External auditors are hired to review and analyze the financial and other records of an organization and to attest to the integrity of the organization's financial statements. In recent years, the fees charged by auditors have come under increasing scrutiny. S.

Butterworth and K. A. Houghton, two University of Melbourne (Australia) researchers, investigated the effects of several variables on the fee charged by auditors. The variables are listed at the bottom of the page.

The multiple regression model E(y) = P,, + P,x, +

P2x2 + P3x3 + + P7x7 was fit to data collected for n = 268 companies. The results are summarized in the table on page 587.

a. Write the least squares prediction equation.

b. Assess the overall fit of the model.

c. Interpret the cstirnate of P,.

d. The researchers hypothesized the direction of the effect of each independent variable on audit fees.

These hypotheses are given in the "Expccted Sign

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of p" column in the table on p. 587. (For example, if the expected sign is negative, the alternative hypothesis is Ha: P, < 0.) Interpret the results of the hypothesis test for P4. Use a = .05.

e. The main objective of the analysis was to determine whether new auditors charge less than incumbent auditors in a given year. If this hypothesis is true, then the true value of p, is negative. Is there evidence to support this hypothesis? Explain.