Financial Reporting Quality

Quiz Summary

0 of 6 Questions completed

Questions:

You have already completed the quiz before. Hence you can not start it again.

Quiz is loading…

You must sign in or sign up to start the quiz.

You must first complete the following:

Results

Quiz complete. Results are being recorded.

Results

0 of 6 Questions answered correctly

Your time:

You have reached 0 of 0 point(s), (0)

Average score
Your score

Current
Review / Skip
Answered
Correct
Incorrect

Question 1 of 6

1. Question
An analyst evaluated 3 sets of financial reports. Rank them from the highest to the lowest quality, based on the quality spectrum.
- Set A adhered to accounting principles, but was found to have some evidence of earnings management. Earnings are evaluated to be of high quality.
- Set C adhered to accounting principles, and no evidence of earnings management or accounting bias was found. However, earnings are of poor quality.
- Set B did not fully adhere to the relevant accounting principles, but the accounting was found to be factually correct. No evidence of earnings management or accounting bias.
View Answers:
Correct

Incorrect
Question 2 of 6

2. Question
Which of the following is least likely a motivation for under-report current earnings?
- To reduce the amount of income tax the company needs to pay.
- To relieve some pressure to keep up with earnings outperformance in future periods.
- To avoid violating debt covenants.
Correct

Incorrect
Question 3 of 6

3. Question
Which of the following is least likely a requirement by a local regulatory authority (e.g. SEC) on a public-listed firm?
- To publish periodic financial statements and disclosures.
- An independent audit of the financial reports.
- A signed statement of compliance to debt covenants.
Correct

Incorrect
Question 4 of 6

4. Question
Which of the following is least likely a sign of earnings manipulation?
- A one-time, extraordinary sale reported as revenue.
- The carrying value of a PP&E asset is $500,000 on the balance sheet, but the fair value of the asset is estimated to be $700,000.
- A firm has recently capitalised $300,000 of R&D cost. This cost is typically not capitalised by peer companies in the same industry.
Correct

Incorrect
Question 5 of 6

5. Question
A corrupt manager wishes to increase the reported earnings of his company for the current period. The firm has recently made a purchase of a costly machine. Which of the following is least likely to help him achieve his purpose?
- Use the double declining method of to depreciate the asset.
- Declare a longer useful life of the asset than it usually can last.
- Declare a higher salvage value of the asset than what it usually can be salvaged for.
Correct

Incorrect
Question 6 of 6

6. Question
The management of a firm is concerned that earnings volatility is affecting the share price of the company, and wishes to smooth out the earnings. Which of the following is least likely to help the management achieve their purpose?
- Adjusting the bad debt reserve
- Adjusting the accrued liabilities
- Switching the inventory cost flow method from LIFO to FIFO
Correct

Incorrect

Financial Reporting Quality

Financial Reporting Quality

Quiz Summary

Information

Results

Results

Categories

1. Question

2. Question

3. Question

4. Question

5. Question

6. Question