25) Explain the functions of Top Management and IS Management in the

context of IS Controls.
The controls adapted by the management of an enterprise are to ensure that the
information systems function correctly and they meet the strategic business
objectives. The scope of control here includes framing high-level IT policies,
procedures and standards on a holistic view and in establishing a sound internal
controls framework within the organization. The major functions that a senior
manager must perform are Planning, Organizing, Leading and Controlling.

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 (i) Planning – This includes determining the goals of the information systems function
and the means of achieving these goals. The steering committee shall comprise of
representatives from all areas of the business, and IT personnel that would be
responsible for the overall direction of IT. The steering committee should assume
overall responsibility for the activities of the information systems function.
(ii) Organizing – There should be a prescribed IT organizational structure with
documented roles and responsibilities and agreed job descriptions. This includes
gathering, allocating, and coordinating the resources needed to accomplish the goals
that are established during Planning function.
(iii) Leading – This includes motivating, guiding, and communicating with personnel.
The purpose of leading is to achieve the harmony of objectives; i.e. a person’s or
group’s objectives must not conflict with the organization’s objectives. The process
of leading requires managers to motivate subordinates, direct them and
communicate with them.
(iv) Controlling – This includes comparing actual performance with planned
performance as a basis for taking any corrective actions that are needed. This
involves determining when the actual activities of the information system’s functions
deviate from the planned activities.

(26) What are the various activities performed under Systems Development
Management Controls?
Systems Development Management has responsibility for the functions concerned
with analysing, designing, building, implementing, and maintaining information
systems. The activities mentioned below deal with system development controls in
IT setup.
(i) System Authorization Activities: All systems must be properly and formally
authorized to ensure their economic justification and feasibility. This requires that
each new system request be submitted in written form by users to systems
professionals who have both the expertise and authority to evaluate and approve (or
reject) the request.
(ii) User Specification Activities: Users must be actively involved in the systems
development process wherein a detailed written descriptive document of the logical
needs of the users is created.
(iii) Technical Design Activities: The technical design activities translate the user
specifications into a set of detailed technical specifications of a system that meets
the user’s needs.
(iv) Internal Auditor’s Participation: The internal auditor should be involved at the
inception of the system development process to make conceptual suggestions
regarding system requirements and controls and should be continued throughout all
phases of the development process and into the maintenance phase.
(v) Program Testing: All program modules must be thoroughly tested before they are
implemented. The results of the tests are then compared against predetermined
results to identify programming and logic errors.
(vi) User Test and Acceptance Procedures: Just before implementation, the individual
modules of the system must be tested as a unified whole. A test team comprising
user personnel, systems professionals, and internal audit personnel subjects the
system to rigorous testing. Once the test team is satisfied that the system meets its
stated requirements, the system is formally accepted by the user department(s).

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 (27) Proper IS Controls can be exercised during every stage of SDLC Process.
Explain.
Program Development and Implementation Phase of SDLC aims to produce or acquire
and to implement high–quality programs. The Program Development Life Cycle
(PDLC) has six major phases with the following control aspects –

Phase Controls
Planning Techniques like Work Breakdown Structures (WBS), Gantt charts
and PERT (Program Evaluation and Review Technique) Charts can
be used to monitor progress against plan.
Control The Control phase has two major purposes:
 Task progress in various software life-cycle phases should
be monitored against plan and corrective action should be
taken in case of any deviations
 Control over software development, acquisition, and
implementation tasks should be exercised to ensure
software
released for production use is authentic, accurate, and
complete.
Design A systematic approach to program design, such as any of the
structured design approaches or object-oriented design is
adopted.
Coding Programmers must choose a module implementation and
integration strategy (like Top-down, Bottom-up & Threads
approach), a coding strategy (that follows percepts of structured
programming), and a documentation strategy (to ensure
program code is easily readable & understandable).
Testing Three types of testing can be undertaken:
 Unit Testing – which focuses on individual program
modules;
 Integration Testing – Which focuses in groups of
program modules; and
 Whole-of-Program Testing – which focuses on whole
program.
These tests are to ensure that a developed or acquired program
achieves its specified requirements.

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 Operation Management establishes formal mechanisms to monitor the
and status of operational programs so maintenance needs can be
Maintenance identified on a timely basis. Three types of maintenance can be
used are as follows:
 Repair Maintenance – in which program errors are
corrected;
 Adaptive Maintenance – in which the program is modified
to meet changing user requirements; and
 Perfective Maintenance - in which the program is tuned
to decrease the resource consumption.

(28) Outline the scope and significance of Quality Assurance (QA) Management
Controls.
Scope and significance of Quality Assurance (QA) Management Controls: -
(i) Scope: Quality Assurance Management is concerned with ensuring that the –
a. Information Systems produced by the IS Function achieve certain Quality Goals,
and
b. Development, implementation, operation and maintenance of IS, comply with a
set of Quality Standards.
(ii) Importance: The reasons for the emergence of QA in many organizations are as
follows –
a. Organizations are producing many safety–critical systems, where quality is a
important evaluation criteria.
b. Organizations are undertaking more ambitious projects when they build software.
c. Users are becoming more demanding in terms of their expectations about the
quality of software they employ to undertake their work,
d. Organizations are becoming more concerned about their liabilities if they produce
and sell defective software
e. Poor Quality Control over the production, implementation, operation, and
maintenance of software can lead to problems of – missed deadlines, dissatisfied
Users, lower morale among IS Staff, higher maintenance, and abandonment of
many strategic projects.
f. Improving the quality of IS is a part of a worldwide trend among organizations to
improve the quality of the goods and services they sell.

(29) Explain the functions performed under Operations Management Controls.

Operations management is responsible for the daily running of hardware and
software facilities. Operations management typically performs controls over the
functions as below:
(i) Computer Operations: The controls over computer operations govern the
activities that directly support the day-to-day execution of either test or production
systems on the hardware/software platform available.
(ii) Network Operations: This includes the proper functioning of network operations
and monitoring the performance of network communication channels, network
devices, and network programs and files. Data may be lost or corrupted through
component failure.

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 (iii) Data Preparation and Entry: Irrespective of whether the data is obtained
indirectly from source documents or directly from, say, customers, keyboard
environments and facilities should be designed to promote speed and accuracy and
to maintain the wellbeing of keyboard operators.
(iv) Production Control: This includes the major functions like- receipt and dispatch
of input and output; job scheduling; management of service-level agreements with
users; transfer pricing/charge-out control; and acquisition of computer
consumables.
(v) File Library: This includes the management of an organization’s machine- readable
storage media like magnetic tapes, cartridges, and optical disks.
(vi) Documentation and Program Library: This involves that documentation
librarians ensure that documentation is stored securely; that only authorized
personnel gain access to documentation; that documentation is kept up-to- date
and that adequate backup exists for documentation. The documentation may
include reporting of responsibility and authority of each function; Definiti on of
responsibilities and objectives of each functions; Reporting responsibility and
authority of each function; Policies and procedures; Job descriptions and
Segregation of Duties.
(vii) Help Desk/Technical support: This assists end-user to employ end-user
hardware and software such as micro-computers, spreadsheet packages, database
management packages etc. and provided the technical support for production
systems by assisting with problem resolution.
(viii) Capacity Planning and Performance Monitoring: Regular performance
monitoring facilitates the capacity planning wherein the resource deficiencies must
be identified well in time so that they can be made available when they are needed.
(ix) Management of Outsourced Operations: This has the responsibility for carrying
out day-to-day monitoring of the outsourcing contract.

(30) What are the types of Application Controls? Briefly explain their Accounting
and Operations Audit Trail?
Application Controls can be classified into the following categories-

Boundary Input Communicati Process Databas Output

Controls Controls on Controls Controls e Controls
Control
s
1. 1. Source 1.Physical 1.Run–to–Run 1.Update 1.Storage &
Cryptograph Document Component Totals Controls Logging of
y 2. Data Controls 2.Reasonablen 2.Report sensitive, critical
2. Passwords Coding 2.Line Error ess Controls forms
3. PIN 3. Batch Controls Verificatio 2. Logging of
4.Identificatio 4. 3.Flow n Output Program
n Validation Controls 3.Edit Checks Executions
Cards 5.Existence 4.Link 4.Field 3.Spooling /
5.Biomet /Recovery Controls Initialization Queueing
ric 5.Topological 5.Exception Controls
Devices Controls Report 4. Controls over
6.Channel s Printing
Access

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 Controls 6.Existence/ 5. Report
7.Internetwor Recovery Distribution
king Controls and Collection
Controls Controls
6. Retention
Controls
7. Existence /
Recovery
Controls

Audit trail controls attempt to ensure that a chronological record of all events that have
occurred in a system is maintained. This record is needed to answer queries, fulfill
statutory requirements, detect the consequences of error and allow system monito ring
and tuning.

 The Accounting Audit Trail shows the source and nature of data and processes
that update the database.
 The Operations Audit Trail maintains a record of attempted or actual resource
consumption within a system.

(31) Explain the various Boundary Control Techniques.

Boundary Control Techniques are as under–
 Cryptography: It deals with programs for transforming data into cipher text that
are meaningless to anyone, who does not possess the authentication to access the
respective system resource or file. A cryptographic technique encrypts data (clear
text) into cryptograms (cipher text) and its strength depends on the time and cost
to decipher the cipher text by a cryptanalyst. Three techniques of cryptography are
transposition (permute the order of characters within a set of data), substitution
(replace text with a key-text) and product cipher (combination of transposition and
substitution).
 Passwords: User identification by an authentication mechanism with personal
characteristics like name, birth date, employee code, function, designation or a
combination of two or more of these can be used as a password boundary access
control. A few best practices followed to avoid failures in this control system are;
minimum password length, avoid usage of common dictionary words, periodic change
of passwords, hashing of passwords and number of entry attempts.
 Personal Identification Numbers (PIN): PIN is similar to a password assigned to
a user by an institution a random number stored in its database independent to a
user identification details, or a customer selected number. Hence, a PIN may be
exposed to vulnerabilities while issuance or delivery, validation, transmission and
storage.
 Identification Cards: Identification cards are used to store information required in
an authentication process. These cards are to be controlled through the application
for a card, preparation of the card, issue, use and card return or card termination
phases.
 Biometric Devices: Biometric identification e.g. thumb and/or finger impression,
eye retina etc. are also used as boundary control techniques.

(32) Write short notes on Input Controls

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 Input control:
 Input Controls are responsible for ensuring the accuracy and completeness of data
and instruction input into an application system, sometimes using data codes.
 Input Controls are important since substantial time is spent on input of data, involve
human intervention and are therefore prone to error and fraud.
 Input Controls include Existence/Recovery Controls, since it might be necessary to
re–process input data in case the Master Files are lost, corrupted, or destroyed.
 Source Documents or Transaction Listings are generally stored securely for longer
periods for reasons like statutory requirements, change verification, audit trail, etc.
 Input Controls are further classified into – (a) Source Document Control, (b) Data
Coding Controls, (c) Batch Controls, and (d) Validation Controls.

(33) Explain the concept of Source Document Controls, in the context of Input
Controls.
Source Document Controls: Frauds with respect to Source Documents include data
entry of fictitious transactions, as well as non–recording of certain transactions.
Some Controls with respect to Source Documents are –
 Pre–Numbered Documents: Source Documents should be pre–numbered from the
printer with a unique sequential number on each document. This enables accurate
accounting of document usage and provides an audit trail for tracing transactions
through accounting records.
 Sequential Use of Documents: Source Documents should be distributed to the
Users and used in sequence. There should be adequate physical security / restricted
access over the source document inventory at the User site.
 Periodical Audit: Missing source documents should be identified by reconciling
document sequence numbers, i.e. Printed less Cancelled less Used = Inventory of
Documents. Documents not accounted for, cancelled but not available for audit, etc.
should be reported to Management.

(34) Explain the concept of Data Coding Controls, in the context of Input
Controls.
Data Coding Controls: Two types of errors - Transcription and Transposition errors
can corrupt a data code and cause processing errors. Any of these errors can cause
serious problems in data processing if they go undetected. These simple errors ca n
severely disrupt operations.
 Transcription Errors: It is a special type of data entry error that is commonly made
by human operators or by Optical Character Recognition (OCR) programs. Like
Addition errors (when an extra digit is added to the code); Truncation Errors (when
a digit is removed from the code) and Substitution Errors (replacement of on digit in
a code with another).
 Transposition Errors: It is a simple error of data entry that occur when two digits
that are either individual or part of larger sequence of numbers are reversed
(Transpose) when posting a transaction. For example, a sales order for customer
987654 that is transposed into 897654 will be posted to the wrong customer’s
account. A similar error in an inventory item code on a purchase order could result
in ordering unneeded inventory and failing to order inventory that is needed.

(35) Explain the concept of Batch Controls, in the context of Input Controls.

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 Batch Controls: Batching is the process of grouping together transactions that bear
some type of relationship to each other. Various controls can be exercises over the
batch to prevent or detect errors or irregularities. To identify errors or irregularities
in either a physical or logical batch, three types of control totals are as follows:
 Financial totals: Grand totals calculated for each field containing money amounts.
 Hash totals: Grand totals calculated for any code on a document in the batch, eg.,
the source document serial numbers can be totalled.
 Document/Record Counts: Grand totals for number of documents in record in
batch.

(36) Explain the concept of Validation Controls, in the context of Input

Controls.
Validation Controls: Input validation controls are intended to detect errors in the
transaction data before the data are processed. Some of these controls include the
following:
 Field interrogation: It involves programmed procedures that examine the characters
of the data in the field. This includes the checks like Limit Check (against predefined
limits), Picture Checks (against entry into processing of incorrect/invalid characters),
valid check codes (against predetermined transactions codes, tables) etc.
 Record interrogation: This includes the reasonableness check (Whether the value
specified in a field is reasonable for that particular field?); Valid Sign (to determine
which sign is valid for a numeric field) and Sequence Check (to follow a required
order matching with logical records.)
 File Interrogation: This includes version usage; internal and external labelling; data
file security; file updating and maintenance authorization etc.

(37) Explain the controls to mitigate the exposure in the Communication

sub–system.
Communication Controls: These discuss exposures in the communication
subsystem, controls over physical components, communication line errors, flows,
and links, topological controls, channel access controls, controls over subversive
attacks, internetworking controls, communication architecture controls, audit trail
controls, and existence controls. Some communication controls are as follows:
 Physical Component Controls: These controls incorporate features that mitigate
the possible effects of exposures.
 Line Error Control: Whenever data is transmitted over a communication line, recall
that it can be received in error because of attenuation distortion, or noise that occurs
on the line. These errors must be detected and corrected.
 Flow Controls: Flow controls are needed because two nodes in a network can differ
in terms of the rate at which they can send, received, and process data. For example,
a main frame can transmit data to a microcomputer terminal.
 Link Controls: In Wide Area Network (WAN), line error control and flow control are
important functions in the component that manages the link between two nodes in a
network.
 Channel Access Controls: Two different nodes in a network can compete to use a
communication channel. Whenever the possibility of contention for the channel
exists, some type of channel access control technique must be used.

(38) Write short notes on Processing Controls.

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 Processing Controls: The processing subsystem is responsible for computing,
sorting, classifying, and summarizing data. Its major components are the Central
Processor in which programs are executed, the real or virtual memory in which
program instructions and data are stored, the operating system that manages system
resources, and the application programs that execute instructions to achieve specific
user requirements. Some of these controls are as follows:
(i) Central Processor Controls: Some Controls to reduce expected losses from
errors and irregularities associated with Central Processors are –

Control Explanation
Error Detection and (a) Processors may malfunction due to design errors,
Correction manufacturing defects, damage, electromagnetic
interference, and ionizing radiation.
(b) Various types of Error Detection and Correction
Strategies must be used.
Multiple Execution (a) Determination of number and nature of the execution
States states enforced by the Processor is very critical for the
auditors.
(b) They help to determine unauthorized activities,
such as gaining access to sensitive data maintained in
memory regions assigned to the operating system or other
user processes, etc.
Timing Controls An Operating System might get stuck in an infinite
loop. In the absence of any control, the program will
not allow the Processor to function and prevent other
programs from performing.
Component Failure of Processor can result in significant losses.
Replication Redundant Processors allow errors to be detected and
corrected. If Processor Failure is permanent in
multicomputer or multiprocessor architectures, the
system might re–configure itself to isolate the failed
processor.

(ii) Real Memory Controls:

a. It comprises of fixed amount of primary storage in which programs or data must
reside to carry out the Instructions from the Central Processor.
b. It also tries to detect and correct errors that occur in memory cells and to protect
areas of memory assigned to a program from illegal access by another program.
(iii) Virtual Memory Controls:
a. Virtual Memory exists when the addressable storage space is larger than that of
the available Real Memory Space.
b. To achieve this outcome, a Control Mechanism is used to map Virtual Memory
Addresses into Real Memory Addresses
(iv) Data Processing Controls:
a. These perform validation checks to identify errors during processing of data.
b. They are required to ensure both the completeness and the accuracy of data
being processed.
c. Normally, the processing controls are enforced through database management
system that stores the data.

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 (39) Explain the concept of Update Controls, in the context of Database
Controls.
Major Update Controls are as follows:
(i) Sequence Check between Transaction and Master Files: Synchronization and
the correct sequence of processing between the master file and transaction file is
critical to maintain the integrity of updating, insertion or deletion of records in the
master file with respect to the transaction records. If errors, in this stage are
overlooked, it leads to corruption of the critical data.
(ii) Ensure All Records on Files are processed: While processing, the transaction file
records mapped to the respective master file, and the end-of-file of the transaction
file with respect to the end-of-file of the master file is to be ensured.
(iii) Process multiple transactions for a single record in the correct order:
Multiple transactions can occur based on a single master record (e.g. dispatch of a
product to different distribution centres). Here, the order in which transactions are
processed against the product master record must be done based on a sorted
transaction code.
(iv) Maintain a suspense account: When mapping between the master record to
transaction record results in a mismatch due to failure in the corresponding record
entry in the master record; then these transactions are maintained in a suspense
account.

(40) Explain the concept of Report Controls, in the context of Database

Controls.
Major Report Controls are as follows:
(i) Standing Data: Application programs use many internal tables to perform various
functions like gross pay calculation, billing calculation based on a price table, bank
interest calculation etc. Maintaining integrity of the pay rate table, price table and
interest table is critical within an organization.
(ii) Print-Run-to Run Control Totals: Run-to-Run control totals help in identifying
errors or irregularities like record dropped erroneously from a transaction file, wrong
sequence of updating or the application software processing errors.
(iii) Print Suspense Account Entries: Similar to the update controls, the
suspense account entries are to be periodically monitors with the respective error
file and action taken on time.
(iv) Existence/Recovery Controls: The back-up and recovery strategies together
encompass the controls required to restore failure in a database. Backup strategies
are implemented using prior version and logs of transactions or changes to the
database. Recovery strategies involve roll-forward (current state database from a
previous version) or the roll-back (previous state database from the current version)
methods.

(41) What are the different types of Output Control Techniques?

Output Controls ensure that the data delivered to users will be presented, formatted
and delivered in a consistent and secured manner. Output can be in any form, it can

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 either be a printed data report or a database file in a removable media. Various
Output Controls are as follows:
(i) Storage and Logging of sensitive, critical forms: Pre-printed stationery should
be stored securely to prevent unauthorized destruction or removal and usage.
(ii) Logging of output program executions: When programs used for output of data
are executed, these should be logged and monitored; otherwise
confidentiality/integrity of the data may be compromised.
(iii) Spooling/Queuing: “Spool” is an acronym for “Simultaneous Peripherals
Operations Online”. This is a process used to ensure that the user can continue
working, while the print operation is getting completed. A queue is the list of
documents waiting to be printed on a particular printer; this should not be subject
to unauthorized modifications.
(iv) Controls over printing: Outputs should be made on the correct printer and it
should be ensured that unauthorized disclosure of information printed does not take
place.
(v) Report Distribution and Collection Controls: Distribution of reports should be
made in a secure way to prevent unauthorized disclosure of data. It should be made
immediately after printing to ensure that the time gap between generation and
distribution is reduced. A log should be maintained for reports that were generated
and to whom these were distributed.
(vi) Retention Controls: Retention controls consider the duration for which
outputs should be retained before being destroyed. Retention control requires that
a date should be determined for each output item produced.

