Management Information

Management

Management Information

Systems

Comptroller’s Handbook

May 1995

M-MIS

Comptroller of the Currency

Administrator of National Banks

M

Comptroller's Handbook i Management Information Systems

Management

Information Systems Table of Contents

Introduction 1

Background 1

Risks Associated with MIS 3

Assessing Vulnerability to MIS Risk 4

Achieving Sound MIS 5

MIS Reviews 6

Examination Objectives 9

Examination Procedures 10

Internal Control Questionnaire 17

Purpose 17

MIS Policies or Practices 17

MIS Development 18

User Training and Instructions 19

Communication 20

Audit 20

Conclusion 21

Verification Procedures 22

Comptroller's Handbook 1 Management Information Systems

Management

Information Systems Introduction

Background

A management information system (MIS) is a system or process that provides

the information necessary to manage an organization effectively. MIS and the

information it generates are generally considered essential components of

prudent and reasonable business decisions.

The importance of maintaining a consistent approach to the development,

use, and review of MIS systems within the institution must be an ongoing

concern of both bank management and OCC examiners. MIS should have a

clearly defined framework of guidelines, policies or practices, standards, and

procedures for the organization. These should be followed throughout the

institution in the development, maintenance, and use of all MIS.

MIS is viewed and used at many levels by management. It should be

supportive of the institution's longer term strategic goals and objectives. To

the other extreme it is also those everyday financial accounting systems that

are used to ensure basic control is maintained over financial recordkeeping

activities.

Financial accounting systems and subsystems are just one type of institutional

MIS. Financial accounting systems are an important functional element or part

of the total MIS structure. However, they are more narrowly focused on the

internal balancing of an institution's books to the general ledger and other

financial accounting subsystems. For example, accrual adjustments,

reconciling and correcting entries used to reconcile the financial systems to

the general ledger are not always immediately entered into other MIS systems.

Accordingly, although MIS and accounting reconcilement totals for related

listings and activities should be similar, they may not necessarily balance.

An institution's MIS should be designed to achieve the following goals:

• Enhance communication among employees.

• Deliver complex material throughout the institution.

• Provide an objective system for recording and aggregating information.

Management Information Systems 2 Comptroller's Handbook

• Reduce expenses related to labor-intensive manual activities.

• Support the organization's strategic goals and direction.

Because MIS supplies decision makers with facts, it supports and enhances the

overall decision making process. MIS also enhances job performance

throughout an institution. At the most senior levels, it provides the data and

information to help the board and management make strategic decisions. At

other levels, MIS provides the means through which the institution's activities

are monitored and information is distributed to management, employees, and

customers.

Effective MIS should ensure the appropriate presentation formats and time

frames required by operations and senior management are met. MIS can be

maintained and developed by either manual or automated systems or a

combination of both. It should always be sufficient to meet an institution's

unique business goals and objectives. The effective deliveries of an

institution's products and services are supported by the MIS. These systems

should be accessible and useable at all appropriate levels of the organization.

MIS is a critical component of the institution's overall risk management

strategy. MIS supports management's ability to perform such reviews. MIS

should be used to recognize, monitor, measure, limit, and manage risks. Risk

management involves four main elements:

• Policies or practices.

• Operational processes.

• Staff and management.

• Feedback devices.

Frequently, operational processes and feedback devices are intertwined and

cannot easily be viewed separately. The most efficient and useable MIS

should be both operational and informational. As such, management can use

MIS to measure performance, manage resources, and help an institution

comply with regulatory requirements. One example of this would be the

managing and reporting of loans to insiders. MIS can also be used by

management to provide feedback on the effectiveness of risk controls.

Controls are developed to support the proper management of risk through

the institution's policies or practices, operational processes, and the

assignment of duties and responsibilities to staff and managers.

Comptroller's Handbook 3 Management Information Systems

Technology advances have increased both the availability and volume of

information management and the directors have available for both planning

and decision making. Correspondingly, technology also increases the

potential for inaccurate reporting and flawed decision making. Because data

can be extracted from many financial and transaction systems, appropriate

control procedures must be set up to ensure that information is correct and

relevant. In addition, since MIS often originates from multiple equipment

platforms including mainframes, minicomputers, and microcomputers, controls

must ensure that systems on smaller computers have processing controls that

are as well defined and as effective as those commonly found on the

traditionally larger mainframe systems.

