In a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients’ managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor and client positions (in favor or opposed) regarding proposed changes in accounting standards that would increase client firms’ reported earnings. Here the auditor and client positions are cross-classified versus the size of the client firm. (a) Auditor Positions Large Firms Small Firms Total In Favor 18 125 143 Opposed 20 14 34 Total 38 139 177 (b) Client Positions Large Firms Small Firms Total In Favor 21 111 132 Opposed 18 27 45 Total 39 138 177 Click here for the Excel Data File (a) Test to determine whether auditor positions regarding earnings-increasing changes in accounting standards depend on the size of the client firm. Use α = .05. (Round your expected frequencies to 2 decimal places. Round your answer to 3 decimal places.) (b) Test to determine whether client positions regarding earnings-increasing changes in accounting standards depend on the size of the client firm. Use α = .05. (Round your answer to 3 decimal places.)
In a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients’ managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor and client positions (in favor or opposed) regarding proposed changes in accounting standards that would increase client firms’ reported earnings. Here the auditor and client positions are cross-classified versus the size of the client firm.
(a) Auditor Positions
| Large Firms |
Small Firms |
Total | |
| In Favor | 18 | 125 | 143 |
| Opposed | 20 | 14 | 34 |
| Total | 38 | 139 | 177 |
(b) Client Positions
| Large Firms |
Small Firms |
Total | |
| In Favor | 21 | 111 | 132 |
| Opposed | 18 | 27 | 45 |
| Total | 39 | 138 | 177 |
Click here for the Excel Data File
(a) Test to determine whether auditor positions regarding earnings-increasing changes in accounting standards depend on the size of the client firm. Use α = .05. (Round your expected frequencies to 2 decimal places. Round your answer to 3 decimal places.)
(b) Test to determine whether client positions regarding earnings-increasing changes in accounting standards depend on the size of the client firm. Use α = .05. (Round your answer to 3 decimal places.)
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