Unit 3 Topic 1 IA1

Question 1

What is a current asset?

Answer 1

An asset that will be used up within an accounting period of less than 12 months (things that are used up/converted into cash)

Question 2

What is a non-current asset?

Answer 2

Asset held for more than 12 months
Used to generate more revenue
‘Non-Current assets are assets that are purchased by the business and are not intended for resale, but are to be used within the operation of the business to earn revenue, and will normally be kept and used for longer than one accounting period (generally a year)’

Question 3

What are the 4 types of non current assets

Answer 3

Property/plant/equipment
Intangible assets
Other financial assets (investments)
Other

Question 4

What are types of property/plant/equipment non current assets?

Answer 4

Land, buildings, furniture, machinery

Question 5

What are types of intangible non-current assets?

Answer 5

Franchises, Patents, Trademarks, Copyrights, Brand names, Goodwill

Question 6

What are types of other financial non-current assets (investments)?

Answer 6

Government Security
Shares in companies
Debenture

Question 7

What are a long-term accounts receivable?

Answer 7

A non current asset

Long Term Receivables are the debts (money owed) owed to a company that are due more than twelve months from the last recorded date

Question 8

Should inventories be non-current or current assets and why?

Answer 8

Current because you want to sell inventories the quickest

Question 9

What is a debenture?

Answer 9

• The company/entity issues debentures to investors (who lend money to the company (essentially giving a loan to them). The company (issuer of debenture) repays amount to investors at specified future date (maturity date)
• Issuer agrees to pay regular interest to debenture holders - typically semi-annual/annual basis (compensation)
• Used to raise capital for business operations, finance projects, repay existing debt

Question 10

Should a/c receivables be non-current or current assets and why?

Answer 10

Current since receive them faster

Question 11

What is a government security?

Answer 11

• A type of debt instrument where the government issues bonds/securities to people (receiving the money), then you give out a loan to the government and get interest payments as a bonus (investment)
• Uses it to finance operations, fund public projects, manage budgets and raise capital for various purposes

Question 12

Difference between a tangible/intangible asset

Answer 12

• Tangible: has a physicality to it
• Intangible: lacks physical substance (patents, copyright, trademarks, trade names, franchises)

Question 13

What are running costs (Operating expenses)

Answer 13

Every-day costs like (repairs, maintenance, repairs, fuel, insurance)

• Expenditures to maintain asset in efficient working condition
• I.E. Repairing broken window/machinery/light bulb/clean floors

Associated with asset but consumed during the accounting period
- I.E. rego, fuel, oil, insurance (prepaid insurance)

Question 14

What is a capital expenditure

Answer 14

Expenses that are part off the asset that increase/add its value

1. The expenditure made to bring asset into location and condition ready for use
   I.E. freight/installation costs, legal costs with purchasing assets, like land
2. Improvements/addition to existing assets
   I.E. installation new bodies on delivery vans/extension to buildings/car parks/storage facilities
3. Expenditure to extend life of asset
   I.E. fitting a new reconditioned motor to extend useful life

Question 15

Difference between capital and operating expense?

Answer 15

The Distinction between capital expenditure vs expense is based on time & nature of expenditure

Nature: Operating expenses are regular day-to-day expenses that business incurs to maintain its normal operation while a capital expenditure are significant long-term investments that provide benefits to the business over an extended period

Accounting treatment: Operating expenses recorded on income statement (profit or loss) in the period theyre incurred (since revenue - (expenses) = profit)
While capital expenditure are capitalised on the balance sheet (statement of financial position) –> recorded as an asset

Impact on financial statement: Operating expenses reduce profitability on profit/loss statement while cap exp increase value of assets
(A - L = OE)

Question 16

What happens to profit/loss statement if expenses classified as CapEx?

(incorrect classification)

Answer 16

If something classified as CapEX rather than OPex, overstatement in profit in profit/loss statement because of understated (reported amount less than actual) for expense.

Overstatement of asset (statement of financial position)

Hence future profits are reduced since the expense is charged in future accounting periods

Question 17

What happens to profit/loss statement if capital expenditure is wrongly classified?

Answer 17

Understatement of profit (as expenses overstated) Asset –> Expense if CapEx said to be OPex in addition to understatement of asset (statement of financial position)

Future profit is incorrect as the asset isn’t recorded at its full amount

Question 18

What is depreciation

Answer 18

The allocation of the depreciable amount of an asset over its useful life

a reduction in the value of an asset over time, due in particular to wear and tear.

