Performing a Software Licensing Review: Enhancing IT Risk and Controls.
In today’s dynamic IT environment, software licensing is a critical component of effective internal audit and risk management. A thorough…
2 Feb 25
•My Audit Spot
3 mins
Table of contents
- What Is a Software Licensing Review?
- External Guidance and Best Practices
- Risks Associated with Software Licensing
- Why Include a Software Licensing Review in Your Audit Plan?
- Conclusion
In today’s dynamic IT environment, software licensing is a critical component of effective internal audit and risk management. A thorough software licensing review ensures that your organisation not only complies with licensing agreements but also optimises software usage and costs. Leveraging the FIN68 Audit Work Programme – IT Software Licensing Review, audit teams can assess software licensing practices, identify potential risks, and implement robust controls aligned with SAO principles (Security, Availability, and Operational excellence).
What Is a Software Licensing Review?
A software licensing review is an internal audit process that evaluates how software assets are acquired, managed, and deployed within an organisation. The review examines key areas such as:
- Compliance Management: Ensuring that software usage adheres to vendor licensing agreements and legal requirements.
- Cost Efficiency: Identifying underused or over-licensed software to optimise spending.
- Risk and Controls: Assessing the controls in place to manage software licensing, minimising risks associated with non-compliance and financial loss.
- Operational Processes: Evaluating the effectiveness of procedures for acquiring, tracking, and renewing software licenses.
Our FIN68 template provides a structured framework that helps auditors systematically assess these aspects, ensuring that all critical areas are covered.
External Guidance and Best Practices
Aligning your software licensing review with external guidance is essential for establishing a robust control environment. Key sources of external guidance include:
- ISO/IEC 19770: This series of standards focuses on IT asset management and software licence management, providing best practices for managing software assets efficiently.
- ITIL (Information Technology Infrastructure Library): ITIL frameworks offer guidance on managing IT services and assets, including software licences, to ensure operational excellence.
- Vendor Licensing Guidelines: Many major software providers, such as Microsoft, Oracle, and Adobe, offer detailed licensing guidelines that organisations should adhere to in order to avoid non-compliance risks.
By referencing these standards, internal audit teams can enhance the rigour of their reviews and ensure that software licensing practices are aligned with industry best practices.
Risks Associated with Software Licensing
Failing to manage software licensing effectively exposes organisations to several risks, including:
- Compliance Risks: Non-compliance with licensing agreements can result in legal penalties, reputational damage, and potential litigation.
- Financial Risks: Over-licensing or under-licensing can lead to significant cost inefficiencies, affecting the organisation’s bottom line.
- Operational Risks: Inadequate tracking and management of software licences can result in service disruptions, impacting business operations.
- Security Risks: Unauthorised or unmonitored software installations may introduce vulnerabilities, compromising the organisation’s security posture.
Conducting regular software licensing reviews helps mitigate these risks by identifying gaps and ensuring that appropriate controls are in place.
Why Include a Software Licensing Review in Your Audit Plan?
Incorporating a software licensing review into your audit plan is vital for several reasons:
- Enhanced Risk Management: Regular reviews identify potential non-compliance issues early, allowing organisations to address them before they escalate into larger problems.
- Improved IT Controls: A systematic review ensures that internal controls over software assets are robust, safeguarding the organisation against both operational and financial risks.
- Cost Optimisation: By identifying inefficiencies and redundant licenses, organisations can optimise spending and improve cost efficiency.
- Regulatory Compliance: Adhering to external guidelines and vendor agreements not only reduces legal risks but also reinforces the organisation’s commitment to high standards of governance.
- Stakeholder Assurance: Transparent software licensing practices enhance stakeholder confidence in the organisation’s ability to manage its IT assets responsibly.
Conclusion
Performing a software licensing review is a strategic imperative for organisations aiming to strengthen their IT risk and controls frameworks. By utilising the FIN68 Audit Work Programme – IT Software Licensing Review, internal audit teams can systematically evaluate compliance, manage financial and operational risks, and enhance overall IT governance.
By aligning with external guidance such as ISO/IEC 19770, ITIL, and vendor-specific licensing guidelines, organisations can ensure that their software licensing practices support SAO principles—ensuring Security, Availability, and Operational excellence. Including this review in your audit plan not only mitigates risks but also drives cost efficiency and reinforces robust internal controls, ultimately safeguarding your organisation’s IT assets for long-term success.
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