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Ch:3(c) Information Systems – Audit
(1) What are the objectives of IS Audit?
IS Auditing is defined as the process of attesting objectives that focus on asset
safeguarding, data integrity and management objectives that include effectiveness
and efficiency both. This enables organizations to better achieve four major
objectives that are as follows:
(i) Asset Safeguarding Objectives: The information system assets (hardware,
software, data information etc.) must be protected by a system of internal controls
from unauthorized access.
(ii) Data Integrity Objectives: It is a fundamental attribute of IS Auditing. The
importance to maintain integrity of data of an organization requires all the time.
It is also important from the business perspective of the decision maker,
competition and the market environment.
(iii) System Effectiveness Objectives: Effectiveness of a system is evaluated by
auditing the characteristics and objective of the system to meet business and user
requirements.
(iv) System Efficiency Objectives: To optimize the use of various information
system resources (machine time, peripherals, system software and labour) along
with the impact on its computing environment.

(2) Write short notes on Audit Trails.

Audit trails: Audit Trails refers to the Logs that are designed to record activities at
the System, Application and User levels. When properly implemented, Audit Trails
provide an important detective control to help in accomplishing security policy
objectives. Audit Trails serves 3 main purposes–
a. to detect unauthorized access to the system,
b. to facilitate the reconstruction of events, and
c. promote personal accountability.
Contents of Log: The Audit Trail / Log should contain –
a. specific events,
b. important activities, and
c. other relevant and important information perceived by the management for
effective control.
Types: Audit Trail may be of two types –
a. Accounting Audit Trail – to show the source and nature of data and processes
that update the database.
b. Operations Audit Trail – to maintain a record of attempted or actual resource
consumption within a system.

(3) What are the Security Objectives of Audit Trails?

Audit Trails serve as a control tool and helps to achieve security policy objectives in
the following ways –
1. Detecting Unauthorised Access:
a) Unauthorized Access can be detected on–line or after such access has been
made.

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 b) On–line detection protects the system from outsiders trying to break system
controls. A Real–time audit trail reports changes in system performance caused
by infection of a Virus or Worm. But, such real–time detection involves a
significant amount of cost, and can also reduce operational performance and
speed.
c) After–the–fact detection logs are stored electronically and reviewed periodically.
They are used to determine whether the unauthorised access was successful, or
was only a failed attempt.
2. Reconstructing Events:
a) Audit Trail helps to reconstruct events that led to system failures, security
violations or application processing errors, by means of an Audit Analysis.
b) Audit Analysis identifies and analyses the conditions that caused system failure.
For example, by maintaining a record of all the changes to account balances,
the Audit Trail can be used to reconstruct accounting data files that were
corrupted by system failure. The knowledge of such conditions helps to assign
responsibility and avoid future recurrence.
3. Personal Accountability:
a) Audit Trails monitor user activity even at the lowest level. This serves as a
preventive control.
b) Individuals are afraid of social stigma and hence hesitate to violate security
policy if they know that their actions are recorded in an audit log. This minimizes
security violations.

(4) Write short notes on Integrated Test Facility (ITF) Technique.

The ITF technique involves the creation of a dummy entity in the application system
files and the processing of audit test data against the entity as a means of verifying
processing authenticity, accuracy, and completeness.
 A small set of fictitious records is placed in the master files. The records may be
a fictitious division, department or branch office or a customer or a supplier.
 Processing test transactions to update these dummy records will not affect the
actual records.
 As fictitious & actual records are processed together, the Company employees
are unaware of this testing.
 The system application must distinguish ITF records from actual records, collect
information on the effects of the test transactions, and report the results.
 The IS Auditor compares the processing and expected results to verify the
correctness of systems operations.
 In a Batch Processing System, this technique eliminates the need to reverse test
transactions. It is also easily concealed from employees operating with the
system.

(5) Write short notes on Snapshot Technique.

Tracing a transaction in a computerized system can be performed, with the help of
Snapshots or extended records. The Snapshot Software is built into the system at
those points where material processing occurs, which takes images of the flow of any
transaction as it moves through the application. These images can be utilized to
assess the authenticity, accuracy, and completeness of the processing carried out on
the transaction. The main areas to be considered while using snapshots are –
(a) to locate the snapshot points based on materiality of transactions,

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 (b) to determine when the snapshot will be captured, and
(c) to ensure that the reporting system design and implementation leads to
presentation of data in a meaningful way.

(6) Write short notes on System Control Audit Review File (SCARF)
Technique?
System Control Audit Review File (SCARF) Technique:
 SCARF uses embedded audit modules within the host application system to
monitor transaction activity continuously and collect data on transactions of
special audit significance.
 The data collected is recorded in a SCARF Master File or Audit Log.
 SCARF File records transactions like the following – transactions exceeding a
specified rupee limit, involving inactive accounts, deviating from Company
policy, or containing write–downs of asset values.
 The Auditor receives a periodic printout of the SCARF File, examines the
information to identify questionable transactions, and performs necessary
follow–up investigation.

(7) Write short notes on Continuous and Intermittent Simulation (CIS)

Technique.
Continuous and Intermittent Simulation (CIS): This is a variation of the SCARF
continuous audit technique. This technique can be used to trap exceptions whenever
the application system uses a database management system. During application
system processing, CIS executes in the following way:
 The database management system reads an application system transaction. It
is passed to CIS. CIS then determines whether it wants to examine the
transaction further. If yes, the next steps are performed or otherwise it waits to
receive further data from the database management system.
 CIS replicates or simulates the application system processing.
 Every update to the database that arises from processing the selected
transaction will be checked by CIS to determine whether discrepancies exist
between the results it produces and those the application system produces.
 Exceptions identified by CIS are written to an exception log file.
 The advantage of CIS is that it does not require modifications to the application
system and yet provides an online auditing capability.

(8) Write short notes on Audit Hooks Technique.

Audit Hooks: Audit Hooks are audit routines that flag or mark suspicious
transactions.
 When audit hooks are employed, the Auditors are informed of questionable
transactions immediately on their occurrence by displaying a message on the
Auditor’s terminal. This immediate notification is called real–time notification.
 Example: The Internal Auditor of a Bank, envisaged that Pensioners’ Accounts,
where the pension is directly credited to the pensioner’s account, is vulnerable
to fraud, unless a Life Certificate is obtained each year from the individual
concerned. They devised a system of Audit Hooks to tag records where Life
Certificate was not obtained. The Internal Audit Department will be notified /
informed when a transaction takes place in a tagged record. The Audit
Department can take steps to investigate fraud, if any.

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 (9) Explain the Role and Duties of the IS Auditor in the Audit of
Managerial Controls.
Role and Duties of the IS Auditor in the Audit of Managerial Controls:

1) Top Management and Info. Systems Management Controls: The role of

Auditor at each activity is as under –

Activity Role of auditors

(a) Planning • To evaluate whether or not Top Management has
formulated a high–quality Information Systems plan that is
appropriate to the needs of an organization.
• To see whether strategic and operational plans are linked
properly, plans are reviewed, etc.
(b) • To examine the effectiveness of the IS function based on
Organizing the quality of IS Staff, i.e. whether they are up to date and
motivated in their jobs.
• To see how efficiently the Entity has handled the complex
activity of acquiring and retaining good IS Staff, in an
environment of intense competition and high turnover.
• To see whether Employees of the Entity, are likely persons
to perpetrate irregularities.
(c) Leading • To find variables that indicate when motivation problems
exist or suggest poor leadership, e.g. Staff Turnover,
frequent failure of projects to meet their budget and
absenteeism levels.
• To evaluate how well Top Managers’ communicate with their
Staff, using both formal and informal sources of evidence.
• To assess both the short–run and long–run consequences of
poor communications within the IS Function and to assess
the implications for asset safeguarding, data integrity,
system effectiveness, and system efficiency.
(d) • To evaluate whether Top Management’s choice to the means
Controlling of control over the Users of IS Services is likely to be
effective or not.
• To evaluate controls in ensuring that the IS Function meets
its objectives at a global level

2) Systems Development Management Controls: Three different types of

audits may be conducted during System Development Process as under –

Type Role of Auditors

(a) Concurrent Audit • As Members of the System Development
Team, Auditors assist the Team in improving
the quality of Systems Development for the
specific system they are building and
implementing.
(b) Post – Implementation • Auditors help an Entity learn from its
Audit experiences in the development of a specific
application system. Auditors also help in
evaluating whether the system needs to be

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 scrapped, continued, or modified in some
manner.
(c) General Audit • Auditors evaluate Systems Development
Controls overall, to determine whether they
can reduce the extent of substantive testing
needed to form an audit opinion about
Management’s Assertions relating to the
Financial Statements for systems
effectiveness and efficiency.

3) Programming Management Controls: In Programming Management

Controls, the role of Auditors is as under –

Phase Audit Trails / Role of Auditors

(a) Planning • To evaluate whether the nature of and extent of planning
are appropriate to the different types of software that are
developed or acquired.
• To examine and evaluate how well the planning work is
being undertaken.
(b) Design • To find out whether Programmers use some type of
systematic approach to design.
• To obtain evidence of the design practices used by
undertaking interviews, observations, and reviews of
documentation.
(c) Control • To evaluate whether the nature of and extent of control
activities undertaken are appropriate for the different
types of software that are developed or acquired.
• To obtain evidence on whether the control procedures are
operating reliably, e.g. by choosing a sample of past and
current software development and acquisition projects
carried out at different locations in the Entity.
(d) Coding • To evaluate the level of care exercised by Programming
Management in choosing a Module Implementation and
Integration Strategy.
• To determine whether Programming Management
ensures that Programmers follow structured
programming conventions.
• To check whether Programmers use automated facilities
to assist them in their coding work.
(e) Testing • To evaluate how well Unit Testing is conducted, by
using Interviews, Observations, and examination of
documentation.
• To evaluate the quality of Integration Testing work
carried out by IS Professionals.

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 • To see that Whole–of–Program Tests have been
undertaken for all material programs and that these tests
have been well–designed and executed.
(f) Operation • To ensure timely reporting of maintenance needs occurs
and Maintenance and maintenance is carried out in a well–controlled
manner.
• To see if Management has implemented a review
system and assigned responsibility for monitoring the
status of Operational Programs.
4) Data Resource Management Controls: The Auditors’ Role include the
following –

(a) To determine what controls are exercised to maintain data integrity.

(b) To interview Database Users to determine their level of awareness of these
controls.
(c) To employ test data to evaluate whether Access Controls and Update Controls
are working.

5) Quality Assurance Management Controls: Using Interviews, Observations,

and Reviews of Documentation, IS Auditors can evaluate the following –

(a) To evaluate how well Quality Assurance (QA) personnel perform their
monitoring role.
(b) To evaluate how well QA Personnel, make recommendations for improved
standards or processes.
(c) To evaluate how well QA Personnel, undertake the reporting function and
training.

6) Security Management Controls: The Auditors’ Role include the following –

(a) To evaluate whether or not Security Administrators are conducting ongoing,

high–quality security reviews,
(b) To check whether or not the Entity has an appropriate, high–quality Disaster
Recovery Plan in place, and
(c) To check whether or not the Entity have opted for an appropriate Insurance
Plan.

7) Operations Management Controls: Auditors should pay concern to see

whether the documentation is maintained securely and that it is issued only to
Authorized Personnel. Auditors can use interviews, observations, and review of
documentation to evaluate –

(a) the activities of Documentation Librarians,

(b) how well Operations Management undertakes the Capacity Planning and
Performance Monitoring function,
(c) the reliability of Outsourcing Vendor Controls,
(d) whether Operations Management is monitoring compliance with the
outsourcing contract, and
(e) whether Operations Management regularly assesses the financial viability of
any Outsourcing Vendors

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 (10) Explain the Role and Duties of the IS Auditor in the Audit of
Application Controls.
Role and Duties of the IS Auditor in the Audit of Application Controls: -

Audit Trail Controls: Two types of audit trails that should exist in each
subsystem are as follows:

 An Accounting Audit Trail to maintain a record of events within the subsystem;

and
 An Operations Audit Trail to maintain a record of the resource consumption
associated with each event in the subsystem.
1) Boundary Controls: This maintains the chronology of events that occur when
a user attempts to gain access to and employ systems resources. This includes
the following:
 Identity of the would-be user of the system;
 Authentication information supplied;
 Resources requested;
 Action privileges requested;
 Terminal Identifier;
1. Accounting Audit Trail
Action privileges allowed/denied.
2. Operations Audit Trail
Resource usage from log-on to log-out time.
Log of Resource consumption.
2) Input Controls: This maintains the chronology of events from the time data
and instructions are captured and entered into an application system until the
time they are deemed valid and passed onto other subsystems within the
application system.

1. Accounting Audit Trail

 The identity of the person(organization) who was the source of the data;
 The identity of the person(organization) who entered the data into the
system;
 The time and date when the data was captured;
 The identifier of the physical device used to enter the data into the system;
2. Operations Audit Trail
 Time to key in a source document or an instrument at a terminal;
 Number of read errors made by an optical scanning device;
 Number of keying errors identified during verification;
 Frequency with which an instruction in a command language is used;

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 3) Communication Controls: This maintains a chronology of the events from
the time a sender dispatches a message to the time a receiver obtains the
message.

1. Accounting Audit Trail

 Unique identifier of the source/sink node;
 Unique identifier of each node in the network that traverses the message;
Unique identifier of the person or process authorizing dispatch of the
message; Time and date at which the message was dispatched;
 Time and date at which the message was received by the sink node;
 Time and date at which node in the network was traversed by the message.
2. Operations Audit Trail
 Number of messages that have traversed each link and each node;
 Queue lengths at each node; Number of errors occurring on each link or at
each node; Number of retransmissions that have occurred across each link;
Log of errors to identify locations and patterns of errors;
 Log of system restarts; and
 Message transit times between nodes and at nodes.
4) Processing Controls: The audit trail maintains the chronology of events from
the time data is received from the input or communication subsystem to the
time data is dispatched to the database, communication, or output
subsystems.

1. Accounting Audit Trail

 To trace and replicate the processing performed on a data item.
 To follow triggered transactions from end to end by monitoring input data
entry, intermediate results and output data values.
 To check for existence of any data flow diagrams or flowcharts that describe
data flow in the transaction, and whether such diagrams or flowcharts
correctly identify the flow of data.
 To check whether audit log entries recorded the changes made in the data
items at any time including who made them.
2. Operations Audit Trail
 A comprehensive log on hardware consumption – CPU time used, secondary
storage space used, and communication facilities used.
 A comprehensive log on software consumption – compilers used,
subroutine libraries used, file management facilities used, and
communication software used.
5) Database Controls: The audit trail maintains the chronology of events that
occur either to the database definition or the database itself.

1. Accounting Audit Trail

 To confirm whether an application properly accepts, processes, and stores
information.

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  To attach a unique time stamp to all transactions.
 To attach before-images and after-images of the data item on which a
transaction is applied to the audit trail.
 Any modifications or corrections to audit trail transactions accommodating
the changes that occur within an application system.
 To not only test the stated input, calculation, and output rules for data
integrity, but also should assess the efficacy of the rules themselves.
2. Operations Audit Trail
 To maintain a chronology of resource consumption events that affects the
database definition or the database.
6) Output Controls: The audit trail maintains the chronology of events that
occur from the time the content of the output is determined until the time
users complete their disposal of output because it no longer should be
retained.

1. Accounting Audit Trail

 What output was presented to users;
 Who received the output;
 When the output was received; and
 What actions were taken with the output?
2. Operations Audit Trail
 To maintain the record of resources consumed – graphs, images, report
pages, printing time and display rate to produce the various outputs.

(11) Explain the Role and Duties of the IS Auditor in the Audit of
Environmental Controls.
Auditing environmental controls requires attention to these and other factors and
activities, including:
(i) Power conditioning: The IS auditor should determine how frequently power
conditioning equipment, such as UPS, line conditioners, surge protectors, or motor
generators, are used, inspected and maintained and if this is performed by qualified
personnel.

(ii) Backup power: The IS auditor should determine if backup power is available via
electric generators or UPS and how frequently they are tested. S/he should examine
maintenance records to see how frequently these components are maintained and
if this is done by qualified personnel.

(iii) Heating, Ventilation, and Air Conditioning (HVAC): The IS auditor should
determine if HVAC systems are providing adequate temperature and humidity levels,
and if they are monitored. Also, the auditor should determine if HVAC systems are
properly maintained and if qualified persons do this.
(iv) Water detection: The IS auditor should determine if any water detectors are used
in rooms where computers are used. He or she should determine how frequently
these are tested and if they are monitored.

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 (v) Fire detection and suppression: The IS auditor should determine if fire detection
equipment is adequate, if staff members understand their function, and if they are
tested. He or she should determine how frequently fire suppression systems are
inspected and tested, and if the organization has emergency evacuation plans and
conducts fire drills.
(vi) Cleanliness: The IS auditor should examine data centres to see how clean they
are. IT equipment air filters and the inside of some IT components should be
examined to see if there is an accumulation of dust and dirt.

(12) Explain the Role and Duties of the IS Auditor in the Audit of Physical
Access Controls.
Role of IS Auditor in Auditing Physical Access Controls: Auditing physical access
requires the auditor to review the physical access risk and controls to form an opinion
on the effectiveness of the physical access controls. This involves the following:
 Risk Assessment: The auditor must satisfy him/herself that the risk assessment
procedure adequately covers periodic and timely assessment of all assets, physical
access threats, vulnerabilities of safeguards and exposures there from.
 Controls Assessment: The auditor based on the risk profile evaluates whether the
physical access controls are in place and adequate to protect the IS assets against
the risks.
 Review of Documents: It requires examination of relevant documentation such as
the security policy and procedures, premises plans, building plans, inventory list and
cabling diagrams.

(13) Explain the Role and Duties of the IS Auditor in the Audit of Logical
Access Controls.
Auditing Logical Access Controls requires attention to several key areas that include
the following:
 Network Access Paths: The IS auditor should conduct an independent review of the
IT infrastructure to map out the organization’s logical access paths. This will require
considerable effort and may require the use of investigative and technical tools, as well
as specialized experts on IT network architecture.
 Documentation: The IS auditor should request network architecture and access
documentation to compare what was discovered independently against existing
documentation. Similar investigations should take place for each application to
determine all of the documented and undocumented access paths to functions and
data.

(14) What are the

benefits of big data process?
Benefits of Big Data Processing are as follows:
 Ability to process Big Data brings in multiple benefits, such as-
 Businesses can utilize outside intelligence while taking decisions.
 Access to social data from search engines and sites like Facebook, Twitter are
enabling organizations to fine tune their business strategies.
 Early identification of risk to the product/services, if any

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  Improved customer service
 Traditional customer feedback systems are getting replaced by new systems
designed with Big Data technologies. In these new systems, Big Data and natural
language processing technologies are being used to read and evaluate consumer
responses.
 Better operational efficiency
 Integration of Big Data technologies and data warehouse helps an organization to
offload infrequently accessed data, this leading to better operational efficiency.

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 Ch 4(a) E–Commerce and M–Commerce

1. Write short notes on the concept of E–Commerce.

E-Commerce is the process of doing business electronically. It refers to the use of
technology to enhance the processing of commercial transactions between a company,
its customers and its business partners. It involves the automation of a variety of
Business-To-Business (B2B) and Business-To-Consumer (B2C) transactions through
reliable and secure connections. E–Commerce is a sophisticated combination of
technologies and consumer–based services integrated to form a new paradigm in
business transaction processing. . Transaction Flow in E–Commerce: (a) Order, (b)
Authorisation Request, (c) Authorisation Response, (d) Product Dispatch, (e)
Settlement Request, and (f) Settlement Deposit. [Note: Sometimes, payment is made
before dispatch.]

2. What are the benefits of E–Commerce?

Benefits of E-Business
E-business benefits individuals, businesses, government and society at large. The major
benefits from e-business are as follows:
Benefits to Customer / Individual / User
 Convenience: Every product at the tip of individual’s fingertips on internet.
 Time saving: No. of operations that can be performed both by potential buyers and
sellers increase.
 Various Options: There are several options available for customers which are not
only being easy to compare but are provided by different players in the market.
 Easy to find reviews: There are often reviews about a particular site or product
from the previous customers which provides valuable feedback
Benefits to Business / Sellers
 Increased Customer Base: Since the number of people getting online is
increasing, which are creating not only new customers but also retaining the old
ones.
 Instant Transaction: The transactions of e commerce are based on real time
processes. This has made possible to crack number of deals.
 Easier entry into new markets: This is especially into geographically remote
markets, for enterprises regardless of size and location.
 Better quality of goods: As standardized specifications and competition have
increased and improved variety of goods through expanded markets and the
ability to produce customized goods.

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 Benefits to Government
• Instrument to fight corruption: -In line with Government’s vision, e commerce
provides a pivotal hand to fight corruption.
• Reduction in use of ecologically damaging materials through electronic
coordination of activities and the movement of information rather than physical
objects).

3. Differentiate between Traditional Commerce and E–Commerce.

Difference between Traditional Commerce and E-Commerce are as follows: -

BASE FOR TRADITIONAL E-COMMERCE

COMPARISON COMMERCE
Definition Traditional commerce E-Commerce means carrying
includes all those activities out commercial transactions
which encourage exchange, in or exchange of information,
some way or the other of goods electronically on the
/ services which are manual and internet.
non-electronic.

