Which of the following actions would be considered as contributing to low quality of ﬁnancial reporting?
A) A pharmaceutical company maintains research and development expenses even in a depressed economy.
B) A company reveals that a major customer may ﬁle for bankruptcy.
C) A company uses an accelerated depreciation method for delivery vehicles
D) A beverage company reduces advertising expense in order to meet earnings forecast for the quarter.

Question

Quizplus · Accepted Answer

Reducing advertising expense to meet earnings forecasts can be considered as managing earnings, which contributes to lower quality of financial reporting. This action may not reflect the true economic condition of the company and can mislead investors and other stakeholders.

Which of the Following Actions Would Be Considered as Contributing