(Only on tangible assets) - such as machinery/motore vehicles/furniture

Question 19

What are the 2 reasons for depreciation?

Answer 19

1. Wear and tear
2. Obsolescence

Question 20

What is wear and tear in terms of depreciation?

Answer 20

When assets diminish in value becasue of wear and tear (use degrading quality)
- OpEx like repairs/maintenance can overcome it to extend life by some

Question 21

What is obsolescence

Answer 21

A reason for depreciation where the development of newer technologies make exiting equipment obsolete before the end of its useful life (technical obsolescence in a technical world)
- Also if the asset is no longer suitable for the use by the business, diminishing its worth to the business (commercial obsolescence)
Both can occur whether the asset is used/not

Question 22

What is ammortisation?

Answer 22

Essentially depreciation but on intangible assets & natural resources
- The gradual writing off of the cost of certain assets due to the passing of time or delpetion

Question 23

How does ammoirtisation work in regards to the passing of time for assets?

Answer 23

Certain assets such as patents (that are taken out for 20 years), reduce in value each year until its legal rights expire and thus depreciations to nill.

Question 24

What is depletion in ammortisation?

Answer 24

If the quantity of a natural resource available in mines/quarries/forests diminishes - as the material is removed –> depletes in quantity and hence amortized.

Question 25

What is the difference between amortisation and depreciation?

Answer 25

Depreciation is for tangible assets while amortisation is for intangible

Amortization often has no residual value (like contracts/legal stuff expiring ending with no value) (at the end of its useful life), while depreciation has residual value like vehicles ending with a value despite depreciated.

Amortization typically usually uses the straight-line method while depreciation uses both straight and diminishing balance.

Question 26

What is the useful life? And what are the types?

Answer 26

The life of a asset before it reaches its residual value/while it remains in profitable service.

Can have an exact life or be variable

Question 27

Example and what is it when the useful life is fixed and known?

Answer 27

Where the life of an asset is fixed and known such as leases on buildiings taken out for a period, like 4 years/copyrights acting for the life of the author + 50/70 years or standers patents which expire after usually 20 years

Question 28

What is it when the useful life is variable –> how and example?

Answer 28

When the life depends on the wear/tear, obsolescence or physical deterioration.

Such include, machinery, furniture, electrical equipment, motor vehicles.

Question 29

Can the useful life of an asset outlast the life of a business + example?

Answer 29

Yes, such as land which actually increases in value (hence not subject to depreciation)

Question 30

What is residual value?

Answer 30

The anticipated residual value is the worth of an asset at the end of its useful life (worth asset is to the business at end of its life)

Its estimated trade-in/sale/scrap value at the end of its estimated life

Which is difficult to predict as future events are unpredictable - hence an arbitrary decision based on known facts is used.

Question 31

What are the 2 depreciation methods and briefly explain?

Answer 31

Straight line - each period allocated uniform portion of the cost of the non-current asset less any residual value

Diminishing Balance - Uniform rate of depreciation applied in each period to the cost of the asset, reduced by accumulated depreciation (carrying amoutn)

Question 32

What is the straight-line method, what info is needed (how do u calculate it)

Answer 32

A method of depreciation where each period is allocated a uniform portion of the cost of the non-current asset, less any residual value.

1. Original cost of the asset (necessary costs CapEx & excluding GST)
2. Estimated life of the asset
3. Residual Value of the asset

Straight Line = (Original Cost - Estimated Residual Value) / Estimated Life (useful life)

Question 33

What are the advantages and disadvantages to the straight line method

Answer 33

Advantages
- Simple to use
- More appropriate where benefits o asset roughly equal each period (furniture/buildings)

Disadvantages
- Not take into account degree of usage/age/efficiency of asset
- Not allow likelihood of greater cost of repairs in the later life of asset, due to wear in earlier accounting periods.

