Assessing earnings quality


One step in assessing the quality of earnings is to look for red flags. An example of a red flag is a change in auditors. A parting of the ways with auditors may be because of disagreements over accounting matters. This will be filed in an 8-K report. List five other red flags the astute analyst might look for, describe why it is a red flag, and identify where the analyst might find this information.

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Finance Basics: Assessing earnings quality
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