Accounting analysis: the basics - Steps in accounting analysis

4 important questions on Accounting analysis: the basics - Steps in accounting analysis

What are the steps in accounting analysis:

Identify key accounting policies
asses accounting flexibility
evaluate accounting strategy
evaluate the quality of disclosure
identify potential red flags
recast financial statements and undo accounting distortions

Since all of these policy choices can have a significant impact on the reported performance of a firm, they offer ...

An oppurtinity for the firm to manage its reported numbers

Some of the strategy questions one could ask in examining how managers exercise their accounting flexibility include the following:

Reporting incentives
deviations from the norm
accounting changes
past accounting errors
structuring of transactions
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In assessing a firms disclosure quality, an analyst could ask about the following subjects:

Strategic choices
accounting choices
discussion of financial performance
non-financial performance information
segment information
bad news
investor relations

The question on the page originate from the summary of the following study material:

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