Trine U Relationship between Audit Delay and Companys Fiscal Year Case Study
Question Description
Astudy investigated the relationship between audit delay (Delay), thelength of time from a company’s fiscal year-end to the date of theauditor’s report, and variables that describe the client and theauditor. The independent variables are as follows.
Industry | A dummy variable coded 1 if the firm was an industrial companyor 0 if the firm was a bank, savings and loan, or insurance company. |
Public | A dummy variable coded 1 if the company was traded on an organized exchange or over the counter; otherwise coded 0. |
Quality | A measure of overall quality of internal controls, as judged bythe auditor, on a 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 1indicates “all work performed subsequent to year-end” and 4 indicates”most work performed prior to year-end.” |
A sample of 40 companies provided the following data.
Delay | Industry | Public | Quality | Finished |
62 | 0 | 0 | 3 | 1 |
45 | 0 | 1 | 3 | 3 |
54 | 0 | 0 | 2 | 2 |
71 | 0 | 1 | 1 | 2 |
91 | 0 | 0 | 1 | 1 |
62 | 0 | 0 | 4 | 4 |
61 | 0 | 0 | 3 | 2 |
69 | 0 | 1 | 5 | 2 |
80 | 0 | 0 | 1 | 1 |
52 | 0 | 0 | 5 | 3 |
47 | 0 | 0 | 3 | 2 |
65 | 0 | 1 | 2 | 3 |
60 | 0 | 0 | 1 | 3 |
81 | 1 | 0 | 1 | 2 |
73 | 1 | 0 | 2 | 2 |
89 | 1 | 0 | 2 | 1 |
71 | 1 | 0 | 5 | 4 |
76 | 1 | 0 | 2 | 2 |
68 | 1 | 0 | 1 | 2 |
68 | 1 | 0 | 5 | 2 |
86 | 1 | 0 | 2 | 2 |
76 | 1 | 1 | 3 | 1 |
67 | 1 | 0 | 2 | 3 |
57 | 1 | 0 | 4 | 2 |
55 | 1 | 1 | 3 | 2 |
54 | 1 | 0 | 5 | 2 |
69 | 1 | 0 | 3 | 3 |
82 | 1 | 0 | 5 | 1 |
94 | 1 | 0 | 1 | 1 |
74 | 1 | 1 | 5 | 2 |
75 | 1 | 1 | 4 | 3 |
69 | 1 | 0 | 2 | 2 |
71 | 1 | 0 | 4 | 4 |
79 | 1 | 0 | 5 | 2 |
80 | 1 | 0 | 1 | 4 |
91 | 1 | 0 | 4 | 1 |
92 | 1 | 0 | 1 | 4 |
46 | 1 | 1 | 4 | 3 |
72 | 1 | 0 | 5 | 2 |
85 | 1 | 0 | 5 | 1 |
Enter negative values as negative, if necessary.
- Develop an estimated regression equation that can be used to predictDelay by using Industry and Quality (to 2 decimals, if necessary).
Delay =
+ Industry + Quality - A plot of the residuals as a function of the order in which the data are presented is shown below.
Does this suggest any autocorrelation present in the data?
dL =
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