Solution Found!
Auditors are often required to compare the audited (or
Chapter 11, Problem 4E(choose chapter or problem)
Auditors are often required to compare the audited (or current) value of an inventory item with the book (or listed) value. If a company is keeping its inventory and books up to date, there should be a strong linear relationship between the audited and book values.Acompany sampled ten inventory items and obtained the audited and book values given in the accompanying table. Fit the model \(Y=\beta_{0}+\beta_{1} x+\varepsilon\) to these data.
a What is your estimate for the expected change in audited value for a one-unit change in book value?
b If the book value is x = 100, what would you use to estimate the audited value?
Equation transcription:
Text transcription:
Y=\beta_{0}+\beta_{1} x+\varepsilon
Questions & Answers
QUESTION:
Auditors are often required to compare the audited (or current) value of an inventory item with the book (or listed) value. If a company is keeping its inventory and books up to date, there should be a strong linear relationship between the audited and book values.Acompany sampled ten inventory items and obtained the audited and book values given in the accompanying table. Fit the model \(Y=\beta_{0}+\beta_{1} x+\varepsilon\) to these data.
a What is your estimate for the expected change in audited value for a one-unit change in book value?
b If the book value is x = 100, what would you use to estimate the audited value?
Equation transcription:
Text transcription:
Y=\beta_{0}+\beta_{1} x+\varepsilon
ANSWER:Step 1 of 4
(a)
In this exercise we need to find the least-squares equation
where
where
and
and 