Current Attempt in Progress

During the audit of Lucky Company, the external auditor, Honest Auditors Inc. is deciding upon a procedure to help provide estimates and note actual items that may be outside of a certain range, which would then be classified as notable items and investigated further. The Audit Senior has determined that due to the seasonality of the client's business, the best procedure to use would be a regression analysis. Which of the following would provide the best rationale for this choice?

Regression analysis is useful as a statistical procedure for estimating the value of notable items in small populations and correcting actual values to match the regression equation prediction.

Because the data used in the regression analysis includes current unaudited data which allows for more accurate predictions and smaller prediction intervals.

Regression analysis represents a powerful predictive statistical tool which can assist the auditor in determining expected values, and then comparing actual values to predicted values to determine notable items to investigate.

Regression analysis works best when some of the historical data used for the analysis is missing as the auditor can substitute missing values with current audit values to ensure there are no notable items.