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1. Cloud Computing Background and Why Companies Store Data in the Cloud

The term cloud computing refers to the delivery of computing resources and services, data processing and
storage, and other applications on a demand basis. However, all this is done over the internet. Users often pay
for cloud computing services based on the cloud services and applications that they use. This allows companies
and businesses to scale up in a flexible approach. Especially companies that heavily rely on computing
resources. The name cloud computing is derived from the way internet infrastructure was drawn as a cloud on
patent diagrams and network flowcharts back in the 90s ("How Cloud Computing Can Benefit Your Small
Business", 2022).

Cloud Computing Uses

The everyday internet user often interacts with cloud computing services such as online services like Outlook
365 or Gmail for different purposes. Some of the common uses include: streaming videos, sending emails, and
collaborating with team members.

Some of the most common uses include;

Cloud Backup: This refers to failsafe solutions that help companies in case of data loss, cyberattacks or server
crash. Most of the cloud backup services combine data restoration and synchronization, high-level security,
storage, archiving and real-time backups.

Cloud Storage: This services help companies and businesses to store their data in a cloud storage system that is
located offsite, this allows users to access the data through devices that are connected to the internet. This
creates room for users to sync files and share them securely. The most common cloud storage services include:
Google Drive, Microsoft OneDrive, and Dropbox.

Software as a service: This is service that allows companies to access cloud-based application solutions. This
service comes in handy in many operational areas such as: accounting and sales management. Good examples
of SaaS CRM Software is QuickBooks Online for finance management, Salesforces for managing sales, email
marketing software for marketing.

Cloud hosting: The main role of cloud hosting is information sharing. This can be done via web-based phone
systems, application hosting, data storage and email services. This allows businesses to scale up peak loads.
This is because cloud hosting services can house domain names and manage databases, and host websites.
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Cloud Computing Background

Cloud computing is a revolutionary information technology platform that has transformed how governments,
consumers, businesses and companies deploy computing power, process information and store data. This
technology has enhanced innovation and improved corporate efficiency.

Why Companies Store their Data in the Cloud?

Flexibility Purposes

By investing in cloud computing services, companies get to enjoy a lot of flexibility. This is because users get
to enjoy nearly unlimited storage space and bandwidth, thus allowing them to scale up and down whenever
necessary. This inevitably supports growth over the long-term. For this reason, companies don’t have to
purchase and install equipment’s and other costly infrastructure. This brings the other element on work place
flexibility because employees are able to access data and applications on a remote server, this can be done from
anywhere and at whichever time, provided users have an internet connection.

Business Continuity and Reliability

Cloud computing allows businesses and companies to provide their services even after certain disasters take
place. As such, it is a reliable disaster recovery and backup strategy. Its thus an ideal disaster recovery plan
which is cost efficient. On the same note, the cloud allows data to be mirrored in different servers, such that if
one fails, data is backed up. This minimizes loss of productivity and website downtime.

Cost Efficiency

Cloud computing reduces IT operational cost. This is a significant advantage because the remote servers
eliminate the need for on-site application and storage equipment’s. This reduces the overhead costs such as data
storage. Management and software updates. These services are also cheaper because deployment is on a pay-
per-use basis. Therefore, companies just pay for what they need. This suits small and medium sized enterprises,
especially those that heavily rely on computing resources.

Enhanced Collaboration

Cloud services have improved collaboration amongst team members, communities and groups, through
information sharing. These services have also eliminated the common barriers to communication as seen with
traditional IT. This allows employees working in different locations to collaborate and access information. By
streamlining processes, companies are more productive.
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Performance and Scalability

Cloud services are scalable to meet the needs of any company or business requirements. If a company grows
and ends up needing additional storage space or bandwidth, the services can be scaled up to meet such demands.
This allows optimum performance on heavy loads. Inevitably, this reduces downtime and improves website
speed.

Software Updates Are Automated

Cloud computing service providers conduct regular system updates to make sure that IT requirements are met.
The cloud maintenance of the cloud servers is done around the clock. This is the case even for security updates.
Thus allowing companies to free up money and time which could have been spent on in-house infrastructure.

Environmentally Friendly

Cloud services have a lower carbon footprint and thus are environmentally friendly. This is because the pay-
per-use virtual environment for running web applications and data storage consumes less energy, thus lower
carbon emissions. Also, cloud computing reduces the IT infrastructure that’s needed, specifically physical
hardware.

Software Integration

Cloud computing facilitates automatic software integration. Thus eliminating the need for businesses to
integrate software manually. As such, businesses are able to pick what they need ("Advantages of Cloud
Computing for Businesses | LeadingEdge", 2022). However, the software or applications used are dependent on
what is needed. This eliminates the need for companies to purchase what they don’t need (Djemame et al.,
2016).

