- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 10. Financial Reporting Quality
- Subject 2. Quality Spectrum of Financial Reports
CFA Practice Question
Management most likely prefers ______ accounting choices.
B. unbiased
C. aggressive
A. conservative
B. unbiased
C. aggressive
Correct Answer: C
They will make the company's reported performance look good. On the contrary, investors most likely prefer conservative accounting choices. Companies using more conservative accounting practices are more likely to surprise on the upside while those using aggressive assumptions may be signaling weakness.
User Contributed Comments 2
| User | Comment |
|---|---|
| mbowa | Would surely think, mgmt should prefer unbiased choices!!!! |
| ascruggs92 | I thought the same thing. Unfortunately, this isn't the ethics section. |