All institutions must set up a framework of sound fundamental principles that

identify risk, establish controls, and provide for effective MIS review and

monitoring systems throughout the organization. Commonly, an organization

may choose to establish and express these sound principles in writing. The

OCC fully endorses and supports placing these principles in writing to

enhance effective communications throughout the institution. If however,

management follows sound fundamental principles and governs the risk in the

MIS Review area, a written policy is not required by the OCC. If sound

principles are not effectively practiced, the OCC may require management to

establish written MIS policies to formally communicate risk parameters and

controls in this area.

Sound fundamental principles for MIS review include proper internal controls,

operating procedures and safeguards, and audit coverage. These principles

are explained throughout this booklet.

Risks Associated With MIS

Risk reflects the potential, the likelihood, or the expectation of events that

could adversely affect earnings or capital. Management uses MIS to help in

the assessment of risk within an institution. Management decisions based

upon ineffective, inaccurate, or incomplete MIS may increase risk in a number

of areas such as credit quality, liquidity, market/pricing, interest rate, or foreign

currency. A flawed MIS causes operational risks and can adversely affect an

organization's monitoring of its fiduciary, consumer, fair lending, Bank Secrecy

Act, or other compliance-related activities.

Since management requires information to assess and monitor performance at

all levels of the organization, MIS risk can extend to all levels of the

Management Information Systems 4 Comptroller's Handbook

operations. Additionally, poorly programmed or non-secure systems in which

data can be manipulated and/or systems requiring ongoing repairs can easily

disrupt routine work flow and can lead to incorrect decisions or impaired

planning.

Assessing Vulnerability To MIS Risk

To function effectively as an interacting, interrelated, and interdependent

feedback tool for management and staff, MIS must be "useable." The five

elements of a useable MIS system are: timeliness, accuracy, consistency,

completeness, and relevance. The usefulness of MIS is hindered whenever

one or more of these elements is compromised.

Timeliness

To simplify prompt decision making, an institution's MIS should be capable of

providing and distributing current information to appropriate users.

Information systems should be designed to expedite reporting of information.

The system should be able to quickly collect and edit data, summarize results,

and be able to adjust and correct errors promptly.

Accuracy

A sound system of automated and manual internal controls must exist

throughout all information systems processing activities. Information should

receive appropriate editing, balancing, and internal control checks. A

comprehensive internal and external audit program should be employed to

ensure the adequacy of internal controls.

Consistency

To be reliable, data should be processed and compiled consistently and

uniformly. Variations in how data is collected and reported can distort

information and trend analysis. In addition, because data collection and

reporting processes will change over time, management must establish sound

procedures to allow for systems changes. These procedures should be well

defined and documented, clearly communicated to appropriate employees,

and should include an effective monitoring system.

Comptroller's Handbook 5 Management Information Systems

Completeness

Decision makers need complete and pertinent information in a summarized

form. Reports should be designed to eliminate clutter and voluminous detail,

thereby avoiding "information overload."

Relevance

Information provided to management must be relevant. Information that is

inappropriate, unnecessary, or too detailed for effective decision making has

no value. MIS must be appropriate to support the management level using it.

The relevance and level of detail provided through MIS systems directly

correlate to what is needed by the board of directors, executive management,

departmental or area mid-level managers, etc. in the performance of their

jobs.

Achieving Sound MIS

The development of sound MIS is the result of the development and

enforcement of a culture of system ownership. An "owner" is a system user

who knows current customer and constituent needs and also has budget

authority to fund new projects. Building "ownership" promotes pride in

institution processes and helps ensure accountability.

Although MIS does not necessarily reduce expenses, the development of

meaningful systems, and their proper use, will lessen the probability that

erroneous decisions will be made because of inaccurate or untimely

information. Erroneous decisions invariably misallocate and/or waste

resources. This may result in an adverse impact on earnings and/or capital.

