1. Reporting Quality and Results Quality

a. distinguish between financial reporting quality and quality of reported results (including quality of earnings, cash flow, and balance sheet items);

What is financial reporting quality? A subjective evaluation of the extent to which financial reporting is free of manipulation and accurately reflects the financial condition and operating success of a company.

What is earnings quality? Earnings are considered to be high quality if they exhibit persistence and are unbiased. Sustainable earnings enable better forecasts of future cash flows or earnings.