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.

Question

Quizplus · Accepted Answer

Earnings quality is generally reduced when managers have too much discretion and judgment in applying accounting standards, as this can lead to manipulation or biased reporting.

Which of the Following Statements About Earnings Quality Is False