Audit Software: Efficient and Effective Use

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Audit Software: Efficient and Effective Use

  1. 1. Open Source Audit Software <ul><li>IIA District Conference </li></ul><ul><li>Durham, NC </li></ul><ul><li>2/27/2009 </li></ul><ul><li>Track 1 – Internal Audit </li></ul><ul><li>Mike Blakley, EZ-R Stats, LLC </li></ul>
  2. 2. Objectives <ul><li>Open source audit software – advantages / disadvantages </li></ul><ul><li>Audit software functionality of four major software packages </li></ul><ul><li>SQLite - application in various audit areas </li></ul>
  3. 3. Objectives (cont’d) <ul><li>RAT-STATS - random sampling </li></ul><ul><li>&quot;R&quot; system and its applications </li></ul><ul><li>Cephes - basic functionality </li></ul><ul><li>Excel   open source software </li></ul>
  4. 4. What is open source software? <ul><li>Source and binaries </li></ul><ul><li>Languages </li></ul><ul><li>Maintained by various persons </li></ul><ul><li>Support / development - volunteer basis </li></ul><ul><li>Licensing - GPL, Public Domain, etc. </li></ul>
  5. 5. Advantages <ul><li>Transparency </li></ul><ul><li>Portability </li></ul><ul><li>Lower cost </li></ul>
  6. 6. Disadvantages <ul><li>May require additional expertise </li></ul><ul><li>No slick front-end </li></ul><ul><li>Plain packaging </li></ul><ul><li>Support? </li></ul>
  7. 7. Objectives <ul><li>Open source software -, advantages/disadvantages </li></ul><ul><li>Next topic: Four Major Packages </li></ul>
  8. 8. Four major packages <ul><li>SQLite - database system </li></ul><ul><li>RAT-STATS - random sampling system </li></ul><ul><li>R - library of statistical and plotting routines </li></ul><ul><li>Cephes - mathematical and statistical routines </li></ul>
  9. 9. How Excel fits in <ul><li>Audit tests on data in SQLite </li></ul><ul><li>RAT-STATS  -  Excel workbooks </li></ul><ul><li>R has an Excel interface </li></ul><ul><li>Run R scripts from Excel </li></ul><ul><li>Cephes routines can be called directly from Excel </li></ul>
  10. 10. Recap of objectives <ul><li>1. Open source software -, advantages/disadvantages </li></ul><ul><li>2. Four major software packages </li></ul><ul><li>Next topic is SQLite </li></ul>
  11. 11. Overview <ul><li>Developed in North Carolina! </li></ul><ul><li>Largest number of database installations </li></ul><ul><li>Public domain </li></ul><ul><li>Standards compliant - SQL92 </li></ul><ul><li>Very fast, written in “C” </li></ul><ul><li>Zero installation </li></ul>SQLite
  12. 12. Example Audit uses <ul><li>Sample planning </li></ul><ul><li>Population statistics </li></ul><ul><li>Identification of duplicates </li></ul><ul><li>Match/merge </li></ul><ul><li>Benford's Law </li></ul><ul><li>Same, same, different </li></ul><ul><li>Data stratification </li></ul>
  13. 13. Advantages <ul><li>Cost effective - fast database </li></ul><ul><li>No license cost </li></ul><ul><li>Simple to install </li></ul><ul><li>Portable </li></ul><ul><li>Standards compliant </li></ul>
  14. 14. Disadvantages <ul><li>Doesn't have every &quot;bell and whistle&quot; </li></ul><ul><li>Doesn't support every functionality </li></ul><ul><li>Basic system is “command line” </li></ul>
  15. 15. SQLite Front Ends <ul><li>Excel </li></ul><ul><li>SQLite browser </li></ul><ul><li>Others </li></ul>
  16. 16. Specific audit applications <ul><li>White paper available which explains many of the topics </li></ul><ul><li>Article in EDPACS, June 2008 </li></ul>
  17. 17. How to load data <ul><li>Load using manual &quot;scripts&quot; </li></ul><ul><li>Load with free software </li></ul><ul><li>Import from Excel, Access, text files </li></ul>
  18. 18. Target audience <ul><li>Auditors </li></ul><ul><li>Audit Managers </li></ul><ul><li>Business Analysts </li></ul><ul><li>Researchers </li></ul><ul><li>Anyone working with large data volumes </li></ul>
  19. 19. Screen Shots of SQLiteBrowser <ul><li>1. Identification of duplicates </li></ul><ul><li>2. “Drill down” (using where clause) </li></ul><ul><li>Population subtotals and basic statistics </li></ul><ul><li>Public domain </li></ul>SQLite Database Browser
  20. 20. Identification of Duplicates
  21. 21. “ Drill down” with where clause