MIS which meets the five elements of useability is a critical ingredient to an

institution's short- and long-range planning efforts. To achieve sound MIS, the

organization's planning process should include consideration of MIS needs at

both the tactical and strategic levels. For example, at a tactical level MIS

systems and report output should support the annual operating plan and

budgetary processes. They should also be used in support of the long term

strategic MIS and business planning initiatives. Without the development of

an effective MIS, it is more difficult for management to measure and monitor

the success of new initiatives and the progress of ongoing projects. Two

common examples of this would be the management of mergers and

acquisitions or the continuing development and the introduction of new

products and services.

Management Information Systems 6 Comptroller's Handbook

Management needs to ensure that MIS systems are developed according to a

sound methodology that encompasses the following phases:

• Appropriate analysis of system alternatives, approval points as the

system is developed or acquired, and task organization.

• Program development and negotiation of contracts with equipment and

software vendors.

• Development of user instructions, training, and testing of the system.

• Installation and maintenance of the system.

Management should also consider use of "project management techniques" to

monitor progress as the MIS system is being developed. Internal controls

must be woven into the processes and periodically reviewed by auditors.

Management also should ensure that managers and staff receive initial and

ongoing training in MIS. In addition, user manuals should be available and

provide the following information:

• A brief description of the application or system.

• Input instructions, including collection points and times to send

updated information.

• Balancing and reconciliation procedures.

• A complete listing of output reports, including samples.

Depending on the size and complexity of its MIS system, an institution may

need to use different manuals for different users such as first-level users, unit

managers, and programmers.

MIS Reviews

By its very nature, management information is designed to meet the unique

needs of individual institutions. As a result, MIS requirements will vary

depending on the size and complexity of the operations. For example,

systems suitable for community sized institutions will not necessarily be

adequate for larger institutions. However, basic information needs or

requirements are similar in all financial institutions regardless of size. The

complexity of the operations and/or activities, together with institution size,

point to the need for MIS of varying degrees of complexity to support the

decision-making processes. Examiners should base MIS reviews on an

evaluation of whether the system(s) provide management and directors with

the information necessary to guide operations, support timely decision

Comptroller's Handbook 7 Management Information Systems

making, and help management monitor progress toward reaching institutional

goals and objectives. Although examiners should encourage management to

develop sound information systems, they also should be reasonable in their

expectations about what constitutes suitable MIS.

Examiner MIS reviews are normally focused on a specific area of activity, on a

clearly identifiable departmental or functional basis, or as a part of the activity

being examined within a larger department.

During the examination, the MIS review should occur at both a macro (big

picture) level and also at the micro (functional/product oriented view of the

business) level. The examiner-in-charge of the MIS-review program should

look at the useability and effectiveness of the corporate-wide MIS structure.

The examiner should also collect MIS related observations and information

from the examiners-in-charge of the other areas under review. It would be

very difficult for one examiner to attempt to perform a detailed MIS review for

all of an organization's functional and operational areas of activity. It is

practical and reasonable, however, to have this lead examiner coordinate and

consolidate the MIS reviews from the other examination areas. The MIS

related feedback received from other area examiners provides important and

practical input to the MIS review examiner. The consolidation, coordination,

and analysis of this MIS feedback can be used to reach supportable macrolevel

conclusions and recommendations for corporate-wide MIS activities.

MIS reviews in the functional or product review areas generally should be

performed by an examiner who is considered to be a subject matter expert

(SME) in the area of activities or operations that are being supported by the

MIS systems or processes under review. The SME must have a thorough and

complete understanding of the baseline "business" supported by the MIS

system(s) under review. A solid understanding of the business is fundamental

to the completion of a meaningful MIS review. The decision regarding the

overall quality and effectiveness of MIS generally should be made by the SME

for the area under review. The SME for each area where MIS is under review

must subsequently communicate MIS related findings, conclusions, and

opinions to the examiner charged with the responsibility for the complete MIS

review work program at that examination. This is clearly a collaborative effort

among area SMEs and the examiner charged with the responsibility for this

area of review.

The examiner coordinating the overall MIS review program should be a

commercial examiner with broad experience and understanding which

Management Information Systems 8 Comptroller's Handbook

covers many areas of organizational operations and activity. Alternatively, a

bank information systems (BIS) examiner could serve in this capacity. BIS

examiners should be consulted whenever there are questions, issues, or

concerns surrounding the use of information systems (IS) or electronic data

processing (EDP) technology or the effectiveness of MIS-related internal

controls in any automated area of the organization's activities.