Question 34

What is the diminishing balance depreciation method, what info is needed (how do u calculate it)

Answer 34

Uniform rate of depreciation applied in each period to the cost of the asset, reduced by any accumulated depreciation (i.e. the diminished balance or carrying amount)

Info:
1. Original cost of the asset (necessary costs CapEx & excluding GST)
2. Accumulated Depreciation
3. Rate of depreciation that is applied

Calculate:
Diminishing balance for period = Rate of depreciation * diminished balance

Where DIMINISHED BALANCE = Original cost - accumulated depreciation

Essentially:
Diminishing balance for period = (Rate of depreciation * (original cost - accumuulated depreciation))

Question 35

What are the advantages and disadvantages to the diminished balance depreciation method.

Answer 35

Advantages
- Suitable for use where service rendered by asset is greatest in early years of life (e.g. motor vehicle/machinery (newer = better) - greatest chargers occur in periods with greatest benefits obtained
- Where depreciation charge is lower as the asset becomes older and where there is a likelihood of higher maintanance costs

Disadvantages
- Greater amount of depreciation written off during early life of asset

Question 36

Using the straight line method to calculate annual depreciation, IF
Furniture is purchased for $13,860 (including GST),
Freight = $220 (including GST) is paid and Estimated life = 5 years
Residual value = $800

Answer 36

SLM = ((13860+220)/1.1 - 800)/5_ = $2400 per annum

Question 37

Using diminishing balance, calculate the depreciation for the 1st and 2nd year if
1 July bought vehicle = $33,000 (including GST)
Residual = $12,000
Rate depreciation = 20% of diminishing balance

Answer 37

1st Year
= (original)/1.1 (gst)
= 33,000/1.1 = 30,000
hence 30,000 * 0.2 = $6,000

2nd Year
(30,000 - 6000) * 0.2
= $4,800

Question 38

What are the 5 steps to recording a disposal of a PPE

Answer 38

1. Depreciate the asset for that part of the current accounting period
2. Transfer original cost of asset from asset –> disposal
3. Transfer any accumulated depreciation from accumum deprec –> disposal
4. Record the disposal of the asset (sell)
5. Determine gain/loss made on disposal acc

Question 39

What are the 2 accounts used for depreciating the asset for the part of the period of the current accounting period.

Answer 39

Depreciation on ‘x’ – Debit
Accumulated Depreciation on Motor
Vehicles ‘x’ — Credit
(Depreciation for ‘x’ months)

Question 40

What are the 2 accounts used for the transfer of the original cost to disposal acc

Answer 40

Disposal of ‘x’ — Debit
‘x’ (like motor vehicle) — Credit
(Transfer of ‘x’ to the disposal account)

Question 41

What are the 2 accounts used for the transfer of depreciation to disposal acc?

Answer 41

Accumulated Depreciation on ‘x’ —- Debit
Disposal of ‘x’ —- Credit
(Accumulated depreciation transferred to disposal account)

Question 42

What are the accounts used to record the actaul disposal of a vehicle, (say motor vehicle for $3300 cash)

Answer 42

Cash at Bank/acc rec — 3300 (debit)
GST Collected — 300 (credit)
Disposal of ‘x’ Motor vehicle — 3000 (credit)
(Disposal of ‘x’ for ‘y’ (cash/credit)

Question 43

How do you determine the profit/loss on disposal and what are the accounts?

Answer 43

If Original cost - (all accum deprec) is bigger (>) than the sell price (disposal price) –> LOSS because value is higher than what you got

If Original cost - Acccum is smaller than the price you sold (disposal price) –> its a PROFIT

Disposal of ‘x’ — Debit
Gain/Loss on disposal of non-current assets — Credit
(Gain/loss on sale of motor vehicle)

Question 44

What type of account (nature) is the disposal on ‘x’ account

Answer 44

Not anything really since it cancelled out and hence just put anywhere

Question 45

What is the principle of a historical cost?

Answer 45

That assets are not re-valued to their current market value but maintained at their original cost

HENCE, there MUST be a source document to provide evidence of the ‘original cost’ since recoreded at original cost

Businesses MUST record/account most assets/liabilities at their purchase/acquisition price –> record asset on balance sheet (statemnet of financial position) for the amount paid for the asset
Never adjusted to changes in marker/economy/changes due to inflation

Question 46

What are all the general accounting controls?

Answer 46

(7)
Reliable/competent personnel
Verification
Authorization
Assigning responsibility
Separation & rotation of dutie
Adequate & accurate documents & records
Physical controls & security

Question 47

What are all the non-current asset controls regarding purchasing?

