The concepts of financial reporting quality and earnings quality are related.
Which statement best describes this relationship?
High-quality earnings result from activities that a company will likely be able to
sustain in the future and provide a sufficient return on investment. If you don't have
high quality reporting, you cannot have high quality earnings.
High-quality reporting provides decision-useful information, while high-quality
earnings is a qualitative determination about past earnings.
Financial reporting quality considers the quality of the information in financial
reports, but not disclosures in notes, while earnings quality also considers
disclosures in the notes as well as other sources of information.
