Which qualitative characteristic of financial information alleviates "moral hazard"?
A)Neutrality.
B)Predictive value.
C)Timeliness.
D)Comparability.

Question

Quizplus · Accepted Answer

Neutrality means the absence of bias, and a lack of bias can help alleviate moral hazard in financial information. Moral hazard occurs when people take risks because they do not bear the full consequences of their actions, often due to information asymmetry. Neutrality in financial information helps avoid providing misleading information that can encourage risky behaviors, thereby reducing moral hazard.

Which Qualitative Characteristic of Financial Information Alleviates "Moral Hazard