Transaction Manual Electronically

Processing
Availability for For limited time. This time may 24×7×365
commercial be defined by law. Like special
transactions stores which may run 24 hours,
but in general available for
limited time.

Customer Face-to-face Screen-to-face

interactio
n
Business Scope Limited to particular area. Worldwide reach
Informatio No uniform platform for Provides a uniform platform
n exchange exchange of information. for information exchange.
Nature of Goods can be inspected Goods cannot be inspected
purchase physically before purchase. physically before purchase.
Payment Cash, cheque, credit card, etc. Credit card, fund transfer,
Cash in Delivery, Payment
Wallets, UPCI application etc.

4. Write short notes on the concept of M–Commerce.

M-Commerce is the buying and selling of goods and services through wireless handheld
devices such as Mobile Telephone and Personal Digital Assistants (PDAs). Mobile
Commerce deals about the explosion of applications and, services that are becoming
accessible from Internet–enabled mobile devices. It is also known as next–generation
e–commerce. It enables Users to access the Internet without needing to find a place to
plug in. The key growth in the mobile e-Commerce sector in recent years has been in
through so-called Apps. Apps, short for Mobile Applications, are small piece of software
developed specifically for the operating systems of handheld devices such as mobile

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 phones, PDAs and Tablet computers. Mobile Apps can come preloaded on handheld
devices or can be downloaded by users from the app stores over the Internet.

5. What are the components of E–Commerce?

The major components of E–Commerce are as under: -

Point Description
User User is the Consumer / Buyer, i.e. any Individual / Entity using
the e–Commerce platform / mechanism.
Vendors E–Commerce Vendor refers to the Entity that provides the
required goods and services to the User. Example: Flipkart,
Amazon, etc.
Technology Technology Infrastructure refers to the Computers, Servers,
Database, Mobile Apps, Digital Libraries, Data Interchange, etc.
enabling the e–commerce transactions.
Internet / Faster Net Connectivity contributes significantly to the success of
Network e–Commerce trade of an Entity. Net Connectivity can be through
traditional as well as new technology.
Web Portal  Web Portal provides the Application Interface through which
the User interacts with the Vendor to perform the e–
commerce transactions.
 Web Portals can be accessed through Desktops / Laptops /
PDA / Mobiles / Smart TVs, etc.
 The simplicity and clarity of content on the Web Portal leads
to better customer experience of buying a product online.
Payment  Payment Gateway represents the manner through which the
Gateway Customer makes payment to the e– Commerce Vendors.
 Payment Gateway is a critical component of e–commerce set–
up, which assures the Seller, of the receipt of money from the
Buyer of goods / services.
 Payment Methods include Credit / Debit Card Payments,
Online Bank Payments, Payment Wallet of
 Vendor / Third Party, Cash on Delivery (COD), Unified
Payments Interface (UPI), etc.

6. Explain the role of E–Commerce Vendors in promoting e–Commerce/ e–

Business.
Role of E–Commerce Vendors in promoting e–Commerce/ e–Business: E-
commerce vendors needs to ensure following for better, effective and efficient
transaction.

a. Suppliers and Supply Chain Management: These being another important

component of the whole operations. For effectiveness, they need to ensure that
-
i. They have enough and the right goods suppliers.
ii. They (suppliers) are financially and operationally safe.
iii. Suppliers are able to provide real-time stock inventory.
iv. The order to deliver time is very short.

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 b. Warehouse operations: When a product is bought, it is delivered from the
warehouse of e-commerce vendor. This place is where online retailers pick
products from the shelf, pack them as per customer’s specification / pre-decided
standards and prepare those products to be delivered. These operations have
become very critical to the success of the whole e- commerce business. Many e-
commerce companies are investing huge amounts of money in automating the
whole warehouses.

c. Shipping and returns: Shipping is supplementary and complementary to whole

warehouse operations. Fast returns have become Unique Selling Preposition
(USP) for many e-commerce vendors, so these vendors need very effective and
efficient return processing.

d. E-Commerce catalogue and product display: Proper display of all products

being sold by vendor including product details, technical specifications, makes
for a better sales conversion ratio. These help customers gauge the
products/services being sold. A good catalogue makes a lot of difference to whole
customer experience.

7. What are the items covered in the Technology Infrastructure in E–Commerce?

Technology Infrastructure in E–Commerce comprises the following: –
Point Description

Computers, Servers • These are the backbone for the success of the
and Database venture. Big e- commerce organization invest
huge amount of money/time in creating these
systems. They store the data / program used to
run the whole operation of the organization.
• As cloud computing is increasingly being used,
many small / mid- sized e-commerce originations
have started using shared infrastructures.

Mobile Apps • Mobile Devices (Tablet Computers, Smart

Phones, etc.) have Operating Systems and
Application Software, and can be used to perform
online transactions.
• Mobile Devices may operate on many Operating
Systems like Android, iOS, BlackBerry OS,
Windows Mobile, etc.

Digital Library • A Digital Library is a special library with a focused

collection of digital objects.
• Digital Library can store text, visual material,
audio material, video material, in electronic
media formats, along with means for organizing,
storing, and retrieving the files and media
contained in the library collection.

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 Data Interchange • Data Interchange is an electronic communication
of data.
• For ensuring the correctness of data interchange
between different parties in e–commerce, (viz.
User, Vendor, Payment Gateway, Bank, etc.)
business–specific protocols are being used.

8. Briefly describe the workflow in E–Commerce.

The workflow in E–Commerce: -

Step Activities
Customers login Few e-commerce merchants may allow same
transactions to be done through phone, but the basic
information flow is e- mode.
Product / Service Customer selects products / services from available
Selection options
Customer Places Order is placed for selected product / service by
Order customer. This step leads to next important activity
PAYMENT GATEWAY.
Payment Gateway Here customer makes a selection of the payment
method. In case payment methods is other than cash
on delivery (COD), the merchant gets the update
from payment gateway about payment realization
from customer. In case of COD, e- commerce vendor
may do an additional check to validate customer.
Dispatch and Shipping This process may be executed at two different ends.
Process First if product / service inventory is managed by e-
commerce vendor, then dispatch shall be initiated at
merchant warehouse.
Second, many e-commerce merchants allow third
party vendors to sale through merchant websites.
For example: FLIPKART states that it has more than
1 lac registered third party vendors on its website.
Delivery Tracking Another key element denoting success of e-
commerce business is timely delivery. Merchants
keep a track of this. All merchants have provided
their delivery staff with hand held devices, where the
product / service delivery to customers are
immediately updated.
COD tracking In case products are sold on COD payment mode,
merchants need to have additional check on
matching delivery with payments.

9. What are the Policy Areas to be defined in E–Commerce?

Policy areas to be defined in E-commerce: -
Area Description
Billing • Process of Billing,
• Format of Bill, details to be provided in the Bill,
treatment of applicable Indirect Taxes (GST), etc
Product guarantee / • Proper display of product guarantee / warranty
warranty online as well as documents sent along with the
products.

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 Shipping • Shipping Time,
• Place of Shipping
• Frequency of Shipping
• Mode of Shipping
• Packing at the time of Shipping, etc.
Delivery Policy needs to be defined for:
• Which mode of delivery to be chosen?
• When deliveries to be made?
• Where deliveries to be made?
Return Policy for return of goods need to be put in place
defining:
• Which goods to be accepted in return?
• The number of days within which returns can be
accepted
• The process of verifying the authenticity of
products received back.
• The time within which buyer shall be paid his/her
amount back for goods returned.
Payment Policy guidelines need to be created for the
following payment related issues:
• Mode of payment.
• For which products, specific payment mode shall
be there. Organization restricts cash on delivery
for few consumable products.

10.Explain the terms – (1) Network Architecture, and (2) Client Server
Technology.
Network Architecture: Network Architecture refers to the layout of Network, of – (i)
Hardware, (ii) Software, (iii) Connectivity, (iv) Communication Protocols, and (v) Mode
of Transmission. Network Architecture Diagram provides a full picture of the established
network with detailed view of all the resources accessible.
Client Server Technology: Client / Server (C/S) technology refers to computing
technologies in which the hardware and software components (i.e. Clients and Servers)
are distributed through the Network.

11.Explain the terms – (1) Single Tier Architecture, (2) Two Tier Architecture, (3)
Three Tier Architecture.
Single Tier Architecture: A single computer that contains a Database and a front–end
Interface (GUI) to access the Database is known as Single Tier System. All components
required for a Software Application or Technology is put on a Single Server or Platform.
Two Tier Architecture: In a Two–Tier Architecture, the Presentation Layer or Interface
runs on a Client, and the Data Layer or Data Structure is stored on a Server. The User
System Interface is usually located in the User’s desktop environment and the Database
Management Services are kept in the Server which is a more powerful machine that
services many Clients.

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 Three Tier Architecture: Three–Tier Architecture is a Client–Server Architecture in
which the functional process logic, data access, computer data storage and user
interface are developed and maintained as independent modules on separate platforms.

12.Explain how and why the Three–Tier Architecture is used in E–Commerce.

Three - Tier architecture is a software design pattern and well-established software
architecture. Its three tiers are the Presentation Tier, Application Tier and Data Tier.
Three-tier architecture is a client-server architecture in which the functional process
logic, data access, computer data storage and user interface are developed and
maintained as independent modules on separate platforms. The three-tier architecture
can be explained below:
Presentation Tier: Occupies the top level and displays information related to
services available on a website. This tier communicates with other tiers by sending
results to the browser and other tiers in the network.

Application Tier: This tier is pulled from the Presentation tier. It controls application
functionality by performing detailed processing. This refers to the Application Server
and Back End Server, and includes various Parties – (a) E–Commerce Vendor/Seller, (b)
Reseller, if any, (c) Logistics Partner.

Database Tier: This tier houses the database servers where information is stored and
retrieved. Data in this tier is kept independent of application servers or business logic.
The Data Tier includes the data persistence mechanisms (database servers, file
shares, etc.) and the data access layer that encapsulates the persistence mechanisms
and exposes the data. This covers the Information Storehouse /Database, where all
data relating to Customer Orders, Products, Prices, etc. are stored. This covers the
Information Storehouse /Database, where all data relating to Customer Orders,
Products, Prices, etc. are stored.

The following are the needs for Three-Tier Systems:

 Clear separation of user-interface-control and data presentation from application-

logic.
 Dynamic load balancing.
 Change management.

13. What are the Risks in e–Commerce?

Risk is possibility of loss. The same may be result of intentional or un-intentional
action by individuals. Risks associated with e-commerce transactions are high
compared to general internet activities. These include the following:
(i) Privacy and Security: There are often issues of security and privacy due to lack
of personalized digital access and knowledge.

(ii) Quality issues: There are quality issues raised by customers as the original
product differs from the one that was ordered.
(iii) Delay in goods and Hidden Costs: When goods are ordered from another
country, there are hidden costs enforced by Companies.

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 (iv) Needs Access to internet and lack of personal touch: The e-commerce
requires an internet connection which is extra expensive and lacks personal touch.

(v) Security and credit card issues: There is cloning possible of credit cards and
debit cards which poses a security threat.
(vi) Infrastructure: There is a greater need of not only digital infrastructure but also
network expansion of roads and railways which remains a substantial challenge in
developing countries.

(vii) Problem of anonymity: There is need to identify and authenticate users in the
virtual global market where anyone can sell to or buy from anyone, anything from
anywhere.

(viii) Repudiation of contract: There is possibility that the electronic transaction in

the form of contract, sale order or purchase by the trading partner or customer
maybe denied.

14. List the Control Objectives in e–Commerce.

Control Objectives in e–Commerce include the following –
(i) To recognize the significance of Information as a Critical Asset to the Entity,

(ii) To prevent loss from incorrect decision making,

(iii) To recognize the criticality and value of all IT Resources, viz. Hardware,
Software and Personnel,

(iv) To prevent Cost of Data Loss,

(v) To avoid Computer Abuse and its related costs,
(vi) To maintain privacy and integrity of data shared through the Network amongst
various Participants,

(vii) To safeguard IT Assets from un–authorized access

(viii) To ensure System Effectiveness, i.e. the ability to meet substantial User
requirements, and

(ix) To ensure System Efficiency, i.e. to optimize the use of various IS Resources
(machine time, peripherals, system software and Labour).

15. To manage risks in e–Commerce environment, Controls should be

implemented by all Parties in the e–Business Chain. Explain this statement.
In an e-business environment, controls are necessary for all persons in the chain,
including-
(i) Users: This is important to ensure that the genuine user is using the e-
commerce/ m-commerce platform. There is risk if user accounts are hacked
and hackers buy products / services.

(ii) Sellers / Buyers / Merchants: These people need to proper framework in

place to ensure success of business. Many e-commerce businesses have lost
huge amount of money as they did not have proper controls put in place.
These include controls on:
1) Product catalogues

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 2) Price catalogues
3) Discounts and promotional schemes
4) Product returns
5) Accounting for cash received through Cash on Delivery mode of sales.
(iii) Government: Governments across the world and in India have few critical
concerns vis-à-vis electronic transactions, namely:
1) Tax accounting of all products / services sold.
2) All products / services sold are legal. There have been instances where
narcotics drugs have found to be sold and bought through electronic
means.

(iv) Network Service Providers: They need to ensure availability and security
of network. Any downtime of network can be disastrous for business.

(v) Technology Service Providers: These include all other service provider
other than network service provider, for example, cloud computing back-
ends, applications back-ends and like. They are also prone to risk of
availability and security.

(vi) Logistics Service Providers: Success or failure of any e-commerce / m-

commerce venture finally lies here. Logistics service providers are the ones
who are finally responsible for timely product deliveries.

(vii) Payment Gateways: E-commerce vendors’ business shall run only when
their payment gateways are efficient, effective and foolproof.

16. Each Participant should have policies, practices and procedures in place to
protect from e–commerce / m–commerce related risks. Explain this
statement.

1) Educating the participant about the nature of risks:

1) Each Participant (and its Employees / Staff) should be properly educated
and trained about the nature of risks in e– Business. It is easier to
prevent risks and handle incidents, with proper awareness, education and
training.
2) The frequency & nature of education programs, and the eligibility of
participants in those programs should be defined properly.
2) Communication of organizational policies to its customers: To avoid
customer dissatisfaction and disputes, the Entity’s Policies on the following
should be clearly defined and properly communicated to the Customers
through the Website, by appropriate links on the Homepage –

1) Privacy Policies,
2) Information Security Policies,
3) Shipping and Billing Policies,
4) Policies in relation to handling special scenarios, e.g. “Payment Failed”,

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 Order Details not received by Vendor, etc.
5) Refund Policies.
3) Ensure Compliance with Industry Body Standards: All e–Commerce
Participants should comply with the applicable Rules / Regulations (e.g.
FEMA, GST) and also the Standards if any, established by the Industry Body
/ Regulatory Authority (e.g. RBI).
4) Protect your e-Commerce business from intrusion:
1) Viruses: Check your website daily for viruses, the presence of which can
result in the loss of valuable data.
2) Hackers: Use software packages to carry out regular assessments of how
vulnerable your website is to hackers.
3) Passwords: Ensure employees change these regularly and that
passwords set by former employees of your organization are defunct.
4) Regular software updates: Your site should always be up to date with the
newest versions of security software. If you fail to do this, you leave your
website vulnerable to attack.

17. List a few Control Considerations in managing Key Cyber

Security Risks in e–Commerce.

Key Cyber Security Risks can be addressed through various Controls, including –
1) Proper definition of a Network Diagram detailing Servers, Databases, Hubs,
Routers, Internal and External.

2) Networks, their Interconnects / Interfaces, etc.

3) Listing of the Entity’s Digital Assets, their physical locations, and the IT Managers
responsible for their protection.

4) Policy and Procedure Document of the criticality of the Digital Assets, the use of
those digital assets, any direct impact on the Financial Statements of the
company, access restrictions to those assets.

5) Periodical Review of Access Rights to all IT Resources to ensure that the access
to the Users is commensurate with their functional roles and responsibilities.

6) Communication of IT Security Policy to all Staff, detailing the procedures to be

adhered to when accessing IT

7) Systems / resources, e.g. Password Security, restricted use of Internet, etc.

18.Give examples of Legal Issues that are unique to E–Commerce

transactions.
Some unique issues which may not arise in normal commercial transactions, may

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 arise in e–Commerce / m–Commerce transactions. Some examples are as follows

Event Legal questions out of event

Product ordered by ‘A’ delivered to ‘B’. 1) What if ‘B’ accepts

(For example: a DEO). ‘A’ had made the products and starts using?
payment online. 2) ‘A’ had ordered the
product to gift to spouse on his/her
birthday. What of the mental agony
caused?
3) The product is a
medicine necessary of treatment of
‘A’s dependent parents. In case of
any complication to ‘A’s parent due to
delayed delivery who bears the
additional medical costs?
Service ordered by ‘A’ not provided by 1) Who bears the loss
online vendor. For example: ‘A’ courier that may be incurred by ‘A’?
company does not collect an important
document.

‘A’ auction website sales in-advertently 1) What is the legal

sales products which cannot be sold at liability if seller of products?
all, or sale of those products is illegal. 2) What is legal liability
For example: Guns/ Narcotics Drugs. of buyers of such products?
3) What is the legal
liability of auction web- site?
‘A’ downloads a software from a server 1) Whether such a
in USA. ‘A’ is in state of MP and then he download is import?
sells the software to a person in Mumbai 2) If ‘A’ re-exports can
or Sells the same to another person in s/he claim benefits under customs?
Singapore.

19. List the prominent legislations that have an impact on E–

Commerce.
Following commercial laws are applicable to e-commerce and m-commerce
transactions.
a. Income Tax Act, 1961: Income Tax Act, has detailed provisions regarding
taxation of income in India. In respect of e-commerce / m-commerce
transactions, the issue of deciding place of origin transaction for tax purpose is
critical.
b. Companies Act, 2013: Companies Act, 2013, regulates the corporate sector.
The law defines all regulatory aspects for companies in India. Most of the
merchants in e-commerce / m-commerce business are companies, both private
and public.
c. Foreign Trade (Development and Regulation) Act, 1992: An Act to provide
for the development and regulation of foreign trade by facilitating imports into,
augmenting exports from, India and for matters connected therewith or
incidental thereto. Amazon has recently allowed Indian citizens to purchase from

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 its global stores. All these shall be regulated through above law.
d. The Factories Act, 1948: Act to regulate working conditions of workers. The
act extends to place of storage as well as transportation. Most of the merchants
in e-commerce / m-commerce business need to comply with provisions of the
act.
e. The Goods and Services Tax (GST) Law: This Law requires each applicable
business, including e-commerce/ m-commerce, to upload each sales and
purchase invoice on one central IT infrastructure, mandating reconciliations of
transactions between business, triggering of tax credits on payments of GST,
facilitating filling of e-returns, etc.
f. Indian Contract Act,1872: The Act defines constituents of a valid contract.
In case of e-commerce / m-commerce business, it becomes important to define
these constituents.
g. The Competition Act, 2002: Law to regulate practices that may have adverse
effect on competition in India. Competition Commission have been vigilant to
ensure that e-commerce / m-commerce merchants do not engage in predatory
practices.
h. Consumer Protection Act, 1986: The law to protect consumer rights has been
source of most of litigations for transaction done through e-commerce and m-
commerce.

20. List the advantages and disadvantages of Digital Payments.

Advantages of digital payments: -
(i) Easy and convenient: Digital payments are easy and convenient. Person do
not need to take loads of cash with themselves.

(ii) Pay or send money from anywhere: With digital payment modes, one can
pay from anywhere anytime.
(iii) Discounts from taxes: Government has announced many discounts to
encourage digital payments. User get 0.75% discounts on fuels and 10%
discount on insurance premiums of government insurers.
(iv) Written record: User often forgets to note down his / her spending, or even
if nothing is done it takes a lot of time. These are automatically recorded in
passbook or inside E-Wallet app. This helps to maintain record, track
spending and budget planning.

(v) Less Risk: Digital payments have less risk if used wisely. If user losses
mobile phone or debit/credit card or Aadhar card, no need to worry a lot.
No one can use anyone else’s money without MPIN, PIN or fingerprint in the
case of Aadhar. It is advised that user should get card blocked, if lost.

Disadvantages of digital payments: -

(i) Difficult for a Non-technical person: As most of the digital payment modes
are based on mobile phone, the internet and cards. These modes are
somewhat difficult for non-technical persons such as farmers, workers etc.

