Unused inventory is not counted or verified as stock and is not properly packed or secured. What can the audit findings be?
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Auditors are often required to compare the audited (or current) value of an inventory item with the book (or listed) value. If a company is keeping its inventory and books up to date, there should be a strong linear relationship between the audited and book values. A company sampled ten inventory items and obtained the audited and book values given in the accompanying table. Fit the model $Y=\beta_{0}+\beta_{1} x+\varepsilon$ to these data.$$\begin{array}{ccc}\hline \text { Item } & \begin{array}{c} \text { Audit Value } \\\left(y_{i}\right)\end{array} & \begin{array}{c}\text { Book Value } \\\left(x_{i}\right)\end{array} \\\hline 1 & 9 & 10 \\ 2 & 14 & 12 \\3 & 7 & 9 \\4 & 29 & 27 \\5 & 45 & 47 \\6 & 109 & 112 \\7 & 40 & 36 \\8 & 238 & 241 \\9 & 60 & 59 \end{array}$$ a. What is your estimate for the expected change in audited value for a one-unit change in book value? b. If the book value is $x=100,$ what would you use to estimate the audited value?
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