Asset Misappropriation - Essay Example

Asset Misappropriation Regression analysis is a useful method that is used for estimation. It involves the identification of correlation between variables, that is independent variables and dependent variables. In our case the regression analysis equation is y = a+bx. Regression analysis in this case is applied to assess the monthly operating expenses and it depends on the price, fixed costs and the volume of sales. The operating expenses =-$89,000+$0.49X, X is the volume of sales in dollars. As per the equation the companys monthly sales if its zero , then its operating expenses will be equal to $89,000.

This figure it is not realistic to me, because I believe the company should also be having at least some fixed expenses of zero sales. 92 percent is the coefficient of determination which is r squared, this show that the relationship between the independent and the dependent variables is too strong. But as I had said earlier this equation does not create sense to me at all, it is not too easy for me to believe that the relationship of determination should be so high kike this.Regression analysis is very crucial in evaluating the operating expenses hence company auditors may compared with the obtained data so that may see any similarities.

If there are any differences then there must existence of fraudlent actions in the company. In my judgment, the regression data it has been of no value in assessing the operating expenses of the company. On the other hand, it might be also an evidence of indication that there is something incorrect with the equation or the numbers the company has used this formula.References Andrew Gelman and Jenniffer Hill. Data analysis using regression and multilevel/ hierarchical models.2006.