Answer 47

(4)
Authorisation
Selection
Proof of ownership
Payment of cash

Question 48

What are all the non-current asset controls regarding storage?

Answer 48

(3)
Location
Maintenance
Protection (incl. insurance)

Question 49

What are all the non-current asset controls regarding the disposal process?

Answer 49

(3)
Authorisation
Physical disposal
Recipt of cash

Question 50

What are all the technological controls used in business procedures?

Answer 50

(6)
Authentication - password protection/ biometrics
Physical controls
Virus protection
Reliable/responsible personnel
Software-based security (firewalls etc.)
Appropriate backup procedures & maintenance

Question 51

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control: Reliable/competent personel

Answer 51

1. The process of only hiring employees who are competent/knowledgeable in their field of work
2. To ensure accurate, safe, and efficient work. It would not be possible to trust employees or give them any control if they are not reliable and competent.
3. Untrustworthy/unreliable employees who will likely underperform (impacting productivity) and may pose a safety/security threat to the business.

4.Verify qualifications and experience of employees before hiring. Conduct training at induction and on an ongoing basis.

Question 52

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Verification

Answer 52

1. Check accounting data and information by verifying against a trustworthy source.
2. To ensure transactions are legitimate and supported by verified documentation/people.
3. Higher likelihood of fraudulent activity taking place. Unreliable financial information recorded and presented which could be misleading or deceptive.
4. Ensure all transactions are verified using source documents. Check information received is verified by authorised personnel (i.e. owner/manager).

Question 53

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Authorisation

Answer 53

1. To validate a course of action by a superior (owner, manager etc.). i.e. to seek approval before going ahead with a task
2. Requiring authorisation from superiors when making decisions will protect the business from employees who make ineffective/uniformed judgements.
3. Without authorisation, employees could make decisions well above their level of expertise which could result in loss of income, dangerous practices, fraud/theft etc.
4. Implementing an organisational chart where all employees are included under their designated teams with clear lines of command that show owners/managers to report to.

Question 54

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Assigining responsibiilty

Answer 54

1. To enable authorisation and know who is responsible for what.
2. Allows employees to know their positions in the business and who to report to or manage.
3. Employees who are not given clear roles would be unaware of their responsibilities and thus be more likely to make mistakes. It would also mean that owners and managers would have less control as employees would not have superiors to report to.
4. At induction, employees should be given details of the roles and responsibilities as required of their job position.

Question 55

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Separation & rotation of duties

Answer 55

1. Separation of duties is the concept of having more than one employee required to complete a task. Similarly, rotation of duties involves employees being periodically rotated through job positions.

2.Separation of duties is used by businesses to prevent fraud, sabotage, theft, misuse of information, and other security compromises. Rotation of duties discourages employees from getting too comfortable in certain roles and reduces the risk of fraud or theft as employees know the time will come to swap positions with someone else who will have access to their work.

3. Opportunities may be discovered by untrustworthy personnel that may be used to exploit the business, thus increasing the risk of misconduct including fraud or theft.
4. Split jobs into different roles so that no one employee has too much control. This is particularly important when purchasing and recording assets and expense payments. Set job rotation schedules. Encourage employees to go on regular holidays (annual leave) to avoid complacency.

Question 56

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Adequate & accurate documents & records

Answer 56

1. Businesses are required to maintain records of source documentation and financial information so that they may produce as verification should it be needed.
2. Provides evidence of financial transactions and decisions. Discourages false information being reported.
3. Businesses are required by law to keep adequate financial records. Failure to do so can result in hefty fines and criminal convictions.
4. Ensure all important documentation is stored electronically, with important physical documents (such as loan agreements) be stored in a safety deposit box at a financial institution.

Question 57

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the general accounting control:
   Physical controls & security

Answer 57

1. Utilise physical safeguards and security systems to protect business assets including information and data.
2. This provides additional barriers to discourage fraud and theft by not only customers, but employees. Security refers to both physical and online systems – discussed further in Technology Controls.
3. It opens up opportunities for those who are not authorised to access assets of the business with which they have no business interacting. This may encourage actions such as fraud or theft.
4. Purchase adequate security systems including cameras to monitor business premises including back of house/storage facilities. Install physical locks on high security areas and utilise swipe cards that allow access based on levels of authorisation. Lock valuable assets away in secure cupboards.