When performing MIS reviews, examiners should use the guidelines in this

booklet to determine if management has:

• Identified the institution's specific information requirements. Examiners

can focus on specific information needs related to issues such as asset

quality, interest rate risk, regulatory reporting, and compliance. If

possible, the MIS review should be concurrent with examinations of the

commercial, consumer, fiduciary, and BIS activities. This would

enhance interaction and communication among examiners.

• Established effective reporting mechanisms to guide decisions. This

process includes reviewing controls that ensure that information is

reliable, timely, accurate, and confidential.

Comptroller's Handbook 9 Management Information Systems

Management

Information Systems Examination Objectives

1. To determine examination procedures necessary to achieve stated

objectives. (Note: BIS examiner support of commercial staff should be

considered to enhance the depth of coverage for the MIS review if there

are known MIS issues or deficiencies which represent an undue level of

risk and/or if MIS activities are particularly complex or sophisticated.)

2. To determine if MIS policies or practices, processes, objectives, and

internal controls are adequate.

3. To evaluate whether MIS applications provide users with timely,

accurate, consistent, complete, and relevant information.

4. To assess the types and level of risk associated with MIS and the quality

of controls over those risks.

5. To determine whether MIS applications and enhancements to existing

systems adequately support corporate goals.

6. To determine if MIS is being developed in compliance with an

approved corporate MIS policy or practice statement.

7. To determine if management is committed to providing the resources

needed to develop the required MIS.

8. To determine if officers are operating according to established

guidelines.

9. To evaluate the scope and adequacy of audit activities.

10. To initiate corrective action when policies or practices, processes,

objectives, or internal controls are deficient.

11. To determine if any additional work is needed to fulfill the examination

strategy of the institution.

Management Information Systems 10 Comptroller's Handbook

Management

Information Systems Examination Procedures

1. Obtain the following documents:

G Examination Report and related management responses.

G Supervisory Monitoring System (SMS) comments.

G MIS-related workpapers.

G MIS-related audit/compliance reviews.

G Institution's formal MIS policies and practices

framework/guidelines.

G Board/MIS Committee-related minutes.

G Organization charts detailing MIS responsibility.

2. Review previous MIS review-related examination findings. Review

management's response to those findings.

• Discuss with OCC examiners their perception of both the

usefulness and applicability of the five MIS elements applicable

to MIS systems that have been reviewed or are pending review.

• Request copies of any reports which discuss either MIS

deficiencies or strengths from the SME examiners.

• Determine the significance of deficiencies and set priorities for

follow-up investigations.

3. Request and review copies of recent reports prepared by internal or

external auditors of targeted MIS area(s). Determine the following:

• The significance of MIS problems disclosed.

• Recommendations provided for resolving MIS deficiencies.

• Management's responses and whether corrective actions have

been initiated and/or completed.

• Audit follow-up activities.

4. Review the Supervisory Strategy in the Supervisory Monitoring System

and Scope Memorandum issued by the examiner-in-charge (EIC).

5. Review reports for the MIS target area(s). Determine any material

changes involving the usefulness of information and the five MIS

elements:

Comptroller's Handbook 11 Management Information Systems

• Timeliness.

• Accuracy.

• Consistency.

• Completeness.

• Relevance.

6. Review MIS-related policies or practices and processes. Pay special

attention to any changes since the previous review.

7. Review the Internal Control Questionnaire (ICQ) and determine which

questions and/or sections should be used to support the examination's

MIS review.

8. Based on the performance of the previous steps, and discussions with

the EIC and other appropriate supervisors, determine the scope of the

examination and set the objectives.

Select from among the following examination procedures those steps that

are necessary to meet the objectives. Examinations may not require all of

the steps.

9. In conjunction with the EIC, identify each of the functional or productrelated

areas to be reviewed at this examination. Once the scope of

the MIS review has been determined:

• Provide copies of the MIS objectives, ICQs, and examination

procedures to the SME examiner(s). Highlight those areas of MIS

review that need to be addressed during the review.

• The MIS review examiner will aggregate these observations,

conclusions, and recommendations for each of the functional

areas addressed and incorporate them (as appropriate) into the

final MIS Review conclusions.

