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      Question

      `Which of the following financial reports are considered

      to be of lowest quality? Financial reports that reflect:
      A Unstable earnings Correct Answer Incorrect Answer
      B Departures from accounting principles Correct Answer Incorrect Answer
      C Biasness in accounting choices Correct Answer Incorrect Answer
      D Consistent losses Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      Financial reports that depart from generally accepted accounting principles are considered to be of lower quality than those that reflect biased accounting choices. Financial reports that reflect unstable earnings or losses may be of higher quality. Profit or loss does not have any relationship with reporting quality.

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