Question 58

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding purchasing:
   Authorisation

Answer 58

1. As the purchase of property, plant and equipment is a major decision, higher level management must authorise such purchases. All purchase orders must show authorisation.
2. Employees must seek authorisation of the business owner and/or manager before making purchases of non-current assets. This is to allow the owner/manager control over all business purchases to ensure assets are best-fit.
3. Without authorisation, an employee may purchase expensive non-current assets to be used for personal gain. It also creates opportunities for fraud and theft by employees.
4. Purchase orders should be prepared for all PP&E purchases and signed off by upper management.

Question 59

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding purchasing:
   SELECTION

Answer 59

1. As the purchase of property, plant and equipment may commit the business to large payments and ownership over several accounting periods, it is important that all the facts are known before purchase.
2. To avoid unnecessary spending or purchasing of items that are not fit for purpose or that are exploited for personal use.
3. An employee who is not qualified to select the most appropriate asset to suits the business’ needs may purchase an asset that is ineffective causing loss to the owner who may be required to replace it.
4. Allow only suitably qualified and responsible employees to select property, plant and equipment. For example, when purchasing machinery, all technical details regarding performance, operation, reliability, anticipated repair costs, initial cost and cost of delivery should be examined by an expert.

Question 60

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding purchasing:
   PROOF OF OWNERSHIP

Answer 60

1. The purchase of property, plant and equipment is usually accompanied by proof of ownership.
2. To provide evidence on ownership that may be required at time of sale or for warranty claims and servicing.
3. No ability to prove ownership of an asset which may hinder its ability to be repaired, replaced or sold.
4. Ensure all relevant purchase documentation including invoices and receipts are stored securely and electronically. Deeds of title for property should be kept in a safe or bank safe deposit box.

Question 61

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding purchasing:
   PAYMENT OF CASH

Answer 61

1. Once the purchase of the asset is authorised, it become a normal cash payment. Before payment is made, a check must be made that the asset has been received and the purchase order matches the tax invoice.
2. If the business does not check that what has been received is what was ordered they must not make payment or it may be difficult to get cash back should the item be incorrect.
3. The business may be left with an asset that is not able to be used for the purchase for which it was bought. It may result in an additional asset being required which is a waste of funds.
4. Check that the asset received matches the purchase order before making payment. Include all purchase details of the asset, including cash/credit/loan payments, in the asset register.

Question 62

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding storage:
   LOCATION

Answer 62

1. All assets should be identified by some means, usually by an asset number (QR code for e.g.).
2. It is important to know where assets are at all times as they are expensive, income-producing items owned by the business. If their locations are unknown, there is an increase in the risk of damage and theft occurring.
3. Assets may go missing. the opportunity for fraud or theft to occur is also increased if the location of an asset is unknown due to infrequent updating of the register.
4. Regular checks should be made to ensure assets are situated where thy are expected to be as per the asset register.

Question 63

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding storage:
   MAINTENENANCE

Answer 63

1. It is essential that assets be kept in good working order.
2. To ensure efficiency of output (machinery, for example) and safety (equipment, vehicles, etc.) and so to not disrupt productivity and thus the business’ ability to make sales.
3. If a business does not regularly maintain/service its assets it is likely that the assets will no longer perform at optimum level. For example, machinery and motor vehicles must be regularly maintained to ensure safety and performance.
4. Keeping accurate records of servicing schedules and booking in ahead of time to ensure assets are well maintained at all times.

Question 64

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding storage:
   PROTECTION (INCL. INSURANCE)

Answer 64

1. The assets must be protected against theft or damage. This includes having appropriate insurance policies on all assets.
2. The asset register indicates the assets that should be on hand, and regular checks should be made to ensure that this is the case. Adequate insurance should also be maintained against unforeseen circumstances.
3. Without regular checks to ascertain the condition of assets, they may fall into a state of disrepair, impacting the businesses ability to generate revenue. Without insurance, assets may not be able to be replaced if something happens to them (e.g. fire, theft, loss etc.).
4. It is important that the business owner regularly conduct checks on assets and review insurance policies so that all assets are adequately covered and are able to be replaced if required without requiring cash.