(ii) The risk of data theft: There is a big risk of data theft associated with the
digital payment. Hackers can hack the servers of the bank or the E-Wallet
a customer is using and easily get his/her personal information. They can

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 use this information to steal money from the customer’s account.
(iii) Overspending: One keeps limited cash in his/her physical wallet and hence
thinks twice before buying anything. But if digital payment modes are used,
one has an access to all his/her money that can result in overspending.

21. Briefly explain a few methods of Digital Payments.

1) UPI Apps:
▪ Unified Payment Interface (UPI) is a system that powers multiple Bank
Accounts (of Participating Banks), several banking services features like fund
transfer, and merchant payments in a single mobile application.
• UPI is a payment mode which is used to make fund transfers through the
Mobile App.
• Some examples of UPI Apps are BHIM, SBI UPI App, HDFC UPI App, iMobile,
Phone Pe App, etc.
2) Immediate Payment Service (IMPS):
▪ Immediate Payment Service (IMPS) is an instant inter–Bank Electronic Fund
Transfer Service that can be transacted through Mobile Phones.
▪ IMPS is also being extended through other channels such as ATM, Internet
Banking, etc.
3) Mobile Apps:
▪ BHIM (Bharat Interface For Money) is a Mobile App developed by the National
Payments Corporation of
▪ India (NPCI) based on UPI.
▪ BHIM facilitates e–payments directly through Banks and supports all Indian
Banks which use that platform. BHIM is built on the IMPS infrastructure and
allows the User to instantly transfer money between the Accounts of any two
parties.
▪ BHIM works on all Mobile Devices and enables users to send or receive money
to other UPI Payment Addresses by scanning QR Code or using Account
Number with Indian Financial Systems Code (IFSC) Code or MMID (Mobile
Money Identifier) Code for Users who do not have a UPI–based Bank Account.
4) Aadhar Enabled Payment Service(AEPS):
▪ AEPS is an Aadhaar based digital payment mode. Customer needs only his or
her Aadhaar number to pay to any merchant.
▪ AEPS allows bank to bank transactions
▪ It means the money you pay will be deducted from your account and credited
to the payee’s account directly.
▪ Customers will need to link their AADHAR numbers to their bank accounts.
APES once launched can be used at POS terminals also.

22. What are the Special Laws governing E-commerce?

Special Laws governing E-
commerce

Information Technology Act,

Reserve Bank of India, 1934
2000 (As amended 2008)

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 Objectives of Information Technology Act, 2000

Grant legal recognition for electronic transaction

Grant legal recognition to digital signature

Recognise electronic storage of data

Electronic filing of documents with Government

Legal recognition for keeping books of account in

electronic format by bankers
Legal sanction to transfer fund electronically to and
between banks and financial institutions
In order to amend the Indian Penal Code, Indian
Evidence Act, 1972, Bankers Book Evidence Act, 1891
and RBI Act, 1934
Manage cyber-crimes at national and international levels
by enforcing laws

Provide legal infrastructure to promote e-commerce and

secure information system
Governs all internet activities in India and is applicable
to all online transactions in India, and provides for
penalties, prosecution for non-compliances

Reserve Bank of India Act, 1934

An OTP / PIN for all transactions done through debit / credit

cards
The conversion of all Credit / Debit cards to be made CHIP
based

Compliance with capital adequacy norms for payments wallet

like SBI BUDDY/ PAYTM etc.

23. Explain the Trends in E-commerce.

The latest trends in e-commerce are as follows:
i. Content: The content of the web should be such which not only attracts the
customers’ attention but also helps in engaging them. Shoppable videos for
customers instead of using images and content would enable them to shop for
products and services directly from videos.
ii. Social Commerce: The latest trend is the inclusion of e-commerce in social
networks, such as Facebook, Twitter, YouTube, etc. Social media platforms offer
innovative methods to reach first-time and new generation customers, engage
and reward existing customers and showcase the best to offer.

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 iii. Mobile Commerce: The user is moving from desktop to mobile computing. 55%
of the online traffic is generated from mobile devices and still it is on the increase.
The creation of mobile application for e-commerce site is the latest trend to drive
many online shoppers who use mobile apps for online shopping.
iv. Biometrics: Serious security issues such as hacking, spamming, online fraud and
theft of confidential data are still holding back many online users from purchasing
products online. Biometric verification is a recent e-commerce technology trends
that measure the physical characteristics of users such as fingerprints, palm, face,
or voice to solve security issues. With the use of biometrics, there will be no more
stolen or forgotten password problem, also this enhanced security measures will
make forging difficult for intruders.
v. Artificial Intelligence: Another trend in e-commerce is the use of Chatbot, a
fully automated chat agent that will answer all the questions of consumers and act
as a first point of contact. Chatbots commonly known as messenger bots is a piece
of software that can be used by a retailer to chat with customers via text or voice.
Well-designed chatbots can offer personalized assistances, enhance the user
experience, process orders, track shipments, provide product suggestion,
automates processes, and lot more.
vi. Predictive Analysis: The use of predictive analysis tools is increasing to predict
the online customers’ behavior. By segmenting the customers in different
categories, the company can optimize its e-mail communication in order to
increase conversions by offering-
• the right customer
• the right product
• in the right way and
• at the right time.
The analytical approach would lead to an increase in the number of new
customers. Predictive analysis tools help in predicting customers’ buying habits, as
well as their tastes and preferences, both quantitative and qualitative.

24. Explain Mobile Banking & Cryptocurrency

Mobile Banking: It is a service provided by a bank or other financial institution that
allows its customers to conduct different types of financial transactions remotely
using a mobile device such as a mobile phone or tablet. It uses software, usually
called an app, provided by the banks or financial institution for the purpose. Each
Bank provides its own mobile banking App for Android, Windows, and iOS mobile
platform(s).
Cryptocurrency: Cryptocurrency is a digital currency produced by a public network,
rather than any government, that uses cryptography to ensure that payments are
sent and received safely. A cryptocurrency is a medium of exchange wherein records
of individual coin ownership are stored in a computerized database using strong
cryptography.
Cryptocurrency is called so because all the data is ensured with strong cryptography.
The strong cryptography makes it almost impossible to counterfeit or double spend.
The other digital currencies such as DigiCash utilizes a Trusted Third Party approach
in which a third party verifies and facilitates the transactions. Cryptocurrency is
completely decentralized, which means that there are no servers involved and no
central controlling authority.

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 Cryptocurrency is stored in a digital wallet either on the computer or on other
hardware. The first cryptocurrency was Bitcoin which was launched in 2009. The
other cryptocurrencies prevailing in the world today include Litecoin, Peercoin,
Namecoin, as well as Ethereum.

25. List out the drawbacks of Digital payments.

Drawbacks of Digital Payments

Difficult for a Non-technical person

Risk of data theft

Overspending

Disputed transactions

Increased business costs

Necessity of internet access

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Ch:4(b) Emerging Technologies
1. Outline the concept of Virtualization. What are its major applications?
• Virtualization means to create a virtual version of a device or resource,
such as a server, storage device, network or even an operating system where
the framework divides the resource into one or more execution
environments.
• Virtualization refers to technologies designed to provide a layer of abstraction
between computer hardware systems and the software running on them.
• The core concept of Virtualization lies in Partitioning, which divides a single
physical server into multiple logical servers. Once the physical server is
divided, each logical server can run an operating system and applications
independently.
• Virtualization allows its’ users to manipulate their systems’ operating systems
into thinking that a group of servers is a single pool of computing resources
and conversely, allows its users to run multiple operating systems
simultaneously on a single machine.

2. What are the different types of Virtualization?

Common Types of Virtualization:
1) Hardware Virtualization:
• Hardware Virtualization or Platform Virtualization refers to the creation of a
virtual machine that acts like a real computer with an operating system.
• Software executed on these virtual machines is separated from the
underlying hardware resources.
• The basic idea of Hardware virtualization is to consolidate many small
physical servers into one large physical server so that the processor can be
used more effectively.
• The software that creates a virtual machine on the host hardware is called a
hypervisor or Virtual Machine Manager.

2) Network Virtualization:
• Network Virtualization is a method of combining the available resources in a
network by splitting up the available bandwidth into channels, each of which
is independent from the others, and each of which can be assigned (or
reassigned) to a particular server or device in real time.
• This allows a large physical network to be provisioned into multiple smaller
logical networks and conversely allows multiple physical LANs to be combined
into a larger logical network.
• This behavior allows administrators to improve network traffic control,
enterprise and security.
• Network virtualization involves platform virtualization, often combined with
resource virtualization.

3) Storage Virtualization:

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 • Storage Virtualization is the apparent pooling of data from multiple storage
devices, even different types of storage devices, into what appears to be a
single device that is managed from a central console.
• Storage virtualization helps the storage administrator perform the tasks of
backup, archiving, and recovery more easily and in less time by disguising
the actual complexity of a Storage Area Network (SAN).
• Administrators can implement virtualization with software applications or by
using hardware and software hybrid appliances.
• Storage virtualization is sometimes described as “abstracting the logical
storage from the physical storage.

3. Write short notes on the concept of “Grid Computing”.

• Grid Computing is a computer network in which each computer’s resources
are shared with every other computer in the system.
• It is a distributed architecture of large numbers of computers connected to
solve a complex problem.
• It is a special kind of distributed computing. In distributed computing,
different computers within the same network share one or more resources.
• In the ideal grid computing system, every resource is shared, turning a
computer network into a powerful supercomputer.
• Processing Power, Memory and Data Storage are all community resources
that Authorized Users can tap into and use for specific tasks. Every
Authorized Computer would have access to enormous processing power and
storage capacity.
• Every authorized computer would have access to enormous processing power
and storage capacity.

4. What are the major applications of Grid Computing?

Application Areas of Grid Computing:
• Civil engineers collaborate to design, execute, & analyze shake table
experiments.
• An insurance company mines data from partner hospitals for fraud detection.
• An application service provider offloads excess load to a compute cycle
provider.
• An enterprise configures internal & external resources to support e- Business
workload.
• Large-scale science and engineering are done through the interaction of
people, heterogeneous computing resources, information systems and
instruments, all of which are geographically and organizationally dispersed.

5. What are the Resources that can be “pooled” in Grid Computing?

The resources which are “pooled” or linked in a Grid include the following –
Computation:
Computing Cycles provided by the Processors of the Machines on the grid can be
pooled together. This possible even if Processors vary in speed, architecture,

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 software platform, and other factors like memory, storage, and connectivity, etc.
There primary ways to exploit the Computation Resources of a Grid are –
• To run an existing application on an available machine on the Grid rather
than locally,
• To use an application designed to split its work in such a way that the
separate parts an execute in parallel on different Processors, and
• To run an application, that needs to be executed many times, on many
different machines in the Grid.
Storage:
•
A grid providing an integrated view of data storage is sometimes called a
Data Grid.
• Each machine on the grid usually provides some quantity of storage for grid
use, even if temporary.
• Storage can be memory attached to the Processor or it can be Secondary
Storage, using Hard Disk Drives or other permanent Storage Media.
• More advanced file systems on a grid can automatically duplicate sets of
data, to provide redundancy for increased reliability and increased
performance.
Communications:
•Communications within the grid are important for sending jobs and their
required data to points within the grid.
• If only a limited Bandwidth available for communications, it can limit the
utilization of the Grid.
• Higher Speed Networks may also be provided to meet the demands of jobs
transferring larger amounts of data.
Software and Licenses:
• Instead of installing costly Software in each Node, it is possible to have
Software installed for the Grid as a whole.
• Multi–User Licenses can be purchased to permit access by many Nodes at
the same time.
• A License Management Software keeps track of how many Nodes are
concurrently using the software, within the limits of the license.
Special equipment, capacities, architectures, and policies:
• Platforms on the grid will often have different architectures, operating
systems, devices, capacities, and equipment.
• Each of these items represents a different kind of resource that the grid can
use as criteria for assigning jobs to machines.

6. List the advantages of Grid Computing.

Advantages of Grid Computing as follows:
1) Making use of Underutilized Resources:
• In most organizations, there are large amounts of underutilized computing
resources including even the server machines.

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 • Grid computing (more specifically, a data grid) can be used to aggregate
unused storage into a much larger virtual data store, possibly configured to
achieve improved performance and reliability over that of any single
machine.
2) Resource Balancing:
• Grid offers resource balancing effect by scheduling grid jobs on machines
with low utilization.
• This feature of grid computing handles occasional peak loads of activity in
parts of a larger organization.
• If the grid is already fully utilized, the lowest priority work being performed
on the grid can be temporarily suspended or even cancelled and performed
again later to make room for the higher priority work.

3) Parallel CPU Capacity:

• The potential for usage of massive parallel CPU capacity is one of the mos t
common visions and attractive features of a grid.
• A CPU-intensive grid application can be thought of as many smaller sub-
jobs, each executing on a different machine in the grid.
• To the extent that these sub-jobs do not need to communicate with each
other, the more scalable the application becomes.

4) Virtual resources and virtual organizations for collaboration:

• Grid computing provides an environment for collaboration among a wider
audience.
• The users of the grid can be organized dynamically into several virtual
organizations, each with different policy requirements.
• The grid can help in enforcing security rules among them and implement
policies, which can resolve priorities for both resources and users.

5) Access to additional resources:

• In addition to CPU and storage resources, a grid can provide access to other
resources as well.
• if a user needs to increase their total bandwidth to the Internet to
implement a data mining search engine, the work can be split among grid
machines that have independent connections to the Internet.

6) Reliability:
• High-end conventional computing systems use expensive hardware to
increase reliability.
• The machines also use duplicate processors in such a way that when they
fail, one can be replaced without turning the other off.
• All of this builds a reliable system, but at a great cost, due to the duplication
of expensive components.

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 7) Management:
• The grid offers management of priorities among different projects.
• Aggregating utilization data over a larger set of projects can enhance an
organization’s ability to project future upgrade needs.
• When maintenance is required, grid work can be rerouted to other machines
without crippling the projects involved.

7. What are the security factors to be considered in Grid Computing?

Following aspects should be considered in defining the Security
Architecture: –
• Single Sign-on: A user should authenticate once and they should be able
to acquire resources, use them, and release them and to communicate
internally without any further authentication.
• Protection of Credentials: User passwords, private keys, etc. should be
protected.
• Interoperability with local security solutions: Access to local resources
should have local security policy at a local level. Despite of modifying every
local resource there is an inter-domain security server for providing security
to local resource.
• Exportability: The code should be exportable i.e. they cannot use a large
amount of encryption at a time. There should be a minimum communication
at a time.
• Support for secure group communication: In a communication, there
are number of processes which coordinate their activities. This coordination
must be secure and for this there is no such security policy.
• Support for multiple implementations: There should be a security policy
which should provide security to multiple sources based on public and
private key cryptography.

8. Write short notes on the concept of “Cloud Computing”.

a) Cloud Computing, simply means the use of computing resources as a service
through networks, typically the Internet.
b) Internet is generally visualized as “Clouds”. Hence, use of Internet–based
computing is called Cloud Computing.
c) Cloud Computing is a combination of both software based and hardware-
based computing resources, provided through a Network Service.
d) Cloud Computing is designed to enable Users –
 to have anytime access to a shared pool of applications and resources,
 to access data using a simple front–end interface such as a Web
Browser, and
 to develop, deploy and manage their resources on the Internet /
Cloud, i.e. virtualization of resources.

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 9. List the objectives of Cloud Computing.
The objectives of cloud–based Computing are as under –
1) To bring all available IT resources in an eco–friendly and cost–saving way,
2) To ensure and improve IT services as accessible and available from anywhere
["Anywhere Access" (AA)],
3) To enlarge / upgrade / upscale the activities to match evolving business
needs in a cost–effective manner,
4) To integrate IT–infrastructure and to create a manageable environment,
5) To reduce costs relating to Hardware and IT Energy / Power consumption.

10. Briefly describe the features of Cloud Computing.

Features of Cloud Computing:
1) Elasticity and Scalability:
• Cloud computing gives us the ability to expand and reduce resources
according to the specific service requirement.
• we may need a large number of server resources for the duration of a specific
task.
• We can then release these server resources after we complete our task.
2) Pay-per-Use:
• We pay for cloud services only when we use them, either for the short term
or for a longer duration.
3) On-demand:
• Because we invoke cloud services only when we need them, they are not
permanent parts of the IT infrastructure.
• This is a significant advantage for cloud use as opposed to internal IT
services.
• With cloud services, there is no need to have dedicated resources waiting to
be used, as is the case with internal services.
4) Resiliency:
• The resiliency of a cloud service offering can completely isolate the failure of
server and storage resources from cloud users.
• Work is migrated to a different physical resource in the cloud with or without
user awareness and intervention.
5) Multi Tenancy:
• Public cloud service providers often can host the cloud services for multiple
users within the same infrastructure.
• Server and storage isolation may be physical or virtual depending upon the
specific user requirements.
6) Workload Movement:
• Cloud-computing providers can migrate workloads across servers both inside

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 the data center and across data centers.
• This migration might be necessitated by cost or efficiency considerations

11. What are the advantages of Cloud Computing? (Any 8 points)

Major advantages of Cloud Computing include–
1) Achieve economies of scale: Volume output or productivity can be
increased even with fewer systems and thereby reduce the cost per unit of
a project or product.
2) Reduce spending on technology infrastructure: Data and information
can be accessed with minimal upfront spending in a pay- as-you-go
approach, which is based on demand.
3) Globalize the workforce: People worldwide can access the cloud with
Internet connection.
4) Streamline business processes: Getting more work done in less time
with less resources are possible.
5) Reduce capital costs: Not required to spend huge money on hardware,
software, or licensing fees.
6) Pervasive accessibility: Data and applications can be accesses anytime,
anywhere, using any smart computing device, making our life so much
easier.
7) Monitor projects more effectively: It is feasible to confine within
budgetary allocations and can be ahead of completion cycle times.
8) Less personnel training is needed: It takes fewer people to do more
work on a cloud, with a minimal learning curve on hardware and software
issues.
9) Minimize maintenance and licensing software: As there is too much of
premise computing resources, maintenance becomes simple and updates
and renewals of software systems rely on the cloud vendor or provider.
10) Improved flexibility: It is possible to make fast changes in our work
environment without serious issues at stake.

12. Differentiate between Grid Computing and Cloud Computing.

Aspect Grid Computing Cloud Computing
Grid Computing is the Cloud Computing refers to
Meaning
provisioning of IT resources provisioning of IT– resources
through a Control Server, to as a service through the
Internet.

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 multiple locations, using web–
services.
This uses Software to divide Resources are maintained in
Structure
and carve out pieces of the Cloud / Internet for easy
program, as a large system access, without installation of
image, to many computer Software in the User Device.
nodes.
Generally, access to Grid Access to Cloud applications
Device use
Computing is through one type can be from a variety of
of device only, e.g. only devices – Desktop, Laptop,
Desktop PCs, or only Laptops, Smartphones, etc.
etc.

Sometimes, if one part of the Data is stored in the Cloud /

Point of
Software in a Node fails, the Internet, which can be
failure
application in other Nodes retrieved as per Users
relying on such Node / requirement. Failure of one
Software, also fail. However, node, will not affect other
this can be avoided using nodes.
certain Passover technologies.
Suitable only for large Suitable for any size of data
Data storage
volumes of data. Not storage starting from 1 Byte to
economical if the data size is several Terabytes.
small.
Higher Cost of Investment Comparatively lower
Cost
and Operating Expenses, due investment and operating
to need for large system expenses, in areas of
images, and associated Hardware, Software, Training,
hardware to operate and Data Storage, etc.
maintain them.
A computational Grid focuses Cloud Computing offers two
Focus
mainly on computationally types of service levels /
intensive operations. instances – Standard and
High–CPU.

13. What are the different types of Cloud Computing Environment?

Based on their deployment & usage, the Cloud Computing Environments may be
classified as-
(i) Public Clouds: The public cloud is the cloud infrastructure that is provisioned
for open use by the general public. It may be owned, managed, and operated
by a business, academic, or government organizations, or some combination of
them. Typically, public clouds are administrated by third parties or vendors over
the Internet, and the services are offered on pay-per-use basis. These are also
called Provider Clouds.

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 (ii) Private Clouds: This cloud computing environment resides within the
boundaries of an organization and is used exclusively for the organization’s
benefits. These are also called Internal Clouds or Corporate Clouds. Private
Clouds can either be private to the organization and managed by the single
organization or can be managed by third party.
(iii) Community Clouds: The community cloud is the cloud infrastructure that is
provisioned for exclusive use by a specific community of consumers from
organizations that have shared concerns. It may be owned, managed, and
operated by one or more of the organizations in the community, a third party
or some combination of them, and it may exist on or off premises. This model
is suitable for organizations that cannot afford a private cloud and cannot rely
on the public cloud either.
(iv) Hybrid Clouds: This is a combination of both at least one private (internal) and
at least one public (external) cloud computing environments - usually,
consisting of infrastructure, platforms and applications. The usual method of
using the hybrid cloud is to have a private cloud initially, and then for additional
resources, the public cloud is used. It is typically offered in either of two ways.
A vendor has a private cloud and forms a partnership with a public cloud provider
or a public cloud provider forms a partnership/franchise with a vendor that
provides private cloud platforms.

