Which of the Following Statements About Earnings Quality Is False

question 100

Multiple Choice

Which of the following statements about earnings quality is false?

• A) Earnings quality is enhanced when managers are afforded discretion and judgment in applying accounting standards.
• B) Permanent earnings result in higher earnings quality, while transitory earnings result in lower earnings quality.
• C) Earnings quality is of considerable interest not only to investors and creditors but also to auditors, regulators, and academics.
• D) Earnings quality captures the degree to which reported income provides financial statement users with useful information for predicting future firm performance.

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Definitions:

Deindividuation

A psychological state where an individual loses self-awareness and self-restraint, often occurring in group settings that promote anonymity.

Lowballing Strategy

A sales technique where an item is initially offered at a lower price than is actually intended to be charged, after which the price is increased.

Obligated To Reciprocate

A social norm suggesting that individuals should return a favor or service, contributing to the establishment of reciprocal social exchanges.

Obedience

The act of following orders or directives from an authority figure, even if they are against one's personal wishes.