• If there are issues, observations, conclusions or

recommendations related to operational or technology aspects

of the institution's MIS, the commercial examiner should

coordinate these with the BIS examiner or BIS manager if the BIS

examiner is not already involved in the MIS review process.

Management Information Systems 12 Comptroller's Handbook

10. For the selected sample of MIS system(s) and as appropriate to support

the defined scope, obtain:

G User manual.

G User training manual/instructions.

G Project plan and related workpapers.

G Sample of MIS Output Reports.

G MIS project development/enhancement workpapers.

11. As examination procedures are performed, test for compliance with

established policies or practices and processes, and the existence of

appropriate internal control measures. Refer to the Internal Control

Questionnaire as needed.

12. Identify any area with inadequate supervision and/or undue risk.

Discuss with the EIC the need to perform verification procedures. As

required, perform appropriate verification procedures.

13. Select and review samples of ongoing executive reports for the

targeted MIS area(s). Determine whether:

• The source of the information collected originates from the

expected business area.

• Users of the information are the appropriate employees or

managers within that area of activity.

• The reports are ultimately distributed to the appropriate users.

• The flow of these MIS information/reports is consistent with the

responsibilities reflected on the area's official organization chart.

14. Determine the degree to which management and the staff in an area

under review use MIS adequately and can support that the MIS being

used is appropriate and effective. Perform the following steps:

• Discuss the five MIS elements with a senior manager(s) of the

respective business unit.

• Repeat this work step with an employee of the business unit who

has experience with the MIS system. (Note: This task is designed

to determine if significant differences regarding the adequacy of

the MIS exist among management and/or staff.)

• Based on management's self-assessment of the useability of its

Comptroller's Handbook 13 Management Information Systems

MIS, identify any planned activities to enhance, modify, or

expand these systems.

15. Review minutes of the board of directors or committee(s) representing

the MIS target area(s) for a relevant time period.

• Determine any areas where the "packet" of information does not

seem to meet the five required elements of MIS.

• Identify MIS issues for follow up.

16. Request a copy of the development plan for significant MIS-related

projects. Examples could include executive information packets, credit

approval and take-out commitments, and funds management systems.

• Review MIS project objectives and determine if they address

reported MIS weaknesses and meet business unit plans.

• Review the project management technique used by management

and determine the status of important MIS projects.

• Sample a significant MIS project(s) and determine whether it

follows an approved and implemented development

methodology that encompass the following phases:

) Analysis of system alternatives, organization of tasks, and

approval of phases by system users/owners.

) Program development and negotiation of contracts for

equipment and software vendors.

) Development of user instructions and system testing

procedures.

) Installation and maintenance of the system.

17. Select a system and request copies of relevant user instructions.

Determine whether the guidelines are meaningful, easy to understand,

and current.

18. Determine whether user manuals provide adequate guidelines in the

following areas:

• Complete description of the system.

• Input instructions, including collection points and times to

sendupdated information.

Management Information Systems 14 Comptroller's Handbook

• Balancing/reconciliation instructions.

• Full listing of output reports, including sample formats.

19. Obtain from the user manuals or the appropriate manager a work flow

showing data from the point-of-entry, through user processes, to final

product. The purpose of this task is to review how information is

identified, gathered, merged, manipulated, and presented. (Depending

on the organization's sophistication and system size, examiners may

have to develop this work flow themselves.)

• Discuss the area's MIS process with a representative sample of

users and determine if they know where the data is coming from,

where it is going, and how it gets there. A complete

understanding would suggest the interviewees both use and

understand the MIS system(s) supporting them.

• Identify and note the points where adjustments to data occur.

• Identify the department staff who are responsible for the MISrelated

input data and reports; i.e., obtain a list of users, ad hoc

software report writers, and the programmers involved.

Compare this information with the material acquired in the

immediately preceding item.

• Determine if preparation and reconciliation processes are

sufficient to reasonably ensure integrity of information.

• Determine if data adjustments are adequately documented.

• Determine the effectiveness of ad hoc report-writing capabilities

by reviewing the software vendor's user manual for data

presentations.

• Through observation and interview determine useability,

commonality, simplicity, and effectiveness of MIS reports

supporting the decision-making process for that area of activity.