14.Write short notes on – (a) Public Clouds, (b) Private Clouds, (c) Community
Clouds, and (d) Hybrid Clouds.
1) Public Clouds: The public cloud is the cloud infrastructure that is provisioned for
open use by the general public. It may be owned, managed, and operated by a
business, academic, or government organizations, or some combination of them.
Typically, public clouds are administrated by third parties or vendors over the
Internet, and the services are offered on pay-per-use basis. These are also called
Provider Clouds.

Features:
(i) Scalable, since Public Clouds have higher resources, and Service
Providers ensure that all requests are granted.
(ii) Affordable, since Public Cloud is offered to the public on a pay–as–you–
go basis (e.g. per hour, etc.), and hence, low cost of usage / deployment.
(iii) Less Secure than other deployment Models, since Public Cloud is
offered by a Third Party who have full control over the Cloud.
(iv) Highly Available, i.e. access from any part of the world with proper
permission, without much geographical or other access restrictions.
(v) Stringent SLAs, since the Service Provider’s business reputation and
customer strength are largely dependent on the Cloud Services, SLAs
are followed strictly and violations are avoided.

2) Private Clouds: This cloud computing environment resides within the boundaries
of an organization and is used exclusively for the organization’s benefits. These
are also called Internal Clouds or Corporate Clouds. Private Clouds can either be

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 private to the organization and managed by the single organization or can be
managed by third party.

Features:
(i) More Secure since the Private Cloud is deployed and managed by the
Entity itself, and lower chance of data leakage.
(ii) Better Control, since the Entity need not rely on anybody else for control
of the Private Cloud.
(iii) Weak SLAs, since in a Private Cloud, Formal SLAs do not exist or are
weak as it is between the Entity and User of the same Entity.

3) Community Clouds: The community cloud is the cloud infrastructure that is

provisioned for exclusive use by a specific community of consumers from
organizations that have shared concerns. It may be owned, managed, and
operated by one or more of the organizations in the community, a third party
or some combination of them, and it may exist on or off premises. This model
is suitable for organizations that cannot afford a private cloud and cannot rely
on the public cloud either.

Features:
(i) Collaborative & Distributive: No single Company has full control over
the whole cloud. This is usually distributive and hence better co–
operation provides better results.
(ii) Partially Secure: Only a few organizations share the Cloud, so there
is a possibility that the data can be leaked from one organization to
another, however it is safe from the external world.
(iii) Cost Effective: Community Cloud becomes cost effective since it is
shared by many organizations.

4) Hybrid Clouds: This is a combination of both at least one private (internal)

and at least one public (external) cloud computing environments - usually,
consisting of infrastructure, platforms and applications. The usual method of
using the hybrid cloud is to have a private cloud initially, and then for additional
resources, the public cloud is used. It is typically offered in either of two ways.
A vendor has a private cloud and forms a partnership with a public cloud
provider or a public cloud provider forms a partnership/franchise with a vendor
that provides private cloud platforms.

Features:
(i) Scalable: Hybrid Cloud with the help of its Public Cloud counterpart is
also scalable.
(ii) Partially Secure: The Private Cloud is considered as secured and Public
Cloud has high risk of security breach. The Hybrid Cloud is thus partially
secure.
(iii) Stringent SLAs: SLAs are more stringent than the Private Cloud, and
might be on the lines provided by the Public Cloud Service Providers.

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 (iv) Complexity: Cloud Management is complex as it involves more than
one type of deployment models, with high number of Users.

15.Cloud Computing has its disadvantages. Explain.

Drawbacks of Cloud Computing:
1) If Internet connection is lost, the link to the cloud and thereby to the data and
applications is lost.
2) Security is a major concern as entire working with data and applications depend
on other cloud vendors or providers.
3) Although Cloud computing supports scalability (i.e. quickly scaling up and down
computing resources depending on the need), it does not permit the control on
these resources as these are not owned by the user or customer.
4) Depending on the cloud vendor or provide, customers may have to face
restrictions on the availability of applications, operating systems and
infrastructure options.
5) Interoperability (ability of two or more applications that are required to support
a business need to work together by sharing data and other business-related
resources) is an issue wherein all the applications may not reside with a single
cloud vendor and two vendors may have applications that do not cooperate with
each other.

16.Explain the various Models of Cloud Computing Environment in brief.

Infrastructure as a Service (IaaS):
• IaaS, a hardware-level service, provides computing resources such as
processing power, memory, storage, and networks for cloud users to run their
application on-demand.
• This allows users to maximize the utilization of computing capacities without
having to own and manage their own resources.
• The end-users or IT architects will use the infrastructure resources in the form
of Virtual machines (VMs) and design virtual infrastructure, network load
balancers etc., based on their needs.
• The IT architects need not maintain the physical servers as it is maintained
by the service providers.
Platform as a Service (PaaS):
• In traditional application development, the application will be developed
locally and will be hosted in the central location.
• In stand-alone application development, the application will be developed
by traditional development platforms result in licensing - based software,
whereas PaaS changes the application development from local machine to
online.
• Typical PaaS providers may provide programming languages, application
frameworks, databases, and testing tools apart from some build tools,
deployment tools and software load balancers as a service in some cases.
• Examples of PaaS: Google App Engine, Windows Azure Compute, etc.
Software as a Service (SaaS):
• SaaS provides ability to the end users to access an application over the
Internet that is hosted and managed by the service provider.
• The end users are exempted from managing or controlling an application
the development platform, and the underlying infrastructure.

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 • SaaS changes the way the software is delivered to the customers.
• SaaS provides users to access large variety of applications over internets
that are hosted on service provider’s infrastructure.

Instance Description

Testing as a • Provides users with software testing capabilities such as

Service (TaaS) generation of test data, generation of test cases, execution of
test cases and test result evaluation on a pay-per-use basis.

API as a • Allows users to explore functionality of Web services such as

Service Google Maps, Payroll processing, and credit card processing
(APIaaS) services etc.

Email as a • Provides users with an integrated system of emailing, office

Service (EaaS) automation, records management, migration, and integration
services with archiving, spam blocking, malware protection, and
compliance features.

17. Different instances of Iaas

Instance Description
Network as a • Provides users with needed data communication capacity to
Service (NaaS) accommodate bursts in data traffic during data-intensive activities
such as video conferencing or large file downloads.
• It is an ability given to the end-users to access virtual network
services that
are provided by the service provider over the Internet on a per-
per-use basis.
• Allows network architects to create virtual networks; virtual
network interface cards (NICs), virtual routers, virtual switches,
and other networking components.
• Allows the network architect to deploy custom routing protocols
and enables the design of efficient in-network services, such as
data aggregation, stream processing, and caching. NaaS
providers operate using three common service models: Virtual
Private Network (VPN), Bandwidth on Demand (BoD) and Mobile
Virtual Network (MVN).
Storage as a • Provides storage infrastructure on a subscription basis to users
Service (STaaS) who want a low-cost and convenient way to store data,
synchronize data across multiple devices, manage off-site
backups, mitigate risks of disaster recovery, and preserve
records for the long-term.
• It is an ability given to the end users to store the data on the
storage services
provided by the service provider.

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 • STaaS allows the end users to access the files at any time from
any place. STaaS provider provides the virtual storage that is
abstracted from the physical storage of any cloud data center.
Database as a • Provides users with seamless mechanisms to create, store, and
Service (DBaaS) access
databases at a host site on demand.
• It is an ability given to the end users to access the database
service without
the need to install and maintain it on the pay-per-use basis.
• The end users can access the database services through any
Application Programming Interfaces (APIs) or Web User
Interfaces provided by the service provider.

18. What are the other cloud service models?

Instance Description
Communicatio • It is an outsourced enterprise communication solution that
n as a Service can be leased from a single vender. The CaaS vendor is
(CaaS) responsible for all hardware and software management and
offers guaranteed Quality of Service (QoS). It allows
businesses to selectively deploy communication devices and
modes on a pay-as-you-go, as-needed basis.
• This approach eliminates the large capital investments.
Examples are: Voice over IP (VolP), Instant Messaging (IM),
Collaboration and Videoconferencing application using fixed
and mobile devices.
Data as a • Provides data on demand to a diverse set of users, systems
Service or application. The data may include text, images, sounds,
(DaaS) and videos.
• Data encryption and operating system authentication are
commonly provided for security. DaaS users have access to
high-quality data in a centralized place and pay by volume
or data type, as needed.
• However, as the data is owned by the providers, users can
only perform read operations on the data. DaaS is highly
used in geography data services and financial data services.
Security • It is an ability given to the end user to access the security
as a service provided by the service provider on a pay-per-use
Service basis.
(SECaaS)
• It is a new approach to security in which cloud security is
moved into the cloud itself whereby cloud service users will
be protected from within the cloud using a unified approach
to threats.
Identity as a • It is an ability given to the end users; typically, an
Service organization or enterprise; to access the authentication
(IDaaS) infrastructure that is built, hosted, managed and provided
by the third-party service provider.
• Generally, IDaaS includes directory services, authentication
services, risk and event monitoring, single sign-on services,
and identity and profile management.

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 19. What is Mobile Computing?
• Mobile Computing refers to the technology that allows transmission of data
via a computer without having to be connected to a fixed physical link.
• Mobile Computing is the use of portable computing devices in conjunction
with mobile communications technologies to enable users to access the
Internet and data on their home or work computers from anywhere in the
world.
• Mobile Voice technology (i.e. Cell Phones Network) is extended to Mobile
Computing, where data is being sent and received across the Network, on
a wireless platform.
• An extension of this technology is the ability to send and receive data
across these cellular networks.

20. List a few benefits of Mobile Computing.

Benefits of Mobile Computing:
• It provides mobile workforce with remote access to work order details, such
as work order location, contact information, required completion date,
asset history relevant warranties/service contracts.
• It enables mobile sales personnel to update work order status in real- time,
facilitating excellent communication.
• It facilitates access to corporate services and information at any time, from
anywhere.
• It provides remote access to the corporate Knowledge base at the job
location.
• It enables to improve management effectiveness by enhancing information
quality, information flow, and ability to control a mobile workforce.

21. What are the components of Mobile Computing?

The key components of Mobile Computing are as follows:

Mobile Communication:
• This refers to the infrastructure put in place to ensure that seamless and
reliable communication goes on.
• This would include communication properties, protocols, data formats and
concrete technologies.

Mobile Hardware:
• This refers to the various Mobile Devices or Device Components that
receive or access the service of mobility.
• It includes Portable Laptops, Smart Phones, Tablet PCs, and Personal
Digital Assistants (PDA) that use an existing and established network to
operate on.
• At the back end, there are various servers like Application Servers,
Database Servers and Servers with wireless support, WAP gateway, a
Communications Server and/or MCSS (Mobile Communications Server
Switch) or a wireless gateway embedded in wireless carrier’s network.

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 Mobile Software:
• It is the actual program that runs on the Mobile Hardware and deals with
the characteristics and requirements of Mobile Applications.
• It is the operating system of that Device, i.e. essential to make the Device
operate.
• Mobile Applications (called Apps), are developed by organizations for use
by customers.
• However, Apps could represent risks, in terms of flow of data, personal
identification risks, introduction of malware and access to personal
information of Mobile Owner.

22. How does Mobile Computing work?

Mobile Computing operates similar to an Employee’s Desktop PC access the
Organization’s applications, except that the User’s Device is not physically
connected to the organization’s system.
• The user enters or access data using the application on hand-held
computing device.
• Using one of several connecting technologies, the new data are transmitted
from hand-held to site’s information system where files are updated and
the new data are accessible to other system user.
• Now both systems (hand-held and site’s computer) have the same
information and are in sync.
• The process works the same way starting from the other direction.

23. List a few limitations of Mobile Computing.

1) Insufficient Bandwidth: Mobile Internet access is generally slower than
direct cable connections using technologies such as General Packet Radio
Service (GPRS) and Enhanced Data Rates for GSM Evolution and 3G, 4G
networks. These networks are usually available within range of commercial
cell phone towers. Higher speed wireless LANs are inexpensive but have very
limited range.
2) Security Standards: When working mobile, one is dependent on public
networks, requiring careful use of Virtual Private Network (VPN). Security is
a major concern while concerning the mobile computing standards on the
fleet. One can easily attack the VPN through a huge number of networks
interconnected through the line.
3) Power consumption: When a power outlet or portable generator is not
available, mobile computers must rely entirely on battery power. Combined
with the compact size of many mobile devices, this often means unusually
expensive batteries must be used to obtain the necessary battery life.
4) Transmission interferences: Weather, terrain and the range from the
nearest signal point can all interfere with signal reception. Reception in
tunnels, some buildings, and rural areas is often poor.
5) Potential health hazards: People who use mobile devices while driving is
often distracted from driving, and are thus assumed more likely to be involved
in traffic accidents. Cell phones may interfere with sensitive medical devices.
There are allegations that cell phone signals may cause health problems.
6) Human interface with device: Screens and keyboards tend to be small,

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 which may make them hard to use. Alternate input methods such as speech
or handwriting recognition require training.

24. Write short notes on the concept of Green Computing or Green IT.
• Green Computing or Green IT refers to the study and practice of
environmentally sustainable computing or IT.
• In other words, it is the study and practice of establishing/ using computers
and IT resources in a more efficient and environmentally friendly and
responsible way.
• The objective of Green computing is to reduce the use of hazardous materials,
maximize energy efficiency during the product’s lifetime, and promote the
recyclability or biodegradability of defunct products and factory waste.
• Such practices include the implementation of energy-efficient Central Processing
Units (CPUs), servers and peripherals as well as reduced resource consumption
and proper disposal of electronic waste (e-waste).

25. User Habits play a significant role in Green IT. Explain.

For effective implementation of Green Computing, Government Regulation as well
as well–informed work habits of Computer Users are necessary. Some such steps
for Green IT include
• Use energy–efficient Central Processing Units (CPUs), Servers and Peripherals.
• Switch Off the CPU and all peripherals during extended periods of inactivity.
• Switch–on and Switch–off energy–intensive peripherals such as Laser Printers,
according to need of use.
• Use Liquid Crystal Display (LCD) Monitors rather than Cathode Ray Tube (CRT)
monitors.
• Use Notebook Computers rather than Desktop Computers whenever possible.
• Use the power–management features to turn off Hard Drives and displays after
several minutes of inactivity.
• Minimize the use of paper and properly recycle waste paper.
• Dispose off e–waste according to applicable law and regulations.
• Employ alternative energy sources for power supply to Workstations, Servers,
Networks and Data Centers.
• Plan work so as to handle all computer–related tasks in one go, instead of
alternating between paperwork and system–work. Switch off Computer in
durations of paperwork.

26. List a few Best Practices in Green IT.

Some of such steps for Green IT include the following:
1) Develop a sustainable Green Computing plan:
• On-going communication about and campus commitment to green IT best
practices to produce notable results.
• Include power usage, reduction of paper consumption, as well as
recommendations for new equipment and recycling old machines in
organizational policies and plans;
• Use cloud computing so that multiple organizations share the same
computing resources thus increasing the utilization by making more efficient
use of hardware resources.
2) Recycle:

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 • Dispose e-waste according to central, state and local regulations;
• Manufacturers must offer safe end-of-life management and recycling
options when products become unusable; and
• Recycle computers through manufacturer’s recycling services.
3) Make environmentally sound purchase decisions:
• Purchase of desktop computers, notebooks and monitors based on
environmental attributes;
• Provide a clear, consistent set of performance criteria for the design of
products;
• Use Server and storage virtualization that can help to improve resource
utilization, reduce energy costs and simplify maintenance.
4) Reduce Paper Consumption:
• Reduce paper consumption by use of e-mail and electronic archiving;
• Use of “track changes” feature in electronic documents, rather than red line
corrections on paper;
• While printing documents; make sure to use both sides of the paper, recycle
regularly, use smaller fonts and margins, and selectively print required
pages.
5) Conserve Energy:
• Use notebook computers rather than desktop computers whenever possible;
• Use the power-management features to turn off hard drives and displays
after several minutes of inactivity;
• Power-down the CPU and all peripherals during extended periods of
inactivity;

27. Write short notes on the “Bring Your Own Device” (BYOD)
Concept.
• BYOD (Bring Your Own Device) refers to business policy that allows employees
to use their preferred computing devices, like smart phones and laptops for
business purposes.
• It means employees are welcome to use personal devices to connect to the
corporate network to access information and application.
• The BYOD policy has rendered the workspaces flexible, empowering employees
to be mobile and giving them the right to work beyond their required hours.
• Though it has led to an increase in employees’ satisfaction but also reduced IT
desktop costs for organizations as employees are willing to buy, maintain and
update devices in return for a one-time investment cost to be paid by the
organization.

28. What are the threats associated with BYOD Concept?

Risks associated in implementation of BYOD are generally classified into four broad
areas:
1) Network Risks:
• In BYOD Environment, the Employer has no control the over the number of
devices and systems used, traffic handled, and data exchanged over the
Internet / Intranet.
• Network Security Risk increases in case of Virus attack, and when there is
a need for scanning all systems in the Network.

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 • If a virus hits the network and all the devices connected to the network
need be scanned, it is probable that some of the devices would miss out
on this routine scan operation.
• In addition to this, the network security lines become blurred when BYOD
is implemented.
2) Device Risks:
• In BYOD Environment, Loss of Employee’s Personal Devices which contains
sensitive corporate information, can cause financial and reputational
embarrassment to an organization.
• Data from stolen or lost devices can provide easy access to Company emails,
Company trade secrets and confidential data from a misplaced device.
3) Application Risks:
• Employees’ Mobiles and Smart Devices are not generally protected by
Security Software available with the Entity.
• Also, there is a lack of clarity in identifying ‘who is responsible for device
security ‘the organization or the User’.
4) Implementation Risks:
• It is normally exemplified and hidden in ‘Weak BYOD Policy’.
• Corporate knowledge and data are key assets of an organization, the
absence of a strong BYOD policy would fail to communicate employee
expectations, thereby increasing the chances of device misuse.
• This risk relates to the possibility of lack of proper BYOD Policy or poor
communication thereof, device misuse, and consequent loss of valuable
Corporate Knowledge and Data.
• This risk can be overcome through measures like – (i) adherence to a robust
BYOD Implementation Policy, (ii) an effective Employee education / training
program.

29. Write short notes on Web 3.0.

• The term Web 3.0, also known as the Semantic Web, describes sites wherein
the computers will be generated raw data on their own without direct user
interaction.
• Web 3.0 seeks to achieve a more connected open & intelligent web applications
using the concepts of natural language processing, machine learning, machine
reasoning and autonomous agents.
• Web 3.0 Application uses Content Management Systems along with Artificial
Intelligence.
• These systems are capable of answering the questions posed by the Users,
because the application is able to think on its own and find the most probable
answer, depending on the context, to the query submitted by the User.

30. Write short notes on Internet of Things (IoT) Concept.

The Internet of Things (IoT) is a system of interrelated computing devices,
mechanical and digital machines, objects, animals or people that are provided with
unique identifiers and the ability to transfer data over a network without requiring
human-to-human or human-to- computer interaction.
Applications: Some of the applications are as follows:

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 • Home Appliances are connected to create a “virtual home”, so that all activities
at home can be monitored through the Mobile Phone / Hand–held devices held
by the Owner while s/he is at office.
• Office Appliances are connected through intranet, so that many statistical
information on Resource Usage can be obtained effectively, e.g. Number of
Pages printed in Office Printer, etc.
• Governments can keep track of resource utilizations / extra support needed.
• Wearables: Just like smart homes, wearables remain another important
potential IoT application like Apple smartwatch.
• Connected Car: Connected car technology is a vast and an extensive network of
multiple sensors, antennas, embedded software, and technologies that assist in
communication to navigate in our complex world.

31. Write short notes on Artificial Intelligence (AI) and Machine

Learning Concepts.

