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Basic Question 2 of 11
Which of the following are motivations to overreport earnings?
II. Higher incentive compensation
III. Meeting market's earnings expectations
IV. Meeting debt covenants
V. Obtaining trade relief
I. Negotiation of labor union contracts
II. Higher incentive compensation
III. Meeting market's earnings expectations
IV. Meeting debt covenants
V. Obtaining trade relief
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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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.