ors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients' managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor positions regarding proposed changes in accounting standards that would decrease client firms’ reported earnings.     Large Firms Small Firms Total   In Favor 27       152       179        Opposed 29       154       183                 Total 56       306       362

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In a 1993 article in Accounting and Business Research, Meier, Alam, and Pearson studied auditor lobbying on several proposed U.S. accounting standards that affect banks and savings and loan associations. As part of this study, the authors investigated auditors’ positions regarding proposed changes in accounting standards that would increase client firms’ reported earnings. It was hypothesized that auditors would favor such proposed changes because their clients' managers would receive higher compensation (salary, bonuses, and so on) when client earnings were reported to be higher. Table (below) summarizes auditor positions regarding proposed changes in accounting standards that would decrease client firms’ reported earnings.

 

  Large
Firms
Small
Firms
Total
  In Favor 27       152       179     
  Opposed 29       154       183     
        
  Total 56       306       362     
        
 

 

 

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Determine whether the relationship between auditor position and the size of the client firm is the same for earnings-decreasing changes in accounting standards as it is for earnings-increasing changes in accounting standards. Use α = 0.05. (Round your expected frequencies to 2 decimal places. Round your answer to 3 decimal places.)

 

  χ2 = 
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