Artificial Intelligence (AI): The ability described above when exhibited by

machines is called as Artificial intelligence (AI). It is intelligence exhibited by
machines.
For example:
1) This technology is being used in autonomous vehicles, the google car.
2) Apple online assistant Siri is supposed to use it.
Applications: Artificial Intelligence is being used in the following applications:
• Autonomous vehicles (such as drones and self-driving cars);
• Medical diagnosis, in cancer research. Predicting the chances of an individual
getting ill by a disease;
• Creating art (such as poetry);
• Proving mathematical theorems;
• Playing games (such as Chess or Go), and predicting the outcomes. Say which
number on a lottery ticket may win;
• Search engines (such as Google search);
• Online assistants (such as Siri);

Machine Learning: Machine Learning is a type of Artificial Intelligence (AI) that

provides computers with the ability to learn without being explicitly programmed.
The process of machine learning is similar to that of data mining. For example:
1) Machine learning has been used for image, video, and text recognition, as well
as serving as the power behind recommendation engines. Apple SIRI is a good
example.
2) This technology is being is being used in autonomous vehicles, the google car.
Applications: Virtually all applications were in AI using Machine learning so that
some value is added. It includes specifically following application:
• Autonomous vehicles (such as drones and self-driving cars),

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 • Medical diagnosis, in cancer research. Predicting the chances of an individual
getting ill by a disease.
• Playing games (such as Chess or Go), and predicting the outcomes. Say which
number on a lottery ticket may win.
• Search engines (such as Google search),
• Online assistants (such as Siri).

32.Explain Pertinent issues related to Cloud computing

As an emerging technology, cloud computing involves several issues. Some of the
pertinent issues related to cloud computing are:

Threshold Policy • The main objective of implementing threshold policy is

to inform cloud computing service consumers and
providers what they should do.
• Quite often, this policy does not exist. The only legal
document between the customer and service provider is
the Service Level Agreement (SLA).
• This document contains all the agreements between the
customer and the service provider; it contains what the
service provider is doing and is willing to do.
• However, there is no standard format for the SLA, and
as such, there may be services not documented in the
SLA that the customer may be requiring in future.
Interoperability • If a company enters a contract with one cloud
computing vendor, it may find it difficult to change to
another computing vendor that has proprietary APIs
(application programming interfaces) and different
formats for importing and exporting data. This creates
problems of achieving interoperability of applications
between two cloud computing vendors.
• Once a company is locked in with one cloud provider, it
is not easy to move an entire infrastructure to other
clouds.
Hidden Costs • Such costs may include higher network charges for
storage and database applications, or latency issues for
users who may be located far from cloud service
providers.
Unexpected • An application may perform well at the company’s
Behaviour internal data centre. It does not necessarily imply that
the application will perform the same way in the cloud.
• Therefore, it is essential to test its performance in the
cloud for unexpected behaviour.
• Testing may include checking how the application
allocates resources on sudden increase in demand for
resources and how it allocates unused resources.
Security Issues • Cloud computing infrastructures use new technologies
and services, most of which have not been fully
evaluated with respect to security.
• The important security issues with cloud computing are
the management of the data might not be fully
trustworthy; the risk of malicious insider attacks in the
cloud; and the failing of cloud services.

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 • Maintaining confidentiality is one the major issues faced
in cloud systems because information is stored at a
remote location which can be accessed by the service
provider. Data confidentiality can be preserved by
encrypting data.
• Cloud systems share computational resources, storage,
and services between multiple customer applications in
order to achieve efficient utilization of resources while
decreasing cost.
• However, this sharing of resources may violate the
confidentiality users’ IT Assets. It must be ensured that
there a degree of isolation between these users.
Legal Issues • Cloud systems need to adhere to several regulatory
requirements, privacy laws and data security laws.
• These laws vary from country to country and cloud
users have no control over where their data is physically
located.
Software • From the perspective of the application development,
Development in developers face the complexity of building secure
Cloud applications that may be hosted in the cloud.
• The speed at which applications will change in the cloud
will affect both the System Development Life Cycle
(SDLC) and security.
• The project manager must keep in mind the applications
should be upgraded frequently.
Bugs in Large- • One of the difficult challenges in Cloud Computing is
Scale removing errors in these very large-scale distributed
Distributed systems.
Systems

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Ch:5 Core Banking Systems

1. List the major features of Banking Business.

The key features of a banking business are as follows:
1) The custody of large volumes of monetary items, including cash and negotiable
instruments, whose physical security should be ensured.
2) Dealing in large volume (in number, value and variety) of transactions.
3) Operating through a wide network of branches and departments, which are
geographically dispersed.
4) Increased possibility of frauds as banks directly deal with money making it mandatory
for banks to provide multi-point authentication checks and the highest level of
information security.

2. Write short notes on the following activities of Banks

(a) Acceptance of Deposits,
(i) Banks accept Deposits from their Customers, which is the source of money for the
purpose of lending.
(ii) Deposits may be made by Customers in various schemes for pre–defined /
specified periods.
(iii) Banks accept deposits in various forms, e.g. Term Deposits, Savings Bank Deposits,
Current Account Deposits, Recurring Deposit, Saving–cum–Term Deposit, etc.
(iv) Banks offer various innovative products and schemes, to mobilise Deposits

(b) Granting of Advances – (Funded Limits),

(i) Advances constitute the major revenue–generating activity of Banks.
(ii) In respect of Business Sector, Advances may be in different forms – (a) Cash Credit,
(b) Bill Purchasing / Discounting, (c) Overdrafts, (d) Term Loans, etc.
(iii) In respect of Retail Sector, Advances may be towards Vehicles, Housing, Education,
etc.
(iv) Banks may also provide special facilities like issuance of Commercial Papers, ECB
(External Commercial Borrowing) on behalf of Bank/ Borrower, securitization of
Credit Sales, etc.
(v) Many Banks have specialized Centres to handle the Advances function, e.g.
Corporate Banking Branch, SME Advances Branch, etc.

(c) Letter of Credits and Guarantees – (Non–Funded Limits),

(i) Issuing Letters of Credit and Guarantees are the major Non–Funded Limits
granted by Banks to customers engaged in business, industrial and commercial
activities.
(ii) A Letter of Credit (LC) is an Undertaking by a Bank to the Payee (the Buyer) any

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 amount up to the limit specified in the LC, provided the terms and conditions
mentioned in the LC are complied with.
(iii) A Bank may provide Guarantees for the performance of contractual obligations
undertaken by their Customers, or satisfactory performance of goods supplied by
them, or for submission by Customers to Government Agencies, or to Suppliers of
goods, etc. in lieu of any Security Deposit.

(d) Collections,
(i) Customers can deposit instruments like Cheques, Drafts, Pay Orders, Travelers
Cheques, Dividend and Interest Warrants, Tax Refund Orders, etc. drawn in their
favour and Trade Bills drawn by them on their Buyers with their Bank for
collection.
(ii) Banks collect the proceeds of these instruments, on behalf of the customer.
(iii) Collection Services are also extended for Term Deposit Receipts, instruments
issued by Post Offices, e.g. National Savings Certificates, Postal Orders, etc.

(e) Clearing,
(i) Clearing, i.e. collecting instruments on behalf of Customers, is done through
Clearing House Mechanism.
(ii) A Clearing House settles the inter–Bank transactions among the local participating
Member Banks and Post Offices.
(iii) Clearing Houses generally adopt the electronic means, viz. MICR (Magnetic Ink
Character Recognition) Code for its operations.
(iv) MICR Code is a 9–digit code comprising relevant information about the
transaction and the Bank. MICR technology allows machines to read and process
cheques, and complete voluminous transactions within a short time.
(v) Using Core Banking System (CBS), Banks/Branches, honour and pay instruments
of other Branches beyond their Clearing Zone payable at par by the designated
Branch of that Centre.

(f) Remittances,
(i) Remittances involve transfer of funds from one place to another.
(ii) Remittances are handled by Banks through – (a) Demand Draft (DD) / Bankers’
Cheque / Pay Orders, (b) Telegraphic / Mail Transfers (TT/MT), (c) Electronic
Funds Transfer (NEFT / RTGS transfer).

(g) Credit Cards,

(i) Credit Cards permit Customers to draw / avail an “Advance” from the Bank while
making a purchase, and settle the amount to the Bank after the specified credit
period. Sometimes, Cash Withdrawal is also permitted on a Credit Card.
(ii) Generally, Credit Cards issued by Banks are linked to one of the International

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 Credit Card Networks (VISA, Master, etc.)

(h) Debit Cards,

(i) Debit Card facilitates Customers to pay at any authorized outlet, or to withdraw
money from an ATM from their account. Debit Cards are networked with an Inter–
Bank Network.
(ii) When a Debit Card is used for a transaction, the amount is immediately deducted
from the Customer’s Account Balance. There is no “Advance” or “Loan” given by
the Bank in this case.

(i) Other Services.

Other Services rendered by Banks include –
(i) Retail Banking: These are Front–Office Operations that cover all operations which
provide Direct Retail Services to Customers.
(ii) High Net–Worth Individuals (HNI): Banks provide special services to customers
classified as High Net–Worth Individuals (HNI) based on value/volume of
deposits/ transactions.
(iii) Back Operations: These cover all operations done at the Back Office of the Bank,
and include General Ledger, Management Information Systems, Reporting, etc.
(iv) Specialized Services: Banks perform services like Insurance Broking, Claims,
Underwriting, Life Insurance, Non–Life Insurance, etc, either by themselves, or by
separate Entities / Subsidiaries.
(v) Risk Management: Risk Management is done at strategic, tactical, operational and
technology areas of the Bank. Risk Management is managed as per the Bank’s
Policy, with detailed standards, procedures and guidelines provided for uniform
implementation.

3. Give a few examples of IT Controls in Banks.

Some examples of internal controls in bank branch are given here:
1) Work of one staff member is invariably supervised/ checked by another staff
member, irrespective of the nature of work (Maker-Checker process).
2) A system of job rotation among staff exists.
3) Financial and administrative powers of each official/ position is fixed and
communicated to all persons concerned.
4) Branch managers must send periodic confirmation to their controlling authority on
compliance of the laid down systems and procedures.
5) All books are to be balanced periodically. Balancing is to be confirmed by an
authorized official.
6) Details of lost security forms are immediately advised to controlling so that they can
exercise caution.

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 7) Fraud prone items like currency, valuables, draft forms, term deposit receipts,
traveller’s cheques and other such security forms are in the custody of at least two
officials of the branch.
4. Write short notes on Implementing IT Controls in Banks. (May 2019)
Sample list of IT related controls are:
1) The system maintains a record of all log-ins and log-outs.
2) If the transaction is sought to be posted to a dormant (or inoperative) account, the
processing is halted and can be proceeded with only with a supervisory password.
3) The system checks whether the amount to be withdrawn is within the drawing
power.
4) The system flashes a message if the balance in a lien account would fall below the
lien amount after the processing of the transaction.
5) Access to the system is available only between stipulated hours and specified days
only.
6) Individual users can access only specified directories and files. Users should be given
access only on a ‘need-to-know basis’ based on their role in the bank. This is
applicable for internal users of the bank and customers.
7) Exception situations such as limit excess, reactivating dormant accounts, etc. can be
handled only with a valid supervisory level password.
8) A user timeout is prescribed. This means that after a user logs-in and there is no
activity for a pre-determined time, the user is automatically logged out of the system.
9) Once the end-of-the-day process is over, the ledgers cannot be opened without a
supervisory level password.

5. Differentiate between General Controls and IT Application Controls, in the context

of Banking Sector.
In the context of Banking Sector, Controls may be classified as under:

Point General controls Application controls

Meaning These are controls which These are controls which are
pervade across different layers implemented in an application, to
of IT Environment and IT prevent or detect and correct
Systems. errors.
Scope Their impact is macro in nature, They pertain to the scope of
i.e. at different levels of IT individual business processes or
Environment. application systems (i.e. micro–
impact.)
Purpose 1) To meet overall objectives of 1) To ensure accurate and reliable
the IT System, processing,

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 2) To manage IT related risks 2) To ensure that all transactions
effectively, and data remains authorized,
3) To ensure that the complete, accurate and valid
Technology in use, supports during its input, update and
the Business Objectives. storage.
Examples 1) IT Security Policy, 1) Only Transactions of the day will
2) Business Continuity Plan be processed by the System.
3) Change Management 2) Excess Drawing permitted only
Documentation, etc if authorised.

6. All key modules of banking are all connected and related transactions are interfaces
with central server. Explain.
All key modules of banking are all connected and related transactions are interfaces with
central server are explained below:
1) Back Office: The Back Office is the portion of a company made up of administration and
support personnel, who are not client-facing. Back- office functions include settlements,
clearances, record maintenance, regulatory compliance, accounting, and IT services.
Back Office professionals may also work in areas like monitoring employees'
conversations and making sure they are not trading forbidden securities on their own
accounts.

2) Data Warehouse: Banking professionals use data warehouses to simplify and

standardize the way they gather data - and finally get to one clear version of the truth.
Data warehouses take care of the difficult data management - digesting large quantities
of data and ensuring accuracy - and make it easier for professionals to analyse data.

3) Credit-Card System: Credit card system provides customer management, credit card
management, account management, customer information management and general
ledger functions; provides the online transaction authorization and service of the bank
card in each transaction channel of the issuing bank; Support in the payment application;
and at the same time, the system has a flexible parameter system, complex organization
support mechanism and product factory-based design concept to speed up product time
to market.

4) Automated Teller Machines (ATM): An Automated Teller Machine (ATM) is an

electronic banking outlet that allows customers to complete basic transactions without
the aid of a branch representative or teller. Anyone with a credit card or debit card can
access most ATMs.

5) Central Server: Initially, it used to take at least a day for a transaction to get reflected in
the real account because each branch had their local servers, and the data from the server
in each branch was sent in a batch to the servers in the data centre only at the end of the
day (EOD). All the bank's branches access applications from centralized data

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 centres/servers, therefore, any deposits made in any branch are reflected immediately
and customer can withdraw money from any other branch throughout the world.

6) Branch Banking: CBS are the bank’s centralized systems that are responsible for
ensuring seamless workflow by automating the frontend and backend processes within
a bank. CBS enables single-view of customer data across all branches in a bank and thus
facilitate information across the delivery channels.

7. What is CORE Banking System?

➢ CORE stands for “Centralized Online Real–Time Environment”.
➢ Core Banking System (CBS) is the set of basic software components that manage
the services provided by a Bank to its Customers through its Branches and other
points of transaction.
➢ A Bank’s CBS functions as a heart (Circulatory System) and also its nervous system in
the electronic world.
➢ CBS is the platform where Communication Technology and Information Technology
are merged to suit the core needs of Banking.

8. Briefly describe a few Features of CBS.

The characteristics of CBS are:
1) There is a common database in a central server located at a Data Centre, which gives
a consolidated view of the bank’s operations.
2) Branches function as delivery channels providing services to its customers.
3) CBS is centralized Banking Application software that has several components which
have been designed to meet the demands of the banking industry.
4) CBS is supported by advanced technology infrastructure and has high standards of
business functionality.
5) Core Banking Solution brings significant benefits such as a customer is a customer of
the bank and not only of the branch.
6) CBS is modular in structure and is capable of being implemented in stages as per
requirements of the bank.

9. List a few technology components of CBS.

The key technology components of CBS are as follows:
➢ Database Environment
➢ Application Environment
➢ Web Environment
➢ Security Solution
➢ Connectivity to the Corporate Network and the Internet
➢ Data Centre and Disaster Recovery Centre
➢ Network Solution architecture to provide total connectivity
➢ Enterprise Security architecture
➢ Branch and Delivery channel
➢ Online Transaction monitoring for fraud risk management

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 10. Write short notes on the following– (a)Infosys’ Finacle, (b) Nucleus FinnOne, and (c)
Oracle's Flexcube, (d) BaNCS, (e) bankMate.
(a) Finacle: Core banking software suite developed by Infosys that provides universal
banking functionality covering all modules for banks covering all banking services.
(b) FinnOne: Web-based global banking product designed to support banks and financial
solution companies in dealing with assets, liabilities, core financial accounting and
customer service.
(c) Flexcube: Comprehensive, integrated, interoperable, and modular solution that
enables banks to manage evolving customer expectations.
(d) BaNCS: A customer-centric business model which offers simplified operations
comprising loans, deposits, wealth management, digital channels and risk and
compliance components.
(e) bankMate: A full-scale Banking solution which is a scalable, integrated e- banking
systems that meets the deployment requirements in traditional and non-traditional
banking environments. It enables communication through any touch point to provide
full access to provide complete range of banking services with anytime, anywhere
paradigm.

11. CBS is based on Client–Server Architecture. Explain the Role of Client, Server and
Branches in this regard.
Role of Client:
➢ User may be a Customer, or Staff at a Branch / Office.
➢ User–Actions and Controls are predominantly menu–driven.
➢ User is prompted by the Software to initiate an activity or to apply a control.
➢ User’s actions are validated by the CBS, and the transaction is permitted / allowed
accordingly.
➢ All operations that a Customer may do at any of the Branches of the Bank, are
validated at those Branches. However, the accounting process is centralized at the
Central Data Centre, and is updated at the Centralized Database.
Role of Server:
➢ Update of Database immediately when transactions are input and validated /
authorised,
➢ Updating of parameters globally,
➢ System–generated Transactions, e.g. Application of Interest and Service Charges,
Standing Instructions, Transfers, etc.
➢ Balancing/Reconciliation of Ledgers,
➢ Triggering and Generation of various kinds of Reports, etc.
Role of Branches:
➢ Beginning–Of–Day (BOD) Operations,
➢ Managing manual documents/vouchers, capturing data required for input into the
software,
➢ Internal Authorization,
➢ End–Of–Day (EOD) Operations,
➢ Reviewing Reports for control and error correction.

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 12. The Technology Architecture of CBS has a four–layer Model. Describe briefly.
The Technology Architecture of CBS has a four–layer Model as under –
1) Client: A Client Device can be a Teller, ATM, POS, Mobile Phone, Telephone, WAP
Client, Internet, TV Browser, Personal Digital Assistant (PDA), Branch Computer
Terminal, etc.
2) Channel Servers: The above Clients connect to the Channel Servers. Channel Servers
include Branch Server, Web Server, ATM/POS Switch, WAP or SMS Server, IVR Server,
etc.
3) Application Server: Channel Servers route the Client Request to the Application
Server (housed in the Central Data Centre). Application Server components include
TP Monitors, Host Connect and Business Intelligence.
4) Host Server: The Host Database Server houses the Execution Logic, and also has an
appropriate DBMS (e.g. Oracle RDBMS).

13. Explain the various key aspects in-built into the architecture of the Core Banking
System.
Some key aspects in-built into architecture of a CBS are as follows:
1) Information flow: This facilitates information flow within the bank and improves the
speed and accuracy of decision-making. It deploys systems that streamline integration
and unite corporate information to create a comprehensive analytical infrastructure.
2) Customer centric: Through a holistic core banking architecture, this enables banks
to target customers with the right offers at the right time with the right channel to
increase profitability.
3) Regulatory compliance: This holds the compliance in case bank is complex and
expensive. CBS has built-in and regularly updated regulatory platform which will
ensure compliance.
4) Resource optimization: This optimizes utilization of information and resources of
banks and lowers costs through improved asset reusability, faster turnaround times,
faster processing and increased accuracy.

14. Prepare a list of risks associated with Data Centre and Network Operations of Core
Banking System.
Risks associated in respect of Data Centre and Network Operations of Core Banking System
are:
➢ The transactions may not be recorded completely or accurately, and the related items
will be inaccurately or incompletely recorded.
➢ Invalid items may be recorded or valid items may be inaccurately or incompletely
recorded.
➢ Timely and adequate technical support may not be available and issues may not be
resolved.
➢ User queries may not be timely and adequately resolved.
➢ Timely execution and complete processing and availability of data may not be ensured.

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 ➢ Unavailability of applications or data backups in the event of a disaster.
➢ Backup may not be available if subject to some disaster, resulting in risk of data loss.
➢ Data may be lost and systems may not be recoverable in the event of a serious system
failure.

15. Write short notes on the following Servers in a CBS IT Environment – (a) Application
Server, (b) Internet Banking Application Server (c) ATM Channel Server, (d) Internet
Banking Channel Server, (e) Database server, (f) Web Server, (g) Proxy Server, (h)
Anti–Virus Software Server.

(a) Application Server:

➢ All the transactions of the Customer are processed by the Data Centre. The Application
Server performs necessary operations and this update the account of the Customer in the
Database Server.
➢ Generally, the Application Server is located at the Central Data Centre. Sometimes, the
Application Server may be decentralized and located at a Regional Office or at Branch for
easy and quick response.
➢ The Application Software in the Application Server should always be the latest version as
accepted after adequate testing. The Testing process is such that –
1) Changes are first made to a separate server called “Test Server”.
2) Programs are debugged and certified that the program is now amended as required
and performs as is expected of it.
3) The changed and latest Application Software is moved into the “Live” Application
Server under proper authority.
4) The earlier version of the Software is archived.
5) The latest copy of the Software would always have a Backup Copy.