It is also important to note that cloud computing abstracts the application platform and software which runs in
the hardware. This introduces a lot of efficiency because the software creates room for virtual servers to
interface with the applications. The virtual machines often reside on a physical server. Ideally, many virtual
machines can reside on a single physical server. This is where the issue of virtualization comes in handy as it
allows for workload management in a flexible manner ("IEEE Cloud Computing Call for Papers Connecting
Fog and Cloud Computing", 2016). For this reason, cloud computing providers can remove or modify resources
without necessarily reconfiguring the services.

The other advantage with cloud computing is the flexibility aspect when it comes to data processing locations.
This is because applications and data can be transferred into datacenters where its shared amongst users. For
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this reason, it’s easier to build capacity on a large scale compared to what a single company can achieve. This is
why cloud computing is considered as a scalable infrastructure which creates room for the amortization of the
aggregate demand. Mainly because services are sold on a per unit resource basis.

The other reason why companies store their data on the cloud is because it’s a utility services with different
contractual levels of pay-per-use basis. The service also has high-level of availability, and different contractual
levels of reliability. To be much specific, cloud computing is referred to as enhanced utility due to the
difference in service offerings amongst cloud computing providers. This creates room for the customization of
service and technology levels depending on the consumer’s needs. But they key point is ease of configuration
and customization according to the user needs. Maintaining and buying IT infrastructure such as networking
equipment and hardware is time and money consuming. However, for cloud computing, companies don’t have
to invest in infrastructure. This saves cost and frees up money for companies to invest in other ventures. Cloud
computing allows companies to be flexible with their budget since they only pay for what they use.

2. Advantages that accrue to companies out of using cloud computing

Data which was provided by Foundry’s 2020 cloud computing research, about 92% of companies are using
services which rely on cloud computing. Another forecast report by Flexera pointed out that 2/3 of SMB
workloads will need cloud computing services in 2022. With the pervasive nature of online work due to the
pandemic, the trend will inevitably continue.
Cloud computing has helped companies save money and time, this has inevitably boosted productivity. Mainly
due to enhanced innovation and improved collaboration. The other advantages include:
Accessibility of Data
Companies can easily access data using devices that are connected to the internet. There’s no need to store data
in a physical on-site server or computer. Data can be stored on the cloud and accessed online. The central web-
based hub provides access to information from any location provided one is authorized.
Consistency
Cloud computing introduces consistency amongst team members who are collaborating on projects. This is
especially the case when people are working on digital files. This is because files stored in the cloud are in a
central location and hence data is synced and users have access to the up-to date versions.
Easy to scale up
Companies can easily adjust the number of users who have access to the cloud services. The same applies when
they need to scale down. Therefore, companies cannot run out of capacity in any case, they avoid any
unnecessary expenses.
Companies can work remotely
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Companies can allow their employees to access specialized applications and files from remote locations. For
this reason, employees don’t necessarily have to be in the office. They can work collaboratively from home.

Easy to Restore and Back up Data

In the event that a server crashes or data is lost, companies that store their data in the cloud can restore the data.
Data loss can happen due to many reasons such as power surges, natural disasters or hardware failure. However,
if an organization has backed up its data in the cloud, restoring it is very easy. Such information remains
accessible and safe.
Cost-efficiency
Maintaining and buying IT infrastructure such as networking equipment and hardware is time and money
consuming. However, for cloud computing, companies don’t have to invest in infrastructure. This saves cost
and frees up money for companies to invest in other ventures. Cloud computing allows companies to be flexible
with their budget since they only pay for what they use. This pricing often comes in an annual or monthly
expense. However, it is manageable and predictable. Additionally, cloud computing has reduced the cost needed
to run companies that rely on computing resources. As such, small businesses or companies can access dynamic
provisioning of computing power and resources. Also, the upfront investments required have also been reduced
or eliminated. Mainly because of the Cap-ex model.
The other advantage is that cloud computing is an adaptive infrastructure that facilitates balancing of computing
loads in a flexible manner. In a stochastic paradigm, when the service demand is high, the demand load is
balanced. All the while, the economies of scale also expand. Most importantly, cloud computing has helped
companies lower the computing barriers that hinder innovation (Chi & Lei, 2018).

3. What type of business data do companies store on the cloud (Provide examples of data kept on the
cloud by real companies: Apple, eBay, Netflix, etc.)
In cloud data storage, there are three types of storage: block storage, file storage, and object storage. Each of the
aforementioned storage has its own advantages and uses.
Object Storage
Object storage provides advantages such as metadata characteristics and vast scalability. The most common
object storage solution in the market is Amazon Simple Storage Service (S3), it best suited for developing
modern applications. It’s very flexible and scalable and facilitates the import of data stores for backup, analytics
or archival purposes.

