Hi there,

Use this checklist:

http://www.linuxforum.com/forums/index.php?showtopic=14077

I would suggest you assume that you have a system that is more
compromised than you initially have thought.

Work through the checklist described in the link shown above. 
Firewalls aren't necessarily useless ... in combination with a
firewall you can do the following (generically speaking):

- always read security updates related to the specific sets of
applications|code you run
- update your system religously
- limit the amount of change on the system by confining users to a
limited set of usable commands (check setuid|setgid bits and general
permissions)
- disable compilation of any kind of source by *anyone*, and if you
need to compile anything then install a compiler and do what you need
to do and get rid of it
- run automated tasks that notify you of change on your system and
become very familiar with patterns of change so you can spot something
out of the ordinary...this is a big ask especially if you have a very
dynamic system but it's worth doing to help you react quickly
- run automated tasks that notify you of attempts to access your
system 'legitimately' and see who is accessing what and when
- try and break in to your own system ;) 
- about a hundred more things.......

All of the above may seem overkill to some but believe me it is worth
it if only as a learning exercise...initially the effort seems to be a
lot but once you're doing the above things, it only takes 5-10 minutes
a day of reading some logs|reports and giving the system an occasional
once over to maintain a modicum of security.

Also - Jim made a good point about using the last good known copy of
your system to rebuild - which is CD install + backups of data.

Good luck.

-Abhinav

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