(b) Internet Banking Application Server:

➢ The Internet Banking Software which is stored in the IBAS (Internet Banking Application
Server) authenticates the Customer with the login details stored in the IBCS (Internet
Banking Channel Server).
➢ Authentication involves comparison of the details provided by the Customer, with the data
already stored in the Data Server, to ensure that the Customer is genuine and is authorised
to do Internet Banking.

(c) ATM Channel Server:

➢ This Server contains the details of ATM Account Holders (e.g. Account Number, Customer
Name, Balance, etc.).
➢ Since ATMs are attached to the Central Network, the control is established through ATM
Switch.
➢ A File containing the Account Balances of the Customers [called Positive Balance File (PBF)]
is sent to the ATM Switch, by the Central Database.
➢ So, ATM Transactions continue to happen without any halt, even if the Central Database is
busy or inaccessible due to EOD activities, etc.

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 ➢ Once the Central Database Server becomes accessible, all the transactions that took place
till such time as the
➢ This ensures – (a) continuity of ATM Operations, and (b) prompt updation of the Central
Database.

(d) Internet Banking Channel Server:

➢ The Internet Banking Database Server as well as the IBCS Software stores the details as to
Username, Passwords, Home Branch, etc. of all the Internet Banking Customers.
➢ The Internet Banking Customer should first log into the Bank’s Website with the Username
and Password.
➢ After verifying his credentials, the IBCS Server forwards his transaction request to the
Application Server.

(e) Database Server:

➢ The Database Server of the Bank contains the entire data of the Bank.
➢ Data consists of – (a) Transaction Data and (b) Master Data.
➢ Direct Access is not permitted to the Database Server, so as to ensure Data Integrity.
➢ Access to the Database Server is permitted only for – (a) the Application Software, i.e.
normal Application Server, (b) ATM Server, and (c) Internet Banking Application Server
(IBAS).
➢ There is a designated role for maintenance of the Database, i.e. the Database Administrator
(DBA).
➢ Every access to the Database is logged and monitored, including the activities of the DBA
himself.

(f) Web Server:

➢ The Web Server is used to host all Web Services and Internet–related Software, using HTTP
(Hypertext Transfer Protocol).
➢ All the Online Requests and Websites are hosted and serviced through the Web Server.
➢ User logs in and makes a request to the Web Server, which hosts the Internet Banking
Website.
➢ Web Server uses HTTP to send the files that form the Web Pages to the Users.
➢ To protect the Web Server from unauthorized use, a Firewall is designed such that only
traffic addressed to the Web Server through the Authorized Port is permitted.
➢ All Computers that host Websites must have Web Server Programs. Sometimes, there may
be dedicated computers and appliances to function as Web Servers.

(g) Proxy Server:

➢ A Proxy Server is a Computer that offers a Computer Network Service to allow Clients to
make indirect network connections to other network services.
➢ A Client connects to the Proxy Server, and then requests a connection, file, or other resource
available on a different Server.
➢ The Proxy Server provides the resource either by connecting to the specified server or by
serving it from a cache.

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 ➢ Sometimes, the Proxy may alter the Client’s request or the Server’s response for various
purposes.

(h) Anti–Virus Software Server:

➢ The Anti–Virus Server is used to host Anti–Virus Software.
➢ All the Software deployed are first scanned to prevent unnecessary consequences. This
ensures that appropriate Virus/ Malware Scans are performed.

16. Application Software in a CBS Environment have 4 Gateways. Briefly explain them.
Application Software have 4Gatewaysthrough which the Bank / Entity can control the
functioning, access and use the various menus and functions of the software –

1) Configuration:
➢ Configuration refers to the manner in which a Software is set–up for use.
➢ Configuration is thus the first step after Software Installation, and is a very significant step.
➢ It includes both Hardware and Software Parameters.
➢ Configuration will define how the Software will function and what menu options are
displayed.
➢ CBS Configuration involves defining the various parameters as per the Bank’s Policies,
Practices, Procedures and Business Process Rules.
➢ CBS Configuration includes –
• modifying the default parameters in Systems Software,
• defining the workflow for each of the Products or Services,
• setting up of different CBS Modules e.g. Advances, Deposits, Cash, Treasury, etc.
• defining the Access Rules, User Creation, Rights, Password Procedures, etc.
• specifying the manner of system–driven transactions, e.g. Interest Computation.

2) Masters:
➢ Masters refer to the setting parameters for various types of Product and Service Types as
per the Software Modules used in the Bank.
➢ The Parameter Settings in the Masters will determine how the Software will process
relevant transactions.
➢ After configuring the software, the Masters are set–up first time during installation.
➢ Masters are also called Standing Data, since they are changed only when – (i) there are
changes in Business Processes, Values, etc. and (ii) they are authorised by appropriate levels
of Management.
➢ Some examples of masters in context of CBS Software are as follows:
• Customer Master: Customer type, details, address, PAN details,
• Employee Master: Employee Name, Id, designation, level, joining details, salary, leave,
etc.
• Income Tax Master: Tax rates applicable, Slabs, frequency of TDS, etc.

3) Transactions:
➢ In CBS, Transactions refer to the actual transactions of various Products and Services.
➢ Some examples of transactions in the context of CBS software are given here:

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 • Deposit transactions: opening of a/c, deposits, withdrawals, interest computation,
etc.
• Advances transactions: opening of a/c, deposits, withdrawals, transfers, closure, etc.
• ECS transactions: Entry, upload, authorize/approve, update, etc.
• General Ledger: Expense accounting, interest computation update, charges update,
etc.

4) Reports:
➢ Information processed by the System is provided to Users through Reports.
➢ These reports could be used for monitoring the operations as also for tracking the
performance or security.
➢ Some examples of reports are as follows:
• Summary of transactions of day
• Daily General Ledger (GL) of day
• Activity Logging and reviewing
• MIS report for each product or service
• Reports covering performance/compliance;
• Reports of exceptions, etc.

17. List a few Control Points in implementing CBS.

The deployment and implementation of CBS should be controlled at various stages to ensure
that banks automation objectives are achieved:
1) Planning: Planning for implementing the CBS should be done as per strategic and
business objectives of bank.
2) Approval: The decision to implement CBS requires high investment and recurring
costs and will impact how banking services are provided by the bank. Hence, the
decision must be approved by the board of directors.
3) Selection: Although there are multiple vendors of CBS, each solution has key
differentiators. Hence, bank should select the right solution considering various
parameters as defined by the bank to meet their specific requirements and business
objectives.
4) Design and develop or procured: CBS solutions used to be earlier developed in-
house by the bank. Currently, most of the CBS deployment are procured. There should
be appropriate controls covering the design or development or procurement of CBS
for the bank.
5) Testing: Extensive testing must be done before the CBS is live. The testing is to be
done at different phases at procurement stage to test suitability to data migration to
ensure all existing data is correctly migrated and testing to confirm processing of
various types of transactions of all modules produces the correct results.
6) Implementation: CBS must be implemented as per pre-defined and agreed plan with
specific project milestones to ensure successful implementation.
7) Maintenance: CBS must be maintained as required. E.g. program bugs fixed, version
changes implemented, etc.

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 8) Support: CBS must be supported to ensure that it is working effectively.
9) Updation: CBS modules must be updated based on requirements of business
processes, technology updates and regulatory requirements;
10) Audit: Audit of CBS must be done internally and externally as required to ensure that
controls are working as envisaged.

18. Explain the Business Process Flow of CASA Facility. Outline its Risks and related
Controls.
Process flow of CASA facility:
a. Customer request: Customer – (a) approaches the Relationship Manager (RM) to
apply for a CASA facility, or (b)applies for CASA facility through Internet Banking.
b. Application: Customer submits relevant documents, viz. Application, KYC
Documents (PAN, Aadhaar, Driving License, Passport, etc.), either in physical self–
attested or electronic form (e–KYC).
c. Initial screening: After initial screening for completeness, the RM forwards the
documents to the Credit Team.
d. Assessment: The Credit Team – (a) verifies the documents, (b) assesses the
financial and credit–worthiness of the Applicant Customer, and (c) updates the
appropriate facilities in the Customer Account.
e. Facilities: CASA along with the requested facilities are provided to the Customer
for daily operations. Facilities include Cheque Deposits / Withdrawal, Cash Deposit
/ Withdrawal, RTGS, NEFT, ECS, SMS Alerts, Internet Banking, etc.
Risks & controls in CASA process:
Risk Key controls
Customer Master defined in • Input Controls should be in place to check
CBS is not as per the accuracy of data by comparing with Source
Application / KYC Documents, immediately after its entry.
• Access Rights to authorize the Customer Master in
CBS should be restricted to Authorized Personnel.
Inaccurate Interest / Charges • Interest Allowed on Savings Account balances
is calculated in CBS. should be automatically computed in CBS as per
the defined rules.
• Charges for facilities, e.g. RTGS/NEFT, etc. should
be automatically computed in CBS as per the
defined rules.
Unauthorized Personnel SoD to be maintained between the Initiator (Maker)
approve the CASA transaction and Authorizer (Checker) of the transaction for
in CBS. processing in CBS.
Inaccurate accounting entries Accounting Entries should be generated by CBS
are generated in CBS based on the facilities requested by the Customer,
and defined configurations for those facilities in CBS.

19. Explain the Business Process Flow of Credit Cards. Outline its Risks and related
Controls.
Process Flow of Issuance of Credit Card Facility:

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 (a) Either the customer approaches the relationship manager to apply for a credit card
facility or customer will apply the same through internet banking, the charges/rates
for the facility are provided by the relationship manager basis the credit application
made by the customer.
(b) Once the potential customer agrees for availing the facilities/products of the bank,
the relationship manager request for the relevant documents i.e. KYC and other
relevant documents of the customer depending upon the facility/product.
(c) The document received from the customers are handed over to the Credit team for
sanctioning of the facilities/limits of the customers.
(d) Credit team verifies the document’s, assesses the financial and credit worthiness of
the borrowers and issues a credit limit to the customer in CBS and allots a credit
card.
(e) Credit Card is physically transferred to the customer’s address.

Process Flow of Sale - Authorization process of Credit Card Facility:

(a) Customer will swipe the credit card for the purchase made by him/her on the POS
machine (Point of Sale) at merchant’s shop/establishment.
(b) POS (Point of Sale) will process the transaction only once the same is authenticated.
(c) The POS (Point of Sale) will send the authentication request to the merchant’s bank
(also referred as ‘acquiring bank’) which will then send the transaction
authentication verification details to the credit card network (such as VISA,
MASTER CARD, AMEX, RUPAY) from which the data will be validated by the credit
card issuing bank within a fraction of seconds.
(d) Once the transaction is validated, the approval message is received from credit card
issuing bank to the credit card network which then flows to the merchant’s bank
and approves the transaction in the POS (Point of Sale) machine.
(e) The receipt of the transaction is generated and the sale is completed. The
transaction made is charged during the billing cycle of that month.

Process Flow of Clearing & Settlement process of Credit Card Facility:

(a) The transaction data from the merchant is transferred to the merchant’s bank.
Merchant’s bank clears settlement amount to Merchant after deducting Merchant
fees. Merchant’s bank, in turn now provides the list of settlement transactions to
the credit card network which then provides the list of transactions made by the
customer to the credit card issuing bank.
(b) The credit card issuing bank basis the transactions made, clears the amount to
Merchant’s bank but after deducting interchange transaction fees.
(c) At the end of billing cycle, card issuing company charges the customer’s credit card
account with those transactions in CBS.

Risk & Controls in Credit Card Process:

Risks Key control
Credit Line setup is unauthorized Credit Committee should check that the Financial
and not in line with the Bank’s Ratios, Net–Worth, Risk factors and its
policy corresponding mitigating factors, the Credit Line
offered and the Credit amount etc. is as per the

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 Bank’s Credit Risk Policy and that the Client can
be given the Credit Line
Credit Line setup is unauthorized Access Rights to authorize the Credit Limit in the
and not in line with the bank’s Credit Card System should be restricted to
policy. Authorized Personnel.
Masters defined for the customer • Access Rights to authorize the Customer Master
are not in accordance with the in the Credit Card System should be restricted to
Pre-Disbursement Certificate. Authorized Personnel.
• SoDs should be in place in Credit Card System,
so that a Maker cannot exercise Checker’s rights
also.
Credit Line setup can be • Controls should ensure that a transaction cannot
breached. be made if the aggregate Outstanding Amount
exceeds the Credit Limit assigned to the
Customer.
• A “Denied” message is sent to the Intermediary,
and also to the Customer.
Inaccurate Interest / Charge is Interest on fund–based Credit Cards and Charges
calculated in the Credit Card are automatically calculated in the Credit Card
system. System as per the defined masters.
Inaccurate reconciliations are Daily Reconciliation is made for the balances
performed received from Credit Card Network with the
transactions updated in the Credit Card System
on Card Network Level.

20. Explain the Business Process Flow of Mortgage Loans. Outline its Risks and related
Controls?
Business process flow of mortgage loan:
a. Customer request: Customer approaches the Relationship Manager (RM) or Loan
Officer (LO) to apply for a Mortgage Loan.
b. Discussion: The RM/LO provides Loan Consulting to the Customer / Borrower, on
various procedural and financial aspects of the Loan .
c. Application: Customer submits Loan Application, KYC Documents, Income Proof,
details as to Existing Loans and Financial Obligations, Property proposed to be
purchased, etc.
d. Initial screening: After initial screening and review of the Application and
Documents, the RM/LO forwards the Application and Documents to the Credit
Team.
e. Credit assessment: The Credit Risk Team evaluates various factors like – (i)
Present and Proposed Incomes, (ii)Existing Loan Obligations, (iii) Past Credit
History of the Applicant in terms of CIBIL Score, (iv) Ratios of Proposed EMIs to Net
Disposable Income, (v) Number of Dependents, etc.
f. Under writing team: The Underwriting Team –(1) verifies the Applicant’s Credit
History and current employment information, (2) ensures that the Loan to be
provided is within the lending guidelines, (3) provides a Conditional Approval,
along with the list of documents to be obtained.

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 g. Legal & valuation: The Property proposed to be purchased is evaluated by the Legal
and Valuation Team for – (1) Whether the Applicant will obtain a Clean Title to the
property upon its purchase, and can therefore affect a valid mortgage in favour of
the Bank? (2) Whether the Value of the Property constitutes appropriate security
for the Bank? (3) Whether Norms as to Approved Plan, Age of the Building,
Construction Quality, Completion Certificate, Utility Connections, etc. are complied
with?
h. Operation team: The Legal and Valuation Team sends its report to the Operations
Team. The Operations Team generates the Offer Letter (Sanction Letter) to the
Applicant, providing details as to Loan Amount, Rate of Interest, Period of
Repayment (Tenor), Monthly Instalment, Address of Property, Processing Fees,
Insurance Coverage, and other applicable terms and conditions.
i. Customer acceptance: Customer agrees to the Loan Agreement by signing the Offer
Letter, and Loan Documents. All signed and executed documents are then sent to
the Operations Team.
j. Disbursement: Operations Team disburses the Loan Amount (in one instalment or
in tranches, as per the agreement), generally by a Demand Draft / Electronic
Transfer in favour of the Seller of the Property – after ensuring conditions like TDS
Remittance, Stamp Duty, Margin, etc.
k. Security creation: RM/LO follows up with the Customer for execution of related
documents like Mortgage Deed, CERSAI Certification, etc. to ensure First Charge on
the Property, in the Bank’s favour.
l. Servicing: Customer carries out Loan Servicing activities (e.g. Interest Rate Change,
EMI Change, pre–payments, foreclosure, etc.) through the Nodal Branch, or through
online mode

Risk & Controls in Mortgage Loan Process:

Risk Key control
Incorrect customer and loan details There is secondary review performed by an
are captured which will affect the independent team member who will verify
over- all downstream process. loan details captured in core banking
application with offer letter
Incorrect loan amount disbursed. There is secondary review performed by an
independent team member who will verify
loan amount to be disbursed with the core
banking application to the signed offer letter.
Interest amount is in- correctly Interest amount is auto calculated by the core
calculated and charged. banking application basis loan amount, ROI
and tenure.
Unauthorized changes made to loan System enforced segregation of duties exist in
master data or customer data. the core banking application where the person
putting in of the transaction cannot approve
its own transaction and reviewer cannot edit
any details submitted by person putting data.

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 21. Explain the Business Process Flow of Trade / Business Finance. Outline its Risks and
related Controls.
Business process flow of Trade/Business Finance:
a. Customer request: Customer approaches the Relationship Manager (RM) to apply
for a Mortgage Loan. Alternatively, the RM may identify potential customers and
approach them with the details of the products/ facilities offered by the Bank and
the charges/rates thereof.
b. Discussion: The RM provides Consulting to the Customer / Borrower, on various
procedural and financial aspects of the Loan.
c. Application: Customer submits Loan Application, KYC Documents, Audited
Financial Statements, Financial Projections, details as to Existing Loans and
Financial Obligations, Project Details, etc.
d. Initial screening: After initial screening and review of the Application and
Documents, the RM forwards the Application and Documents to the Credit Team.
e. Credit assessment: The Credit Risk Team evaluates various factors like – (i) Project
Feasibility, (ii) Financial Strength of the Applicant, (iii) Past Credit History of the
Applicant in terms of CIBIL Score, (iv) Key Financial Ratios, (v) Primary and
Collateral Securities offered, etc.
f. Sanction Letter: Legal and Valuation Team seeks to Legal Clearance (i.e. validity of
Title) and Valuation of the Properties offered as Primary and Collateral Security to
the Bank. The Credit Team issues a Sanction Letter to the Customer, containing the
details the terms of the facilities and the Credit Limits the customer is eligible.
g. Customer acceptance & PDC: Customer agrees to the Loan Agreement by signing
the Offer Letter, and Loan Documents. Credit Team prepares a Pre–Disbursement
Certificate (PDC) containing the details of all the facilities and limits approved for
the customer, and sends it to the Disbursement Team. Disbursement Team creates
Customer Account and Master in the Loan Disbursement System and updates the
various credit limits sanctioned as per PDC .
h. Security creation: RM follows up with the Customer for execution of related
documents like Mortgage Deed, CERSAI Certification, ROC Charge Creation, etc. to
ensure a Charge in the Bank’s favour.
i. Disbursement: Disbursement Team disburses the Loan Amount, by – (i) crediting
the Account of the Customer, (ii) Funds Transfer in favour of Vendor (in case of
Term Loans for Asset Acquisition), or (iii)permitting withdrawals by cheque up to
specified limit (in case of CC/OD, etc.)
j. Operations: Customer carries out operations in the account, and Loan Servicing
activities (e.g. Renewals, Interest Rate Change, foreclosure, etc.) in the normal
manner.

Risk & Controls in Trade Finance:

Risk Key control
Credit Line setup is unauthorized Credit Committee should check that the
and not in line with the Bank’s Financial Ratios, Net–Worth, Risk factors and
policy its corresponding mitigating factors, the Credit
Line offered and the Credit Amount, etc. is as

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 per the Bank’s Credit Risk Policy and that the
Client can be given the Credit Line
Credit Line as per CBS is not as per Access Rights to authorize the Credit Limit in
sanctioned limit the Loan System should be restricted to
Authorized Personnel.
Facilities granted may be SoDs should be in place in Loan System, so
unauthorized / inappropriate that a Maker cannot exercise Checker’s rights
also.
Masters defined for the Customer • Access Rights to authorize the Customer
are not as per the PDC. Master in the Loan System should be
restricted to Authorized Personnel.
• SoDs should be in place in Loan System, so
that a Maker cannot exercise Checker’s
rights also.
Credit Line setup can be breached. • Controls should ensure that a transaction
cannot be made if the aggregate
• Outstanding Amount exceeds the Credit
Limit assigned to the Customer
Inaccurate Interest/ Charges are • Interest on Fund–Based Loans and
calculated in the Loan Disbursal Commission Charges for Non–Fund Based
system Loans are automatically calculated in the
Loan Disbursal System as per the defined
Masters.
• Masters are regularly updated for changes
in the Base Rate of Interest.

22. Explain the Business Process Flow of Treasury Operations. Outline its Risks and
related Controls.
Business process flow of treasury operations:
a. Pre-Deal Analytics: Before entering into a Deal (for purchase or sale), Dealers check
various aspects including – (a) Requirements of the Bank, (b) Risk levels undertaken,
(c) Counter–Party and Own Credit Limits, (d) Regulatory Compliance, e.g. Forex
Deals, Board Resolution, International Swaps and Derivatives Association (ISDA)
Agreement, Margin Requirements, etc.
b. Entering into trade deals: Dealers use the appropriate Trading /Communication
Platform, e.g. Reuters’ System, Telephonic Conversation, Brokers or another Private
Channel, with the respective Counter–Party. All transactions in a Treasury Function
are recorded through a system that tracks the flow of each transaction through its life
cycle. The document that records the transaction is called a Deal Ticket.
c. Ticket entry: As soon as the deal is struck with the Counter–Party, the Deal Ticket is
recorded in the Front Office System, and gets queued in for authorization.
d. FO approval: After the Deal Ticket has been created and recorded, it is approved by
another User in the Front Office. Each User is assigned a financial limit, to approve
Ticket Amounts within that limit.
e. Middle office process: If Deal Ticket details are found correct, the Deal Ticket as
approved by FO, flows into the Treasury System. Middle Office now performs Pricing
and Valuations on the Deal Ticket.

