94 p 0001 pyerr is also highly correlated with mi 15

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Unformatted text preview: les. The significant correlation between MI and RMM supports H1. The significant correlation between MI and PERSUASIVENESS, TIMING, and EXTENT support H2p, H2t, and H2e. Finally, as expected the negative correlation between MI and DIFF supports H3. While we note many significant correlations, all VIFs in our subsequent analyses are well below 10. Marquandt (1980) argues that a multicollinearity problem exists if VIF values exceed 10. Management Integrity and Auditor Effort Table 3 presents OLS regression results for Equations (1)–(4). In Equation (1), MI 0.357) is insignificant with RMM as a dependent variable. MI is highly ( 0.034, p significant if we exclude PYERR from the model. Table 2 shows that PYERR and RMM are very highly correlated (r 0.94, p 0.001). PYERR is also highly correlated with MI 15 Some concern was raised that this model needs to control for the tolerable error (or materiality threshold of the auditor). We do not think this is the case as the auditor collects all identified misstatements to consider the overall impact on the financial statements. Nonetheless, we included the tolerable error in our regression and it had no impact on our inferences. Auditing: A Journal of Practice & Theory, November 2005 60 Kizirian, Mayhew, and Sneathen TABLE 1 Descriptive Statistics (n 60) Mean MI RMM PERSUASIVENESS TIMING EXTENT DIFF REVENUE TOTALREVENUE TENURE PYERR PUBLIC INDUSTRY Standard Deviation Quartile #1 Median Quartile #3 1.40 1.50 1.62 79.67 0.07 0.31 17.92 441,124,554 6.85 0.25 0.90 0.63 0.74 0.89 0.32 13.94 0.04 0.46 1.95 1,186,191,750 4.30 0.44 0.30 0.49 1 1 1.40 70 0.03 0 16.31 12,167,500 4 0 1 0 2 1 1.54 80 0.05 0 17.81 54,557,000 6 0 1 1 2 2 1.93 90 0.08 1 18.99 177,326,538 8 1 1 1 MI is an auditor assessment of management’s integrity and commitment to full and fair disclosure of financial information measured on a three-level categorical scale where MI takes on a value of 2, 1, or 0, where 2 represents high levels of integrity. Risk of material misstatement (RMM) is a metric measured on a scale from 1 5 where 1 is low risk and 5 is high risk. PERSUASIVENESS is the average persuasiveness score given to audit proced...
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