20. Review the lines of communication within the institution and determine

the effectiveness of MIS in the following areas:

• Communication paths linking executives, appropriate users, and

information systems employees.

• The flow of communication throughout the organization.

• The documentation of which underlying MIS process supports

the area's management.

Comptroller's Handbook 15 Management Information Systems

21. Determine the adequacy of MIS training including whether:

• Training needs are properly identified and prioritized.

• Training is organized in a formal classroom setting, is on-the-job,

or is a combination of both approaches.

• Training manuals or other material besides the user manual exist.

• The training material adequately covers relevant and current

issues.

• Training material is distributed to the appropriate employees.

22. Determine whether established procedures are sufficient to ensure the

proper testing of system developments or enhancements.

23. Review whether final versions of software enhancements are installed

in a controlled environment that promotes integrity of information.

24 Determine if authorized processes are followed as data is acquired,

merged, manipulated, and up-loaded from subsystems.

25. Determine if the organization has had recent merger and/or acquisition

activity. If it has, determine how management at the senior and

departmental levels ensure that the resulting MIS supports and includes

the five MIS elements mentioned previously. If mergers and

acquisitions are frequent, determine whether:

• Appropriate policies or practices and procedures have been

developed to support such activity from an integrated MIS

perspective.

• The consolidation of MIS systems in a merger still meets the

requirements of a quality MIS system.

26. Review the results of your work, summarize your findings and initial

conclusions, and discuss issues with an appropriate officer(s):

• How well risks are controlled.

• Identify significant control deficiencies.

• Recommend action to remove deficiencies.

• Obtain management's corrective commitments and firm time

frames.

Management Information Systems 16 Comptroller's Handbook

27. Prepare a memorandum of your conclusions and supporting findings.

Identify suggested OCC follow-up actions.

28. After a full discussion with the EIC prepare a memorandum and

document work programs to facilitate future examinations.

Comptroller's Handbook 17 Management Information Systems

Management

Information Systems Internal Control Questionnaire

Purpose

The following questionnaire is provided as a tool to assist examiners in the

assessment, review, and documentation of the quality of the bank's MISrelated

internal controls, policies, practices, and procedures. However,

because the nature and scope of MIS among banks, not all of the questions

will be relevant in every bank. Similarly, a negative answer to a particular

question does not necessarily indicate a weakness in the bank's MIS or

surrounding internal controls if other equally effective or alternate controls are

in place or there are other circumstances that mitigate the risk. Where

appropriate, documentation may include narrative descriptions, flowcharts,

copies of forms used, and substantiation through observation or testing.

Examiners should use their own judgement in deciding which internal control

questions are relevant for a particular bank and whether a negative response

to any particular question should be considered a matter of supervisory

concern.

MIS Policies or Practices

Yes No

1. Has management developed and maintained a current

MIS policy or practice?

2. Does the policy or practice provide guidance in the

following areas:

• The definition, purpose, and fundamental

components of MIS?

• How to achieve effective two-way

communication between management and

employees and specific avenues to maintain such

communication?

• Processes for initiating, developing, and

completing MIS enhancements?

• Guidelines for installing MIS enhancements in a

controlled change environment?

Management Information Systems 18 Comptroller's Handbook

Yes No

• Procedures for acquiring, merging, manipulating,

and up-loading data to other systems?

• Guidance for delineating the need for

internal/external audit coverage and testing?

3. Is the policy or practice reviewed and updated

regularly?

4. Is the policy or practice distributed to appropriate

employees?

5. Does the policy or practice incorporate or require:

• User approval for each phase?

• Installation of MIS enhancements in a controlled

change environment?

• Employees to follow policy or practice and

processes as data is acquired, merged,

manipulated, and up-loaded to other systems?

• Employees to be sufficiently trained for new

systems and subsequent enhancements?

MIS Development

6. Does the internal planning process consider and

incorporate the importance of MIS at both the strategic

and tactical level?

• Are longer term strategic goals (beyond 2 years)

supported by the development of appropriate

MIS?

• Are shorter term tactical goals over the

immediate one-to-two year period regularly and

appropriately reviewed and monitored by

management?

