1 Open Source Audit Software IIA District Conference Durham, NC 2/27/2009 Track 1 – Internal Audit Mike Blakley, EZ-R Stats, LLC

2 Objectives 1. Open source audit software – advantages / disadvantages 2. Audit software functionality of four major software packages 3. SQLite - application in various audit areas

3 Objectives (cont’d) 4. RAT-STATS - random sampling 5. "R" system and its applications 6. Cephes - basic functionality 7. Excel   open source software

4 What is open source software? Source and binaries Languages Maintained by various persons Support / development - volunteer basis Licensing - GPL, Public Domain, etc.

5 Advantages 1. Transparency 2. Portability 3. Lower cost

6 Disadvantages 1. May require additional expertise 2. No slick front-end 3. Plain packaging 4. Support?

7 Objectives 1. Open source software -, advantages/disadvantages Next topic: Four Major Packages

8 Four major packages 1. SQLite - database system 2. RAT-STATS - random sampling system 3. R - library of statistical and plotting routines 4. Cephes - mathematical and statistical routines

9 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

10 Recap of objectives 1. Open source software -, advantages/disadvantages 2. Four major software packages Next topic is SQLite

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

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

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

14 Disadvantages Doesn't have every "bell and whistle" Doesn't support every functionality Basic system is “command line”

15 SQLite Front Ends Excel SQLite browser Others

16 Specific audit applications White paper available which explains many of the topics Article in EDPACS, June 2008

17 How to load data Load using manual "scripts" Load with free software Import from Excel, Access, text files

18 Target audience Auditors Audit Managers Business Analysts Researchers Anyone working with large data volumes

19 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

20 Identification of Duplicates

21 “Drill down” with where clause

22 Population Statistics

23 More information SQLite site – EZ-R Stats – SQLite browser

24 Wrap up Objective 3 What is SQLite? What audit areas can it be used? Data import Next topic is Random Sampling

25 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)

26 Major functional areas 1. Random number generation 2. Sample size determination 3. Attribute sampling 4. Variable sampling 5. Types of sampling stratified unrestricted other

27 How it works Windows based (no Mac or Linux) Simple to install Some documentation Works with Excel, Access and text files

28 Advantages Comprehensive Withstood court challenges as to validity Does all the computations Provides basic documentation for work- papers Easy to install No license cost

29 Disadvantages Only certain confidence levels Little transparency (FOIA) Support?

30 Screen Shots 1. Random numbers 2. Variable sampling

31 Random numbers

32 Variable sampling

33 Wrap up Objective 4 What is RAT-STATS? Audit Areas Random numbers Attribute sampling Variable sampling Next topic is R

34 World-wide development Statisticians College Professors Library of statistical routines Extensive plotting and charting capabilities R is `GNU S’

35 Major functional areas 1. Statistical computing 2. Graphics 3. Linear regression and modeling 4. Statistical tests 5. Time series analysis 6. Data Classification

36 How it works Windows, Mac or Linux Relatively simple to install Extensive documentation Works with Excel, Access text files many databases (including SQLite)

37 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

38 Advantages Comprehensive Good charting and plotting capabilities Extensive statistical functions Easy to install No license cost

39 Disadvantages User interface Fairly steep learning curve Support?

40 Screen Shots 1. Stepwise regression 2. Plot - confidence/precision intervals

41 Stepwise regression

42 Confidence Intervals

43 Wrap up Objective 5 What is R? What audit areas can it be used to address Next topic is Cephes

44 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

45 Major functional areas 1. Statistical computing 2. Mathematical computations 3. Probability

46 How it works Windows only Relatively simple to install Extensive documentation Works as stand alone routines or can be called from Excel

47 Audit areas Sample calculations Random number generation Sample planning Population statistics

48 Advantages Reliable, extensive testing (IEEE) Extensive statistical functions Easy to install No license cost

49 Disadvantages Support ?

50 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

51 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

52 Screen shots 1. Calculations with Excel VBA 2. Plot with confidence/precision intervals

53 Calculations with Excel VBA

54 Plot with confidence/precision intervals

55 Wrap up Objective 6 What is Cephes? Useful for evaluation of random samples, linear regression, etc. Next topic is Excel as a platform

56 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

57 ActiveX Data Objects AuditNet "End User Database Access Using Excel" Example is use of SQLite

58 Visual Basic for Applications Very extensive capabilities Entire applications written in VBA Powerful audit tool Example library

59 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

60 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

61 Advantages Already widely used Many "built-in" capabilities Macro language VBA widely understood

62 Disadvantages Learning curve Support?

63 Wrap up Objective 7 Excel as an audit platform Uses include: database queries, running R, complex stat calculations

64 Questions? Contact info: View this presentation