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 f. Confirmation: After FO Approval of the Deal Ticket and Pricing / Valuation in Middle
Office, the Deal Ticket is verified by a User in the Back Office. After Back Office
Verification, the deal is approved by another User in the Back Office, within the
financial limits / delegated powers. This constitutes the Confirmation of the Deal
Ticket.
g. Settlement: When a deal is complete, a Confirmation Letter containing the terms and
conditions thereof is sent to the Counterparty. Generally, the External Confirmation
from the Counterparty is received on the same day itself. Settlement of Securities /
Funds is made by the Back-Office Team, based on the above.
h. Reconciliation: FOBO (Front Office/ Back Office) Reconciliation – to ensure the
completeness and accuracy of trades/deals done for the day,

Risk & Controls in Treasury Operations

Risk Key control
Unauthorized securities setup in Appropriate Segregation of duties and review
systems such as Front office/Back controls around securities master setup/
office. amendments.
Inaccurate trade is processed Appropriate Segregation of duties and review
controls to ensure the accuracy and
authorization of trades.
Unauthorized confirmations are Complete and accurate confirmations
processed to be obtained from counter-party.
Insufficient Securities available for Effective controls on securities and margins.
Settlement
Incomplete and inaccurate data Inter-system reconciliations, Interfaces and
flow between systems. batch processing controls.
Insufficient funds are available Controls at CCIL/NEFT/RTGS settlements to
for settlements ensure the margin funds availability and the
timely funds settlements.

23. Explain the Business Process Flow of Internet Banking.

Internet Banking Process is as under:
(a) Application:
➢ The Customer applies to the Bank for Internet Banking facility.
➢ The Customer is provided with a User ID and Password.
➢ The Password provided by the Bank is expected to be changed at the first log–in,
and further log–ins are permitted only using the Password as changed by the
Customer.
(b) Validation of User ID and password-Access control:
➢ User accesses the Bank’s Internet Banking Website through a Browser.
➢ The Browser connects to the Bank’s Website.
➢ Bank’s Website and a facility for Log in User keys in the User ID and Password.
➢ Based on the confirmation with the Master Data at IBDS, the IBAS sends an
acknowledgement to the Web Server. The Web Server displays the appropriate
message.
(c) Internet Banking Transactions:

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 ➢ If User ID and Password are properly validated, the Customer is permitted to
perform the authorized transactions and service requests, e.g. Funds Transfer,
Balance Enquiry, Tax Payment, Statement of Accounts, Password Change, etc.
➢ The Service requested is directed by the Web Server to the IBAS for processing.
➢ The Internet Banking Channel Server (IBCS) retrieves the data from the Central
Database Server. The IBCS will be able to access the Central Database Server only
through a Middleware and Firewall.
➢ The Web Server generates a dynamic web page for the service requested, e.g. Tax
Payment Challan, Statement of Accounts, etc. and presents it to the Web Browser
in an encrypted form.
➢ User may choose to log out, or may be automatically logged out after one service
request.
➢ The Customer may also be permitted to have multiple service requests in one
session itself.
➢ If there is no action from the User for some time, the system may log out
automatically with the message as “Session Expired”, and request for a fresh log–
in.

24. Write short notes on e–Commerce Transaction Processing – i.e. Payment Process
through Gateway.
➢ Here, the User logs in on the e–commerce Website Portal, places an order and selects
the option of payment, e.g. through Cards, or through Internet Banking.
➢ For Payment through Internet Banking, the Merchant Site is directed to Bank’s
Merchant–Internet Banking Server.
➢ User must log in in the Bank’s Server and authorize payment, through OTP (Online
Transaction Password) received on the Registered Mobile, to complete the transaction.
➢ After this, the Customer is re–directed from the Bank’s Site to Merchant’s Site.

25. List a few IT risk related to CBS.

Some of the common IT risks related to CBS are as follows:
a) Ownership of Data/ process: Data resides at the Data Centre. Establish clear
ownership.
b) Authorization process: Anybody with access to the CBS, including the customer
himself, can enter data directly. What is the authorization process? If the process is not
robust, it can lead to unauthorized access to the customer information.
c) Authentication procedures: Usernames and Passwords, Personal Identification
Number (PIN), One Time Password (OTP) are some of the most commonly used
authentication methods. However, these may be inadequate and hence the user
entering the transaction may not be determinable or traceable.
d) Several software interfaces across diverse networks: A Data Centre can have as
many as 75-100 different interfaces and application software. A data centre must also
contain adequate infrastructure, such as power distribution and supplemental power
subsystems, including electrical switching; uninterruptable power supplies; backup
generators and so on. Lapse in any of these may lead to real-time data loss.
e) Maintaining response time: Maintaining the interfacing software and ensuring
optimum response time and up time can be challenging.

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 f) User Identity Management: This could be a serious issue. Some Banks may have more
than 5000 users interacting with the CBS at once.
g) Access Controls: Designing and monitoring access control is an extremely challenging
task. Bank environments are subject to all types of attacks; thus, a strong access control
system is a crucial part of a bank’s overall security plan. Access control, however, does
vary between branch networks and head office locations.
h) Incident handling procedures: Incident handling procedures are used to address and
manage the aftermath of a security breach or cyberattack. However, these at times, may
not be adequate considering the need for real-time risk management.
i) Change Management: Though Change management reduces the risk that a new
system or other change will be rejected by the users; however, at the same time, it
requires changes at application level and data level of the database- Master files,
transaction files and reporting software.

26. What is the sub–processes of “Information Security”? List a few risks and related
controls?
In a CBS, “Information Security” includes the following sub– processes:
(a) Policies, Procedures, and Practices: This refers to the processes relating to approval
and implementation of Information Security. These cover all key areas of securing
information at various layers of information processing.
(b) User Security Administration: This refers to security for various Users of IT Systems,
and covers how Users are created and granted access as per the Bank’s Organization
Structure and Access Matrix. User Security Administration ranges from creation to
disabling of Users.
(c) Application Security: This refers to how security is implemented at various aspects of
application. It covers configuration, setting of parameters and security for transactions
through various Application Controls.
(d) Database Security: This refers to various aspects of implementing security for the
Database Software.
(e) Operating System Security: This refers to the security for Operating System Software
which is installed in the Servers, and the Systems which are connected to the Servers.
(f) Network Security: This refers to security at various layers of Network and
Connectivity to the Servers.
(g) Physical Security: This refers to security implemented through Physical Access
Controls.
Risks and related Controls relating to Information Security are as under –
Risks Key IT control
1) Significant information Super user access or administrator passwords are
resources may be modified changed on system, installation and are available
inappropriately, disclosed with administrator only. Password of super use or
without authorization, administrator is adequately protected.
and/or unavailable when
needed.
2) Lack of management Security policies are established and management
direction and commitment monitors compliance with policies.
to protect information
assets.

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 3) Potential Loss of Vendor default passwords for applications systems,
confidentiality, availability operating system, databases, and network and
and integrity of data and communication software are appropriately
system. modified, eliminated, or disabled.
4) User accountability is not All users are required to have a unique user id.
established.
5) Security breaches may go Access to sensitive data is logged and the logs are
undetected. regularly reviewed by management.
6) Potential loss of Physical access restrictions are implemented and
confidentiality, availability administered to ensure that only authorized
and integrity of data and individuals can access or use information resources.
system
27. Write short notes on Application Software Controls in a CBS.
CBS, some Risks and related Controls relating to Application Software are as under –

Risks Key IT control

1) Interest may be incorrectly Interest is automatically correctly computed.
computed leading to incorrect Digits are rounded off appropriately. Interest
recording of income/expenditure. is accurately accrued.

2) Inappropriate assignment of rate The interest rate code is defaulted at the

codes resulting in violation of account level and can be modified to a rate
business rules and/ or loss of code carrying a higher or lower rate of
revenue. interest only based on adequate approvals.

3) Absence of appropriate system System validations have been implemented

validations may result in to restrict set up of duplicate customer
violation of business rules. master records.

4) Inappropriate reversal of System does not permit reversal of the

charges resulting in loss of charges in excess of the original amount
revenue. charged.

5) Multiple liens in excess of the System prevents a single lien from

deposit value may result in exceeding the deposit value. It prevents
inability to recover the marking of multiple liens against the same
outstanding in the event of deposit, thus preventing the total liens
adefault. exceeding the deposit account.

6) Inappropriate security or Access for changes made to the

controls over system parameter configuration, parameter settings is
settings resulting in restricted to authorized user and require
unauthorized or incorrect authorization/ verification from another
changes to settings. user.

28. Explain the process of Money Laundering.

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 Money Laundering is the process used by Criminals, by which the proceeds of crime is
concealed and layered through multiple banking transactions, so that they appear to come
from a legitimate source.
Stages of Money Laundering:
1) Placement:
➢ Proceeds derived from illegal activities are “placed” into the system. This means
the movement of proceeds (e.g. Currency), from the scene of the crime to a place,
or into a form, less suspicious and more convenient for the Criminal.
2) Layering:
➢ Layering involves sending the illegal money through various complex financial
transactions, to change its form and make it difficult to track.
➢ This involves the use of several Shell Corporations, namesake “Charities”,
Offshore Banks, Countries with loose regulation and secrecy laws, and multiple
Bank Transfers between different accounts in different names in different
countries.
➢ Transactions (Deposits and Withdrawals) are made in varying amounts in
various accounts, in various currencies, to change the form of “dirty” money, to
obscure the audit trail, thus making it hard to trace. It also involves the purchase
of Luxury Assets and Financial Instruments.
3) Integration:
➢ Integration involves conversion of illegal proceeds into apparently legitimate
business earnings through normal financial or commercial operations.
➢ Integration of the “cleaned” money into the economy is accomplished by the
Launderer making it appear to have been legally earned. By this stage, it is exceedingly
difficult to distinguish legal and illegal wealth.
➢ Examples: Fictitious “Export” Invoices, obtaining Domestic Loan against a Foreign
Deposit, Purchasing of Property, Luxury Assets and complex Financial Instruments,
etc.

29. Briefly describe the provisions of the Prevention of Money Laundering Act, in the
context of Banks?
➢ Money–Laundering has the meaning assigned u/s 3 which provides as–
Whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or is actually involved in, any process or activity connected with
the proceeds of crime including its concealment, possession, acquisition or use and
projecting or claiming it as untainted property, shall be guilty of offence of Money–
Laundering.
➢ Punishment will give under section 4 as follow- Whoever commits the offence of
Money–Laundering shall be punishable with Rigorous imprisonment for a Minimum
3 years, Maximum 7 years and Fine.
30. Briefly describe the impact of Cybercrimes, in the context of Banks.
Cybercrime or Computer Crime involves use of a Computer and a Network. Cybercrimes are
offences that are committed against Individuals or groups of individuals with a criminal
motive to intentionally harm the reputation of the victim or cause physical or mental harm,
or loss, to the victim directly or indirectly, using modern Telecommunication Networks like
Internet (Chatrooms, email, Notice Boards and Groups) and Mobile Phones.

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 Impact on Banking Sector: Banking Sector is prone to high risks by Cyber Criminals, since
Banks deal with money. In modern technology, Frauds can be committed across geographical
boundaries without leaving a trace. Hence, CBS / Banking Software should have high level of
controls covering all aspects of Cyber Security.
Cyber–related Offences: The Information Technology Act, 2000 contains punishments in
respect of various Cyber–related offences. The Act exposes Banks to both civil and criminal
liability in case of non–compliance.

31. Write short notes on Sensitive Personal Data or Information, in the context of Banks.
Personal Information means any information that relates to a Natural Person, which, either
directly or indirectly, in combination with other information available or likely to be available
with a Body Corporate, is capable of identifying such person.
Sensitive Personal Data or Information (SPDI) of a Person means such Personal Information
which consists of information relating to –
(a) Password,
(b) Financial Information such as Bank Account or Credit Card or Debit Card or other
payment instrument details,
(c) Physical, Physiological and Mental Health Condition,
(d) Sexual Orientation,
(e) Medical Records and History,
(f) Biometric Information,
(g) Any detail relating to the above Clauses as provided to Body Corporate for providing
service, and
(h) Any of the information received under above Clauses by Body Corporate for processing,
stored or processed under lawful contract or otherwise.
Duties of Banks:

• To develop and properly communicate the “Bank’s Privacy Policy”,

• To establish managerial, technical, operational and physical security control measures
that are commensurate with the Information Assets being protected with the nature of
business,
• To train Employees in the proper handling of Personal Information,
• To enter into proper SLAs with Vendors for maintaining confidentiality of SPDI, in case
of outsourced activities,
• To demonstrate that they have implemented security control measures as per their
documented Information
• Security Programme and Information Security Policies, in the event of an Information
Security Breach, etc.

32. Write short notes on Cyber Crime.

Cybercrimes is defined as: ‘Offences that are committed against individuals or groups of
individuals with a criminal motive to intentionally harm the reputation of the victim or cause
physical or mental harm, or loss, to the victim directly or indirectly, using modern
telecommunication networks such as Internet (Chat rooms, emails, notice boards and
groups) and mobile phones.

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 Cybercrime also known as computer crime is a crime that involves use of a computer and a
network. The computer may have been used in committing a crime, or it may be the target.
The United Nations Manual on the Prevention and Control of Computer Related Crime
classifies such crimes into following categories:
• Committing of a fraud by manipulation of the input, output, or throughput of a
computer-based system.
• Computer forgery, which involves changing images or data stored in computers,
• Deliberate damage caused to computer data or programs through virus programs or
logic bombs,
• Unauthorized access to computers by 'hacking’ into systems or stealing passwords,
and,
• Unauthorized reproduction of computer programs or software piracy.
• Cybercrimes have grown big with some countries promoting it to attack another
country’s security and financial health.

33. What are the objectives of the Information Technology Act?

The objectives of the Act are –
1) To grant legal recognition for electronic commerce in place of paper-based methods of
communication and storage of information. Electronic Commerce means the
transactions carried out by means of Electronic Data Interchange and other means of
electronic communication.
2) To give legal recognition to Digital Signature for authentication of any information or
matter, which requires authentication under any law.
3) To provide for a regulatory regime to supervise the Certifying Authorities issuing
Digital Signature Certificates.
4) To facilitate e–governance and electronic filing of documents with Government
departments.
5) To facilitate and give legal sanction to Electronic Fund Transfers between Banks and
Financial Institutions by amending the Reserve Bank of India Act, 1934.
6) To give legal recognition for keeping books of account by Bankers in electronic form by
amending the Bankers’ Book Evidence Act, 1891.
7) To provide for dealing with offences relating to electronic documents by amending the
Indian Penal Code and the Indian Evidence Act, 1872.

34. List some important definitions in the Information Technology Act.

1) Section 2(a) “Access” with its grammatical variations and cognate expressions means
gaining entry into, instructing or communicating with the logical, arithmetical, or
memory function resources of a computer, computer system or computer network;
2) Section 2(i) “Computer” means any electronic, magnetic, optical or other high- speed
data processing device or system which performs logical, arithmetic, and memory
functions by manipulations of electronic, magnetic or optical impulses, and includes all
input, output, processing, storage, computer software, or communication facilities
which are connected or related to the computer in a computer system or computer
network;
3) Section 2(j) “Computer Network” means the interconnection of one or more
Computers or Computer systems or Communication device through-

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 i. the use of satellite, microwave, terrestrial line, wire, wireless or other
communication media; and
ii. terminals or a complex consisting of two or more interconnected computers or
communication device whether or not the interconnection is continuously
maintained;
4) Section 2(o) “Data” means a representation of information, knowledge, facts, concepts
or instructions which are being prepared or have been prepared in a formalized
manner, and is intended to be processed, is being processed or has been processed in a
computer system or computer network and may be in any form (including computer
printouts magnetic or optical storage media, punched cards, punched tapes) or stored
internally in the memory of the computer;
5) Section 2(v) “Information” includes data, message, text, images, sound, voice, codes,
computer programmes, software and databases or micro film or computer-generated
micro fiche;

35. Write short notes on various damages to Computer System or Network u/s 43.
If any person without permission of the owner or any other person who is in- charge of a
computer, computer system or computer network -
a) accesses or secures access to such computer, computer system or computer network;
b) downloads, copies or extracts any data, computer database or information from such
computer, computer system or computer network including information or data held
or stored in any removable storage medium;
c) introduces or causes to be introduced any computer contaminant or computer virus
into any computer, computer system or computer network;
d) damages or causes to be damaged any computer, computer system or computer
network, data, computer database or any other programmes residing in such computer,
computer system or computer network;
e) disrupts or causes disruption of any computer, computer system or computer network;
f) denies or causes the denial of access to any person authorized to access any computer,
computer system or computer network by any means;

36. Write short notes on Penalties & Adjudications under Chapter X of Information
Technology Act.
Section 63. Punishment for false information or failure to give information, etc.
➢ Any person wilfully and maliciously giving false information and so causing an arrest or
a search to be made under this Act shall on conviction be liable for imprisonment for a
term which may extend to two years or with fine which may extend to fifty thousand
rupees or both.
➢ If any person -
a. being legally bound to state the truth of any matter relating to an offence under
section 3, refuses to answer any question put to him by an authority in the exercise
of its powers under this Act; or
b. refuses to sign any statement made by him in the course of any proceedings under
this Act, which an authority may legally require to sign; or

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 c. to whom a summon is issued under section 50 either to attend to give evidence or
produce books of account or other documents at a certain place and time, omits to
attend or produce books of account or documents at the place or time,
he shall pay, by way of penalty, a sum which shall not be less than five hundred
rupees but which may extend to ten thousand rupees for each such default or failure.

Section 70. Offences by companies.

➢ Where a person committing a contravention of any of the provisions of this Act or of any
rule, direction or order made there under is a company, every person who, at the time
the contravention was committed, was in charge of, and was responsible to the company,
for the conduct of the business of the company as well as the company, shall be deemed
to be guilty of the contravention and shall be liable to be proceeded against and punished
accordingly:
Provided that nothing contained in this sub-section shall render any such person liable
to punishment if he proves that the contravention took place without his knowledge or
that he exercised all due diligence to prevent such contravention.
➢ Notwithstanding anything contained in sub-section (1), where a contravention of any of
the provisions of this Act or of any rule, direction or order made there under has been
committed by a company and it is proved that the contravention has taken place with the
consent or connivance of, or is attributable to any neglect on the part of any director,
manager, secretary or other officer of any company, such director, manager, secretary or
other officer shall also be deemed to be guilty of the contravention and shall be liable to
be proceeded against and punished accordingly.

37. Describe the ‘Tampering with Computer Source Documents’ u/s 65 of Information
Technology Act 2000?
Offence:
➢ Knowingly or intentionally concealing, destroying or altering, or causes to conceal,
destroy or alter any computer source code. Computer Source Code means the listing of
programmes, computer commands, design & layout & programme analysis of computer
resource in any form.
Penalty:
➢ Imprisonment up to 3 years, or
➢ Fine up to ₹2,00,000, or
➢ Both.

38. Briefly explain the following with respect to the Information Technology Act 2000:
[Section 66B] Punishment for dishonestly receiving stolen Computer Resource or
Communication Device:
Offence:
➢ Dishonestly receiving or retaining any stolen Computer Resource or Communication
Device knowing or having reason to believe the same to be stolen Computer Resource or
Communication Device.
Penalty:
➢ Imprisonment up to three years, or

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 ➢ Fine up to ₹1,00,000, or
➢ Both.

[Section 66C] Punishment for Identity Theft:

Offence:
➢ Fraudulently or dishonestly making use of the electronic signature, password or any
other unique identification feature of any other person, shall be punished.
Penalty:
➢ Imprisonment up to 3 years and Fine up to ₹1,00,000.

[Section 66D] Punishment for cheating by Personation by using Computer Resource:

Offence:
➢ By means for any Communication Device or Computer Resource cheats by personating.
Penalty:
➢ Imprisonment up to 3 years and Fine up to ₹1,00,000.

[Section 66E] Punishment for Violation of Privacy:

Offence:
➢ Intentionally or knowingly captures, publishes or transmits the image of a private area
of any person without his or her consent, under circumstances violating the privacy of
that person.
Penalty:
➢ Imprisonment up to 3 years, or
➢ Fine up to ₹2,00,000, or
➢ Both.

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