(Solution Download) A study investigated the relationship between audit delay (Delay), the length of time from a...


A study investigated the relationship between audit delay (Delay), the length of time froma company?s fiscal year-end to the date of the auditor?s report, and variables that describethe client and the auditor. Some of the independent variables that were included in thisstudy follow.Industry A dummy variable coded 1 if the firm was an industrial company or 0 if thefirm was a bank, savings and loan, or insurance company.Public A dummy variable coded 1 if the company was traded on an organizedexchange or over the counter; otherwise coded 0.Quality A measure of overall quality of internal controls, as judged by the auditor, ona five-point scale ranging from ?virtually none? (1) to ?excellent? (5).Finished A measure ranging from 1 to 4, as judged by the auditor, where 1 indicates?all work performed subsequent to year-end? and 4 indicates ?most workperformed prior to year-end.?A sample of 40 companies provided the following data.Delay Industry Public Quality Finished62 0 0 3 145 0 1 3 354 0 0 2 271 0 1 1 291 0 0 1 1Delay Industry Public Quality Finished62 0 0 4 461 0 0 3 269 0 1 5 280 0 0 1 152 0 0 5 347 0 0 3 265 0 1 2 360 0 0 1 381 1 0 1 273 1 0 2 289 1 0 2 171 1 0 5 476 1 0 2 268 1 0 1 268 1 0 5 286 1 0 2 276 1 1 3 167 1 0 2 357 1 0 4 255 1 1 3 254 1 0 5 269 1 0 3 382 1 0 5 194 1 0 1 174 1 1 5 275 1 1 4 369 1 0 2 271 1 0 4 479 1 0 5 280 1 0 1 491 1 0 4 192 1 0 1 446 1 1 4 372 1 0 5 285 1 0 5 1a. Develop the estimated regression equation using all of the independent variables.b. Did the estimated regression equation developed in part (a) provide a good fit? Explain.c. Develop a scatter diagram showing Delay as a function of Finished. What does thisscatter diagram indicate about the relationship between Delay and Finished?d. On the basis of your observations about the relationship between Delay and Finished,develop an alternative estimated regression equation to the one developed in (a) toexplain as much of the variability in Delay as possible.

 







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