Question

Econ 235 HW # 2 student name & number: _____________________
Please read the following case study and answer the questions below.

Concerned about her current customer base, manager Andersen started to think of factors that might affect the attractiveness of an auditing firm. Of course, the provided service quality and the fees charged by the auditor seem two important factors. Next, she decides that reputation of the auditing firm also needs to be included in the framework as an independent variable. As illustrated by the dramatic effects of recent auditing scandals, reputation seems especially important for large auditors (i.e., auditing firms that are large in size). Finally, manager Andersen thinks that also the proximity of the auditing firm to the customer is another variable to be included as an independent variable. Proximity very likely affects the possibility for the client to personally meet with the auditors on a regular basis and she knows from her own contact with customers that they perceive personal interactions as quite important.

A. Write two objectives for this study
B. What is the dependent variable?
C. What are the independent variables?
D. What is the moderating variable? And mediating variable if available?
E. Develop a theoretical framework (sketch a diagram to show clearly the relationship between variables).



F. Formulate two sets of hypotheses in words (one directional and one non-directional).

1. Directional hypothesis (H0 & Ha)
2. Non-directional hypothesis(H0 & Ha)

Answer 1

Solution:

Based on the case study given, we can set two objectives as;

A. 1) To find out how various factors could affect the customer base in an auditing firm.

     2) To figure out the changes needed to increase the business in the auditing firm.

B. Current customer base/ Attractiveness of an auditing firm is the dependent variable in the case study.

C. The independent variables are i) service quality of the firm, ii) Fees charged by the firm, iii) Reputation of the firm, iv) proximity of the firm.

D. Personal interactions of auditor and customer stands as the moderating variable that influence the proximity of the firm.

F. Two hypothesis can be;

   1.Ho: An increase in the fees charged by the firm does not reduce the customer base.

     Ha: An increase in the fees charged by the firm reduces the customer base.

2.Ho: Proximity of the firm have no influence on its customer base.

    Ha: Proximity of the firm have a influence on its customer base.

E. (Solution in the picture)