  22. 22. Population Statistics
  23. 23. More information <ul><li>SQLite site – http://sqlite.org </li></ul><ul><li>EZ-R Stats – http://ezrstats.com </li></ul><ul><li>SQLite browser </li></ul><ul><li>http://sqlitebrowser.sourceforge.net/ </li></ul>
  24. 24. Wrap up Objective 3 <ul><li>What is SQLite? </li></ul><ul><li>What audit areas can it be used? </li></ul><ul><li>Data import </li></ul><ul><li>Next topic is Random Sampling </li></ul>
  25. 25. RAT-STATS <ul><li>Federal HHS in San Francisco, with assistance from several universities </li></ul><ul><li>Comprehensive </li></ul><ul><li>Widely used in the health care industry </li></ul><ul><li>Has withstood court challenges </li></ul><ul><li>Are others, such as EZ-Quant (DOD) </li></ul>
  26. 26. Major functional areas <ul><li>1. Random number generation </li></ul><ul><li>2. Sample size determination </li></ul><ul><li>3. Attribute sampling </li></ul><ul><li>4. Variable sampling </li></ul><ul><li>5. Types of sampling </li></ul><ul><ul><li>stratified </li></ul></ul><ul><ul><li>unrestricted </li></ul></ul><ul><ul><li>other </li></ul></ul>
  27. 27. How it works <ul><li>Windows based (no Mac or Linux) </li></ul><ul><li>Simple to install </li></ul><ul><li>Some documentation </li></ul><ul><li>Works with Excel, Access and text files </li></ul>
  28. 28. Advantages <ul><li>Comprehensive </li></ul><ul><li>Withstood court challenges as to validity </li></ul><ul><li>Does all the computations </li></ul><ul><li>Provides basic documentation for work-papers </li></ul><ul><li>Easy to install </li></ul><ul><li>No license cost </li></ul>
  29. 29. Disadvantages <ul><li>Only certain confidence levels </li></ul><ul><li>Little transparency (FOIA) </li></ul><ul><li>Support? </li></ul>
  30. 30. Screen Shots <ul><li>Random numbers </li></ul><ul><li>Variable sampling </li></ul>
  31. 31. Random numbers
  32. 32. Variable sampling
  33. 33. Wrap up Objective 4 <ul><li>What is RAT-STATS? </li></ul><ul><li>Audit Areas </li></ul><ul><ul><li>Random numbers </li></ul></ul><ul><ul><li>Attribute sampling </li></ul></ul><ul><ul><li>Variable sampling </li></ul></ul><ul><li>Next topic is R </li></ul>
  34. 34. <ul><li>World-wide development </li></ul><ul><ul><li>Statisticians </li></ul></ul><ul><ul><li>College Professors </li></ul></ul><ul><li>Library of statistical routines </li></ul><ul><li>Extensive plotting and charting capabilities </li></ul><ul><li>R is `GNU S’ </li></ul>
  35. 35. Major functional areas <ul><li>1. Statistical computing </li></ul><ul><li>2. Graphics </li></ul><ul><li>3. Linear regression and modeling </li></ul><ul><li>4. Statistical tests </li></ul><ul><li>5. Time series analysis </li></ul><ul><li>6. Data Classification </li></ul>
  36. 36. How it works <ul><li>Windows, Mac or Linux </li></ul><ul><li>Relatively simple to install </li></ul><ul><li>Extensive documentation </li></ul><ul><li>Works with </li></ul><ul><ul><li>Excel, Access </li></ul></ul><ul><ul><li>text files </li></ul></ul><ul><ul><li>many databases (including SQLite) </li></ul></ul>
  37. 37. Audit areas <ul><li>Excellent capabilities for regression </li></ul><ul><li>Does step-wise regression (quite costly in other packages) </li></ul><ul><li>Sample planning </li></ul><ul><li>Population statistics </li></ul><ul><li>Charting/plotting as part of audit planning </li></ul>
  38. 38. Advantages <ul><li>Comprehensive </li></ul><ul><li>Good charting and plotting capabilities </li></ul><ul><li>Extensive statistical functions </li></ul><ul><li>Easy to install </li></ul><ul><li>No license cost </li></ul>
  39. 39. Disadvantages <ul><li>User interface </li></ul><ul><li>Fairly steep learning curve </li></ul><ul><li>Support? </li></ul>
  40. 40. Screen Shots <ul><li>Stepwise regression </li></ul><ul><li>Plot - confidence/precision intervals </li></ul>
  41. 41. Stepwise regression
  42. 42. Confidence Intervals
  43. 43. Wrap up Objective 5 <ul><li>What is R? </li></ul><ul><li>What audit areas can it be used to address </li></ul><ul><li>Next topic is Cephes </li></ul>
  44. 44. Cephes <ul><li>Federal Department of Energy at Oak Ridge Laboratories </li></ul><ul><li>Library of mathematical and statistical routines (400+) </li></ul><ul><li>Adaptation of earlier versions in FORTRAN </li></ul><ul><li>Translated into C and Visual Basic </li></ul><ul><li>Highly reliable and extensively tested </li></ul>