File Storage
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File storage serves applications that need a file system and shared files. Such storage needs the support of a
Network Attached Storage Server (NAS). Common file storage solutions include Amazon Elastic File System
which is ideal for media stores, content repositories, and development environments.
Block Storage
Block storage provides low latency, dedicated storage for each host. This is ideal for ERP systems and
enterprise applications such as databases. Its similar to Storage Area Network or Direct Attached Storage
("What is Cloud Storage? | AWS", 2022).

Digital data is stored by business data companies in the cloud. This is because such companies enjoy scalability
and security. Such kind of business data companies include:
Netflix
Netflix stores textual, pictorial, and video data in the cloud. The company is in the entertainment space and has
managed to stream more than 120 million hours of entertainment, thanks to the cloud. To facilitate this, Netflix
employs the AWS cloud services, thus allowing millions of users to stream. Netflix benefits from the storage
services and database management services provided by AWS. This gives the company an edge in scaling up
and innovation ("IEEE Cloud Computing Call for Papers: Intelligence in the Cloud", 2016).

Pinterest
This company stores textual, and pictorial data in the cloud. The company accumulates and aggregates large
amounts of data across the internet. This is made possible by AWS cloud computing services. This has enabled
the company to grow and scale up while accommodating millions of users.

Apple
Apple uses cloud computing to manage one of its programs known as Siri which mimics human’s ability to
listen and offer solutions to questions. This capability is facilitated by the cloud.

4. How cloud computing affects the audit risk

The first front where cloud computing affects audit risk is on the legal front. Mainly because of the legal
expectations laid upon then provider in the sense that they are expected to protect customer data from inherent
attacks (Rizvi, 2022). This affects audit risk because this can be achieved the provider needs to customize the
cloud computing services sought by the client. Ideally, cloud computing affects audit risk because of the need
for specific methods and approaches to be followed in compliance with the regulations and guidelines provided
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by auditing authorities. This is where the audit risk is affected in-terms of values and risks that come into play
during the implementation phase (Linthicum, 2018).

The presence of outside providers in cloud computing presents a challenge with audit risk. Since the vendors are
outsiders and they have to provide support to the client, there is a need for auditors to implement effective risk
assessment methods and frameworks.

The main ways through which cloud computing affects audit risk include: data privacy and security, content
ownership, interfacing with internal systems, business continuity, and system availability. However, the main
challenge is on privacy and security. Mainly because data is stored in an off-site location. This affects audit risk
because cloud computing audit risk has to be done in a value-added approach. This is in compliance with
Auditing Standard No. 2 (by the Public Company Accounting Oversight Board), the company’s management
has a responsibility of maintaining effective internal control (Saxena & Dey, 2016). According to the above
standard, there is need for the service providers to evaluate the IT control environment. SAS 70 (Statement on
Auditing Standard No. 70), a Type 2 audit identifies the specific controls and how effective they are (Banker,
Li, Maex and Shi, 2020). The other factor is on the stipulations of ISACA which necessitate the evaluation of
internal controls and security and their effectiveness. This is why auditors have to look at weaknesses in the
internal control of the cloud computing provider.

References/Bibliography

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Banker, R., Li, X., Maex, S. and Shi, W., 2020. The Audit Implications of Cloud Computing.
Accounting Horizons, 34(4), pp.1-31.
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Rizvi, S., 2022. Cloud Security Auditing: Challenges and Emerging Approaches. [online] InfoQ.
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How Cloud Computing Can Benefit Your Small Business. (2022). Retrieved 3 September 2022, from
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IEEE Cloud Computing Call for Papers Connecting Fog and Cloud Computing. (2016), 3(4), c2-c2.
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IEEE Cloud Computing Call for Papers: Intelligence in the Cloud. (2016), 3(5), 25-25.
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Linthicum, D. (2018). Approaching Cloud Computing Performance. IEEE Cloud Computing, 5(2), 33-
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Chou, D. (2015). Cloud computing risk and audit issues. Computer Standards &Amp; Interfaces, 42,
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Chi, P., & Lei, C. (2018). Audit-Free Cloud Storage via Deniable Attribute-Based Encryption. IEEE
Transactions On Cloud Computing, 6(2), 414-427. https://doi.org/10.1109/tcc.2015.2424882

Saxena, R., & Dey, S. (2016). Cloud Audit: A Data Integrity Verification Approach for Cloud
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