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Subject 2. Evaluating the Quality of Financial Reports PDF Download
Typical steps involved in evaluating financial reporting quality include:

1. An understanding of the company's business and industry in which the company is operating.

2. Review of management compensation and insider transactions.

3. Identify significant accounting areas.

4. Make comparisons.

  • Current period vs. previous year
  • Company vs. competitors: accounting policies, ratio analysis

5. Check for accounting warning signs.

6. Segment analysis.

7. Quantitative tools.

  • Beneish Model: It uses financial ratios and eight variables to identify whether a company has manipulated its earnings.

Learning Outcome Statements

describe how to evaluate the quality of a company's financial reports;

evaluate the quality of a company's financial reports;

CFA® 2023 Level II Curriculum, Volume 2, Module 15

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I used your notes and passed ... highly recommended!
Lauren

Lauren

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