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.