Chapter 12: Financial Reporting Quality

In this section

• Quality of Financial Reports vs. Quality of Earnings/Cash Flows
  Quality of Financial Reports vs. Quality of Earnings/Cash Flows (CFA Level 1): Financial Reporting Quality: Key Elements, Characteristics of High-Quality Reporting, and Quality of Earnings: Why It Matters. Key definitions, formulas, and exam tips.
• Conservative vs. Aggressive Accounting Choices
  Conservative vs. Aggressive Accounting Choices (CFA Level 1): Defining Conservative and Aggressive Approaches, Typical Areas of Judgment, and Financial Statement Implications. Key definitions, formulas, and exam tips.
• Motivations and Conditions for Earnings Manipulation
  Motivations and Conditions for Earnings Manipulation (CFA Level 1): Key Motivations Behind Earnings Manipulation, Meeting or Beating Analyst Forecasts, and Achieving Management Bonus Thresholds. Key definitions, formulas, and exam tips.
• Identifying Warning Signs in Financial Statements
  Identifying Warning Signs in Financial Statements (CFA Level 1): Common Red Flags and Why They Matter, Receivables Growth vs. Sales Growth, and Inventory Surges and Potential Write-Downs. Key definitions, formulas, and exam tips.
• Earnings Persistence and Sustainable Earnings Measures
  Earnings Persistence and Sustainable Earnings Measures (CFA Level 1): Concept of Earnings Persistence, Sustainable Earnings vs. Transitory Items, and Identifying Highly Persistent Earnings. Key definitions, formulas, and exam tips.
• Fraud Triangle and Corporate Governance
  Fraud Triangle and Corporate Governance (CFA Level 1): Test Your Knowledge: Fraud Triangle and Corporate Governance and Which of the following examples best illustrates “Pressure”. Key definitions, formulas, and exam tips.
• Audit Committee Responsibilities in Enhancing Reporting Quality
  Audit Committee Responsibilities in Enhancing Reporting Quality (CFA Level 1): Understanding the Role of the Audit Committee, Independence and Expertise, and Key Responsibilities. Key definitions, formulas, and exam tips.
• External Auditor Independence and Rotation Requirements
  External Auditor Independence and Rotation Requirements (CFA Level 1): Why Independence Matters, Mandatory Rotation Requirements, and Global Landscape and Variations. Key definitions, formulas, and exam tips.
• Handling Complex Transactions with Limited Transparency
  Handling Complex Transactions with Limited Transparency (CFA Level 1): Why Transactions Become Complex and Common Structures That Limit Transparency. Key definitions, formulas, and exam tips.