Happy, the external auditor assigned to audit Winter Corporation, plans to perform analytical procedures to assess risk. One of the instructions by the audit manager was to perform regression analysis when applicable. Being new to this concept, Happy asked the audit manager for an example of regression analysis. What example should the audit manager provide?

		Regression analysis can be done by grouping data into various dimensions. After sorting data into these dimensions, you can analyze the consistency of relationships between data as compared to your expectation.
		One example of regression analysis is looking at sales and selling expenses. Any movement in sales would most likely have a direct correlation with selling expenses.
		Regression analysis involves the comparison of an entity's financial ratios with the industry ratios. Significant differences might indicate risks of misstatement in the company being audited.
		To perform regression analysis, you can select a specific account and analyze its trend. Taking sales as an example, you can predict future amounts based on past performance.