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Open Source Audit Software

IIA District ConferenceDurham, NC2/27/2009

Track 1 – Internal Audit

Mike Blakley, EZ-R Stats, LLC

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Objectives

1. Open source audit software – advantages / disadvantages

2. Audit software functionality of four major software packages

3. SQLite - application in various audit areas

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Objectives (cont’d)

• RAT-STATS - random sampling

• "R" system and its applications

• Cephes - basic functionality• Excel open source

software

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What is open source software? Source and binaries Languages Maintained by various persons Support / development -

volunteer basis Licensing - GPL, Public Domain,

etc.

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Advantages

1.Transparency2.Portability3.Lower cost

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Disadvantages

1. May require additional expertise

2. No slick front-end3. Plain packaging4. Support?

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Objectives

• Open source software -, advantages/disadvantages

Next topic: Four Major Packages

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Four major packages

• SQLite - database system• RAT-STATS - random sampling

system• R - library of statistical and plotting

routines• Cephes - mathematical and

statistical routines

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How Excel fits in

Audit tests on data in SQLite RAT-STATS - Excel

workbooks R has an Excel interface Run R scripts from Excel Cephes routines can be called

directly from Excel

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Recap of objectives

1. Open source software -, advantages/disadvantages

2. Four major software packages

Next topic is SQLite

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Overview

Developed in North Carolina! Largest number of database installations Public domain Standards compliant - SQL92 Very fast, written in “C” Zero installation

SQLite

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Example Audit uses

Sample planning Population statistics Identification of duplicates Match/merge Benford's Law Same, same, different Data stratification

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Advantages

Cost effective - fast database No license cost Simple to install Portable Standards compliant

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Disadvantages

Doesn't have every "bell and whistle"

Doesn't support every functionality

Basic system is “command line”

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SQLite Front Ends

ExcelSQLite browserOthers

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Specific audit applications

White paper available which explains many of the topics

Article in EDPACS, June 2008

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How to load data

Load using manual "scripts"

Load with free software

Import from Excel, Access, text files

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Target audience

AuditorsAudit ManagersBusiness AnalystsResearchersAnyone working with large data

volumes

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Screen Shots of SQLiteBrowser

1. Identification of duplicates

2. “Drill down” (using where clause)

3. Population subtotals and basic statistics

Public domain SQLite Database Browser

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Identification of Duplicates

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“Drill down” with where clause

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Population Statistics

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More information

SQLite site – http://sqlite.org

EZ-R Stats – http://ezrstats.com

SQLite browserhttp://sqlitebrowser.sourceforge.net/

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Wrap up Objective 3

What is SQLite? What audit areas can it be used? Data import

Next topic is Random Sampling

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RAT-STATS

Federal HHS in San Francisco, with assistance from several universities

Comprehensive Widely used in the health care industry Has withstood court challenges Are others, such as EZ-Quant (DOD)

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Major functional areas

1. Random number generation 2. Sample size determination 3. Attribute sampling 4. Variable sampling 5. Types of sampling

stratified unrestricted other

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How it works

Windows based (no Mac or Linux)

Simple to install Some documentation Works with Excel, Access

and text files

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Advantages

Comprehensive Withstood court challenges

as to validity Does all the computations Provides basic documentation

for work-papers Easy to install No license cost

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Disadvantages

Only certain confidence levels

Little transparency (FOIA) Support?

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Screen Shots

1. Random numbers2. Variable sampling

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Random numbers

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Variable sampling

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Wrap up Objective 4

What is RAT-STATS? Audit Areas

Random numbers Attribute sampling Variable sampling

Next topic is R

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World-wide development Statisticians College Professors

Library of statistical routines

Extensive plotting and charting capabilities

R is `GNU S’

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Major functional areas

1. Statistical computing 2. Graphics 3. Linear regression and

modeling 4. Statistical tests 5. Time series analysis 6. Data Classification

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How it works

Windows, Mac or Linux Relatively simple to install Extensive documentation Works with

Excel, Access text files many databases (including SQLite)

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Audit areas

Excellent capabilities for regression

Does step-wise regression (quite costly in other packages)

Sample planning Population statistics Charting/plotting as part of audit

planning

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Advantages

Comprehensive Good charting and

plotting capabilities Extensive statistical

functions Easy to install No license cost

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Disadvantages

User interfaceFairly steep

learning curveSupport?

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Screen Shots

1. Stepwise regression2. Plot - confidence/precision

intervals

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Stepwise regression

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Confidence Intervals

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Wrap up Objective 5

What is R? What audit areas can it be used to

address

Next topic is Cephes

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Cephes

Federal Department of Energy at Oak Ridge Laboratories

Library of mathematical and statistical routines (400+)

Adaptation of earlier versions in FORTRAN

Translated into C and Visual Basic

Highly reliable and extensively tested

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Major functional areas

1. Statistical computing

2. Mathematical computations

3. Probability

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How it works

Windows onlyRelatively simple to installExtensive documentationWorks as stand alone

routines or can be called from Excel

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Audit areas

Sample calculationsRandom number generationSample planningPopulation statistics

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Advantages

Reliable, extensive testing (IEEE)

Extensive statistical functions

Easy to installNo license cost

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Disadvantages

Support ?

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Example of probability functions Chi square distribution Complemented Chi square Inverse Chi square Normal distribution Inverse normal distribution Poisson distribution Inverse Poisson distribution Student's t distribution

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Example of Arithmetic and Algebraic functions Square root Long integer square root Cube root Evaluate polynomial Round to nearest integer value Truncate upward to integer Truncate downward to integer Absolute value

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Screen shots

1. Calculations with Excel VBA

2. Plot with confidence/precision intervals

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Calculations with Excel VBA

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Plot with confidence/precision intervals

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Wrap up Objective 6

What is Cephes? Useful for evaluation of random

samples, linear regression, etc.

Next topic is Excel as a platform

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Excel as an audit platform

Extensive capabilities, generally underused

Can be integrated with open source software

ActiveX Data Objects (ADO) Visual Basic for Applications (VBA) Calling external routines COM Servers

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ActiveX Data Objects

AuditNet

"End User Database Access Using Excel"

http://www.auditnet.org/articles/MB200803.htm

Example is use of SQLite

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Visual Basic for Applications

Very extensive capabilitiesEntire applications written in

VBAPowerful audit toolExample library

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Calling external routines

Can be used to build scripts Then executed by external

applications Excel - Shell command Provides ability to perform a variety

of tasks, such as charting and plotting using R running database queries

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COM Servers

Makes routines directly accessible to Excel using "CreateObject"

Cephes library is an example Many free com servers available Simplifies Excel by

"compartmentalizing" program logic

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Advantages

Already widely usedMany "built-in" capabilitiesMacro language VBA widely

understood

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Disadvantages

Learning curve

Support?

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Wrap up Objective 7

Excel as an audit platformUses include:

database queries, running R, complex stat calculations

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Questions?

Contact info:919-715-4791

Mike.Blakley@ezrstats.comView this presentation