A Useful Worksheet for Preparing Audit Applications of Regression Analysis.

Abstract This article focuses on illustrations of procedures which have been used to develop instructional material for applications of regression analysis for auditing classes. The misleading propensities of ratio analysis and the effectiveness of regression analysis have been demonstrated with the problem material. Thus the attention of student is captured. The procedures, which have been summarized, encourage almost immediate student involvement which is sustained because the problem data require no tedious calculations. The suggested method of data preparation avoids this calculation problem. The material is presented in three parts: first, the procedures which are used for the introduction of regression analysis; second, the worksheet used for developing problem data and eliminating the long, involved calculations; third, some suggestions are made for applications and for modifications. Regression analysis, however, indicates that either labor hours are excessive or that equivalent units are short. This point is underscored by having the students do the computations which have been structured so that they are not time consuming.