Comptroller's Handbook 19 Management Information Systems

Yes No

7. Do project objectives address reported MIS weaknesses

and meet business unit requirements?

8. Does management have a process for monitoring

project schedules?

9. Does management use a project management

technique to monitor MIS development schedules?

10. Does the organization use a consistent and

standardized approach or a structured methodology for

developing MIS projects?

11. Does the methodology encompass the following

phases:

• Analysis of the concept, organization of tasks,

completions of phases, and approvals?

• Development of the program and contracting for

equipment and software?

• Development of user manuals and testing of the

system?

• Post-review of the system and future

maintenance of it?

User Training and Instructions

12. Is the user manual for the MIS system(s) meaningful,

easy to understand, and current?

13. Do user manual requirements include the following

information:

• A brief description of the application or system?

• Input instructions, including collection points and

times to send updated information?

• Balancing/reconciliation instructions?

Management Information Systems 20 Comptroller's Handbook

Yes No

• A full listing of output reports, including samples?

Communication

14. Does management encourage communication lines to

meet the following objectives:

• To effectively link executives, other appropriate

users, and information systems employees?

• To ensure effective two-way communication

between management and employees?

• To document the MIS process?

Audit

15. Has the MIS target area(s) been internally or externally

audited in the past two years?

• If it has, review the scope of the audit, the

findings, and management's response(s) to that

report.

• If it hasn't, interview audit management to

determine what their plans regarding an audit

review of the MIS system are.

Comptroller's Handbook 21 Management Information Systems

Yes No

Conclusion

16. Can this information be considered adequate for

evaluating internal control of MIS activities? This

question presumes that there are no additional

significant internal auditing procedures, accounting

controls, administrative controls, or other circumstances

that impair any controls or mitigate any weaknesses

noted above. (Note: Explain negative answers briefly,

and indicate conclusions as to their effect on specific

examination or verification procedures.)

17. Based on a composite evaluation, evidenced by

answers to the previous questions, internal control is

considered to be _________ (good, medium, or bad).

Management Information Systems 22 Comptroller's Handbook

Management

Information Systems Verification Procedures

1. Using an appropriate sampling technique, select an additional MIS

project(s) from the organization's development plan.

• Review project objectives and determine if they address reported

MIS weaknesses and meet business unit plans.

• Determine whether the MIS projects follow an approved and

implemented development methodology that encompass the

following phases:

) Analysis of system alternatives, organization of tasks, and

approval of phases by system users/owners.

) Program development and contracts for equipment and

software vendors.

) Development of user instructions and testing the system

changes.

) Installation and maintenance of the system.

2. Using the expanded sample, check copies of relevant user instructions.

Verify whether the guidelines are meaningful, easy to understand, and

current.

3. Test whether user manuals provide adequate guidelines in the following

areas:

• Complete description of the system.

• Input instructions, including collection points and times to send

updated information.

• Reconciliation instructions.

• Full listing of output reports, including sample formats.

4. Obtain work flows from the user manuals or managers showing data

from the point-of-entry, through user processes, to final product.

• Test the processes with users to determine if they know where

the data is coming from, where it is going, and how it gets there.

• Identify the points in which data adjustments occur.

Comptroller's Handbook 23 Management Information Systems

• Identify the individuals accountable for contributing to data and

reports. Compare information with the material acquired in the

step immediately preceding this step.

• Test the preparation and reconciliation processes to verify the

integrity of information.

• Determine if data adjustments are adequately documented.

5. Expand the sample by interviewing additional managers and

experienced unit employees to determine their perceptions of MIS.

• Discuss MIS principles of timeliness, accuracy, consistency,

completeness, and relevancy.

• Determine if the employees hold any significant perceptions that

the MIS is ineffective.

6. If available, obtain samples of important recurring executive reports for

the targeted MIS area(s). Test the following areas to determine if:

• Information originates from the expected source business area.

• Users of the information are the employees one would expect

and the data is being used for correct purposes.

• Distribution of the reports ultimately is supplied to all appropriate

users.

7. Review a sample of audit workpapers relating to reports that disclosed

material MIS weaknesses.

• Review documents to determine if auditors tested MIS activities

against policies or practices and processes.

• Test to determine if documented findings support the audit scope

and report comments.