If revenue is strongly seasonal, the auditor might decide to _______.
A)run a time-series regression that is based on the trend and seasonality in historical revenue figures
B)run a non-statistical regression that is based on the seasonality in historical revenue figures
C)run a time-series regression that is based on seasonality only
D)run a time-series regression that is based on the trend only

Question

Quizplus · Accepted Answer

Running a time-series regression that incorporates both trend and seasonality in historical revenue figures is the best choice. This will allow the auditor to account for any expected patterns in revenue due to the seasonality of the business, as well as any overall trends in revenue growth or decline. Running a regression based only on seasonality or trend alone would not capture the full picture of revenue fluctuations throughout the year.

If Revenue Is Strongly Seasonal, the Auditor Might Decide to _______