When analyzing financial statements it is important to recognize that accounting distortions can arise. Accounting distortions are those things that cause deviations in accounting information from the underlying economics. Which of the following statements is not correct? Accounting distortions:
A) can arise as management may deliberately manipulate financial statements.
B) arise often through application of (correct) accounting principles.
C) can affect the quality of earnings.
D) arise if the stock market is not efficient.

Question

Quizplus · Accepted Answer

Accounting distortions are caused by factors such as management's manipulation of financial statements or the application of accounting principles that do not accurately reflect the underlying economic reality. However, they are not caused by the efficiency or inefficiency of the stock market.

When Analyzing Financial Statements It Is Important to Recognize That