Earnings expectations play in quality of earnings

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Reference no: EM13917441

1. In Arthur Levitt's speech, referred to in the opening quote, he also said: "I fear that we are witnessing erosion in the quality of earnings and therefore, the quality of financial reporting. Managing may be giving way to manipulation; integrity may be losing out to illusion." Explain what you think Levitt meant by this statement. What role does financial analysts' earnings expectations play in the quality of earnings?

2. Relevance and faithful representation are the qualitative characteristics of useful information under SFAC 8. Evaluate these characteristics from an ethical perspective. That is, how does ethical reasoning enter into making determinations about the relevance an faithful representation of financial information?

Reference no: EM13917441

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