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proxy server versus firewall

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I oversee a LAN whose only external connection is a proxy server link to an ISP. The internet access serves for research and email. No site is hosted internally, but updated remotely.
The proxy server is hosted on Windows2000 machine. All the PCs are running windows2000 and linked to the proxy server on the same LAN which host the main application on a unix platform. What are the possible threats to this setup? Is a firewall necessary?

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by gale

A proxy is normally used as a cache or to stop certain websites from being accessed. It does nothing to hinder your exposure to the outside world.
A firewall on the otherhand, is designed to stop all traffic unless it is specifically allowed.
For example: you can stop icmp (pings) from outside your network but allow your network to ping the outside world. You can also allow all outbound port 80 (http) and outbound port 21 (ftp) but block all others i.e. port 23 telnet, port 69 tftp.
IMHO a firewall is not only necessary but should be implemented immediately.

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