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Basic Question 2 of 11

Which of the following are motivations to overreport earnings?

I. Negotiation of labor union contracts
II. Higher incentive compensation
III. Meeting market's earnings expectations
IV. Meeting debt covenants
V. Obtaining trade relief
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User Contributed Comments 4

User Comment
DS12 IV is correct, because lenders to the firm may require a firm to maintain specific profits.
hoyleng y II is correct? pls explain. thanks
poomie83 Compensation for management is tied in with performance
dshawkri bonuses or stock options
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I used your notes and passed ... highly recommended!
Lauren

Lauren

Learning Outcome Statements

describe motivations that might cause management to issue financial reports that are not high quality and conditions that are conducive to issuing low-quality, or even fraudulent, financial reports

describe mechanisms that discipline financial reporting quality and the potential limitations of those mechanisms

CFA® 2025 Level I Curriculum, Volume 3, Module 10.