Essay on Business Economics

953 Words May 23rd, 2015 4 Pages
Economics Statistics

Auditors are those professionals who assure that all the financial statements are prepared according to the rules and regulations of Generally Accepted Accounting Principles (GAAP) or Financial Accounting Standard Board (FASB). There are two types of auditors which are internal auditors and external auditors. Importance and difficulty level of decisions significantly differs from one profession to another. Auditors decide on the basis of available data of organization including financial statements and notes to financial statements. There are certain decisions that use statistics to solve these decisions. These decisions are selection of sample financial data from the plenty of financial data. Correctly interpret
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b. Variable can be defined any symbol that can take any variable depends upon other independent variables. There are some variables in the data file which all play important role in determining net income. The purpose all organizations is to increase wealth through accurate decisions and legal way. Two variable which worth defining are growth and taxes of the organizations increase. Growth rate is variable which is determinant of net income and profits. Through growth rate auditors can compare the costs associated with the manufacturing of the product or services that organization manufacture. Every organization pays some portion of the profit to government which is called tax. Tax is variable and directly varies with amount of EBIT. Higher the EBIT, higher will be the tax amount and lower the EBIT lower will be the amount of the tax.

c. Without comparison it is quite difficult to know the trend or behavior of cost, revenue or profit. Their for auditors use growth variable to determine the behavior of cost, revenue or profit. Growth variable is calculated in the available data which is called trend analysis of financial statements. Auditors use growth variable to identify the performance of the organization regarding the management of financial resources. Growth can be calculated through finding the difference between current and base year and then divide answer by base value.

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