  45. 45. Major functional areas <ul><li>1. Statistical computing </li></ul><ul><li>2. Mathematical computations </li></ul><ul><li>3. Probability </li></ul>
  46. 46. How it works <ul><li>Windows only </li></ul><ul><li>Relatively simple to install </li></ul><ul><li>Extensive documentation </li></ul><ul><li>Works as stand alone routines or can be called from Excel </li></ul>
  47. 47. Audit areas <ul><li>Sample calculations </li></ul><ul><li>Random number generation </li></ul><ul><li>Sample planning </li></ul><ul><li>Population statistics </li></ul>
  48. 48. Advantages <ul><li>Reliable, extensive testing (IEEE) </li></ul><ul><li>Extensive statistical functions </li></ul><ul><li>Easy to install </li></ul><ul><li>No license cost </li></ul>
  49. 49. Disadvantages <ul><li>Support ? </li></ul>
  50. 50. Example of probability functions <ul><li>Chi square distribution </li></ul><ul><li>Complemented Chi square </li></ul><ul><li>Inverse Chi square </li></ul><ul><li>Normal distribution </li></ul><ul><li>Inverse normal distribution </li></ul><ul><li>Poisson distribution </li></ul><ul><li>Inverse Poisson distribution </li></ul><ul><li>Student's t distribution </li></ul>
  51. 51. Example of Arithmetic and Algebraic functions <ul><li>Square root </li></ul><ul><li>Long integer square root </li></ul><ul><li>Cube root </li></ul><ul><li>Evaluate polynomial </li></ul><ul><li>Round to nearest integer value </li></ul><ul><li>Truncate upward to integer </li></ul><ul><li>Truncate downward to integer </li></ul><ul><li>Absolute value </li></ul>
  52. 52. Screen shots <ul><li>1. Calculations with Excel VBA </li></ul><ul><li>2. Plot with confidence/precision intervals </li></ul>
  53. 53. Calculations with Excel VBA
  54. 54. Plot with confidence/precision intervals
  55. 55. Wrap up Objective 6 <ul><li>What is Cephes? </li></ul><ul><li>Useful for evaluation of random samples, linear regression, etc. </li></ul><ul><li>Next topic is Excel as a platform </li></ul>
  56. 56. Excel as an audit platform <ul><li>Extensive capabilities, generally underused </li></ul><ul><li>Can be integrated with open source software </li></ul><ul><li>ActiveX Data Objects ( ADO ) </li></ul><ul><li>Visual Basic for Applications ( VBA ) </li></ul><ul><li>Calling external routines </li></ul><ul><li>COM Servers </li></ul>
  57. 57. ActiveX Data Objects <ul><li>AuditNet </li></ul><ul><li>&quot;End User Database Access Using Excel&quot; </li></ul><ul><li>http://www.auditnet.org/articles/MB200803.htm </li></ul><ul><li>Example is use of SQLite </li></ul>
  58. 58. Visual Basic for Applications <ul><li>Very extensive capabilities </li></ul><ul><li>Entire applications written in VBA </li></ul><ul><li>Powerful audit tool </li></ul><ul><li>Example library </li></ul>
  59. 59. Calling external routines <ul><li>Can be used to build scripts </li></ul><ul><li>Then executed by external applications </li></ul><ul><li>Excel - Shell command </li></ul><ul><li>Provides ability to perform a variety of tasks, such as </li></ul><ul><ul><li>charting and plotting using R </li></ul></ul><ul><ul><li>running database queries </li></ul></ul>
  60. 60. COM Servers <ul><li>Makes routines directly accessible to Excel using &quot; CreateObject &quot; </li></ul><ul><li>Cephes library is an example </li></ul><ul><li>Many free com servers available </li></ul><ul><li>Simplifies Excel by &quot; compartmentalizing &quot; program logic </li></ul>
  61. 61. Advantages <ul><li>Already widely used </li></ul><ul><li>Many &quot;built-in&quot; capabilities </li></ul><ul><li>Macro language VBA widely understood </li></ul>
  62. 62. Disadvantages <ul><li>Learning curve </li></ul><ul><li>Support? </li></ul>
  63. 63. Wrap up Objective 7 <ul><li>Excel as an audit platform </li></ul><ul><li>Uses include: </li></ul><ul><ul><li>database queries, </li></ul></ul><ul><ul><li>running R, </li></ul></ul><ul><ul><li>complex stat calculations </li></ul></ul>
  64. 64. Questions? <ul><li>Contact info: </li></ul><ul><li>919-715-4791 </li></ul>[email_address] View this presentation

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