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91影视


Factors that impact an auditor鈥檚 judgment. A study was conducted to determine the effects of linguistic delivery style and client credibility on auditors鈥 judgments (Advances in Accounting and Behavioural Research, 2004). Two hundred auditors from Big 5 accounting firms were each asked to perform an analytical review of a fictitious client鈥檚 financial statement. The researchers gave the auditors different information on the client鈥檚 credibility and linguistic delivery style of the client鈥檚 explanation. Each auditor then provided an assessment of the likelihood that the client-provided explanation accounted for the fluctuation in the financial statement. The three variables of interest鈥攃redibility (x1), linguistic delivery style (x2) , and likelihood (y) 鈥攚ere all measured on a numerical scale. Regression analysis was used to fit the interaction model,y=0+1x1+2x2+3x1x2+ . The results are summarized in the table at the bottom of page.

a) Interpret the phrase client credibility and linguistic delivery style interact in the words of the problem.

b) Give the null and alternative hypotheses for testing the overall adequacy of the model.

c) Conduct the test, part b, using the information in the table.

d) Give the null and alternative hypotheses for testing whether client credibility and linguistic delivery style interact.

e) Conduct the test, part d, using the information in the table.

f) The researchers estimated the slope of the likelihood鈥搇inguistic delivery style line at a low level of client credibility 1x1 = 222. Obtain this estimate and interpret it in the words of the problem.

g) The researchers also estimated the slope of the likelihood鈥搇inguistic delivery style line at a high level of client credibility 1x1 = 462. Obtain this estimate and interpret it in the words of the problem.

Short Answer

Expert verified

a) In the model, variables x1 and x2 are said to have some interaction amongst them indicating that there is a relationship between the two variables which means that the client鈥檚 credibility might be related to the linguistic delivery style the client had chosen. This dependency is expressed using the term 鈥榵1 x2 鈥.

b) H0:1=2=3=0 while Ha At least one of the parameters 1,2,3is non zero

c) At 95% significance level, it can be concluded that 1230

d) The null hypothesis and alternate hypothesis are H0:3=0 while Ha:30

e) At 95% significance level localid="1651179551636" 30 . Hence it can be concluded with enough evidence that x1 and x2do not interact in the model.

f) The slope of the line relating y to x2 when x1 = 22 is 1.47. The positive value denotes a positive relationship amongst the two variables and a low value means that the relation is not so strong.

g) The slope of the line relating y to x2 when x1 = 46 is 2.334. The positive value denotes a positive relationship amongst the two variables and a low value means that the relation is not so strong.

Step by step solution

01

Interaction amongst independent variables

The model is trying to explain the likelihood that the client-provided explanation accounted for the fluctuation in the financial statement where the independent variables are client credibility (x1) and linguistic delivery style (x2) . In the model, variables x1 and x2 are said to have some interaction amongst them indicating that there is a relationship between the two variables which means that the client鈥檚 credibility might be related to the linguistic delivery style the client had chosen. This dependency is expressed using the term 鈥榵1 x2 鈥.

02

Overall goodness of the fit of the model

To check the overall goodness of the fit, the null hypothesis is whether the model parameters are explaining the model where the beta values are zero and the alternate hypothesis is whether the beta values are non-zero.

Mathematically,

H0:1=2=3=0

Ha At least one of the parameters 1,2,3is non zero

03

Goodness of the model fit

H0:1=2=3=0

At least one of the parameters1,2,3is non zero

Here, F test statistic =SSEn-k+1=55.35

H0is rejected if P - value < 0.01. For , since P - value < 0.0005

Sufficient evidence to reject H0 at 95% confidence interval.

Therefore,1230

04

Significance of  β3

To test whether client credibility and linguistic delivery style interact, the value of 3 is tested

Mathematically,

localid="1651179732490" H0:3=0Ha:30

05

Significance ofβ3

H0:3=0Ha:30

Here, t-test statistic 3s3=0.0360.009

Value of t0.05,199 is 1.645

is rejected if t static>t0.05,199 . For=0.05, since t > t0.05,199

Sufficient evidence to reject H0 at 95% confidence interval.

Therefore,30. Hence it can be concluded with enough evidence thatx1and x2do not interact in the model.

06

Interpretation of slope

Given, Ey=15.865+0.037x1-0.0678x2+0.036x1x2for x1=22

localid="1651181050324" Ey=15.865+0.03722-0.0678x2+0.03622x2Ey=16.679+1.47x2

The slope of the line relating y tox2whenx1= 22 is 1.47. The positive value denotes a positive relationship amongst the two variables and a low value means that the relation is not so strong.

07

Interpretation of slope

Given, Ey=15.865+0.037x1-0.0678x2+0.036x1x2 for x1=46

Ey=15.865+0.03746-0.0678x2+0.03646x2Ey=17.567+2.334x2

The slope of the line relating y tox2whenx1= 46 is 2.334. The positive value denotes a positive relationship amongst the two variables and a low value means that the relation is not so strong.

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