Question 65

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding disposal:
   AUTHORISATION

Answer 65

1. As with the purchase, the disposal of assets requires authorisation by higher level management or the owner.
2. This is to prevent an unauthorised employee selling valuable assets. It also prevents disposal without due consideration of all relevant factors.
3. An asset may be sold that is still required by the business. This can lead to being required to repurchase a similar item which is a waste of cash. An employee may also accept a price which is too low as they are not aware of the value of the item.
4. Require owner/managers to authorise all sales of non-current assets.

Question 66

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding disposal:
   PHYSICAL DISPOSAL

Answer 66

1. This can take place by sale, trade-in or scrapping. Whatever method is used, the best possible price should be obtained.
2. A properly authorised employee must be in charge of the physical disposal of the asset.
3. Check multiple sale channels before deciding on who/where to dispose an asset to obtain the best price possible.
4. The disposal of the asset should be recorded in the asset register. Including details of date, sale proceeds etc.

Question 67

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For the non-current asset control regarding disposal:
   RECIPT OF CASH

Answer 67

1. The procedure for receipt of cash from disposal and the controls necessary are as per a normal receipt of cash.
2. When selling an asset, a receipt must be provided to the buyer as evidence of the change of ownership taking place.
3. Without a receipt provide, there would be no source document to prove that the sale transaction took place. This can impact both the buyer and the seller negatively.
4. Always provide buyer with a receipt (tax invoice) and keep a copy for the business’ records.

Question 68

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   Authentication – password protection/ biometrics

Answer 68

1. Using passwords is the single most important control mechanism for a computer system. Passwords should not be written down or shared with any other employees. Biometrics are also used as a form of password. This includes facial and retina recognition, fingerprint scanning etc.

2.Computer systems contain valuable business data and information and must be protected from hackers and unauthorised employees.

3. If a business’ secure information gets into the wrong hands the owner may face extortion and/or legal issues as a result of a breach of customers’ private information.
4. Requiring passwords that are regularly updated and include a mix of letters, numbers, special characters and capital/lower case letters. Using two-factor authenticator apps/text messaging also adds another layer of protection.

Question 69

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   PHYSICAL CONTROLS

Answer 69

1. Servers etc. should be locked with authorised access only.
2. The location of computers including desktop and laptops should be regularly checked.
3. If computers are not regularly checked they are more likely to be vulnerable to security breaches. If employees are able to access main computer systems such as servers etc., they may be able to cause irreparable damage that could negatively impact a business.
4. Check computers regularly to ensure optimal condition so that if they were to fall into the wrong hands security measures would prevent unauthorised access.

Question 70

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   VIRUS PROTECTION

Answer 70

1. It is essential that all business devices have adequate anti-virus protection software installed.
2. Automatically updating software is important as online threats are constantly changing and have the ability to render the business useless as hackers may hold business assets and information ransom.
3. Open to various online threats that may cause the business to cease operations. Leaking of secure information and data.
4. Keep virus protection software up to date on all computers.

Question 71

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   RELIABLE AND RESPONSIBLE PERSONNEL

Answer 71

1. Be sure to hire effective employees and train them on all matters online safety and security.
2. This may include training on how to recognise phishing schemes on email etc.
3. Staff may unknowingly infect business devices, letting hackers gain access.
4. Training at induction and on an ongoing basis for all employees.

Question 72

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   SOFTWARE-BASED SECURITY (FIREWALLS ETC)

Answer 72

1. This encompasses a number of items, including the most common – firewalls.
2. A firewall is a type of program that monitors and controls the flow of communications. It protects the resources of an internal network from being penetrated by outside users on an external network (i.e. the internet).
3. If a business does not maintain adequate software-based security, it opens up its network to intruders who may steal information and data. This may lead to ransom or leaking of private information.
4. Install and maintain up to date firewall and intrusion detection software on all business devices. Check that the most current versions are installed as threats change frequently.

Question 73

1. Explain the control
2. Whys it important
3. Impact if not implemented
4. Recommendation to improve if not utilised
   For technology controls:
   Appropriate backup procedures & maintenance

Answer 73

1. Businesses should conduct cloud-based backups on a regular basis.
2. Cloud-based, offsite backups will protect the business from natural disasters where the physical premises and everything contained may be destroyed.
3. The business may lose valuable data and information which is not able to be recovered. This may lead to a loss of income for the business.
4. Pay for cloud based backup such as OneDrive or iCloud.