Which statement is correct?

Question

Quizplus · Accepted Answer

Lower levels of excessive accruals indicate that a company's financial statements are more closely in line with its actual financial position and performance, resulting in higher-quality earnings. B is incorrect because excessive accruals may not always be directly observable in financial reporting, as they can be hidden through various accounting practices. C is incorrect because it can be difficult to determine the exact contractual incentives behind excessive accruals. D is incorrect because excessive accruals can actually decrease the comparability of financial reporting as they can distort a company's financial performance.

Which Statement Is Correct