Chapter 18: Evaluating Reporting Quality—Overview

In this section

• Defining High-Quality vs. Low-Quality Reporting
  Discover how high-quality reporting fosters market trust and valuation accuracy while low-quality practices can lead to increased risks, restatements, and regulatory fallout.
• Aggressive vs. Conservative Accounting Policies
  Explore the continuum of accounting policy decisions—ranging from aggressive to conservative—and understand how these choices impact earnings, asset valuation, and financial statement quality.
• Key Warning Signs and Discretionary Accruals
  Learn how discretionary accruals can be used to manipulate earnings, spot early warning signs, and evaluate the true quality of financial statements as part of your CFA Level II FSA study.
• Vignette: Identifying Potential Manipulation
  Explore a scenario-based exercise focused on detecting red flags in financial reports, including changes in revenue recognition, intangible asset recognition, and net income vs. CFO discrepancies.