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Question 40: Pre Test CIA 2

Question 40:

Regression analysis assumes that there is a linear relationship between one dependent variable and one or more independent variables. A bell curve would not be conducive to regression analysis, nor would a situation with more than two independent variables changing the dependent variable. Also, there is an assumption that the relationship between dependent and independent variables will hold in the future rather than fluctuating.

For more information, refer to Section III, Chapter 2, Topic D

During a review of a division’s operations, an auditor notes that:

  • Sales revenue has remained the same.
  • The customer base is unchanged.
  • Inventory has increased significantly.
  • The gross margin has increased significantly.

Which of the following statements, if true, could explain the change noted in gross margin?









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