In this lecture, I ask two questions: 1) What does "quality accounting" look like? 2) How does the equity analyst deal with "poor quality accounting"? The answer to the first question conveys what the analyst expects of the accountant and so characterizes accounting quality. The second question focuses on the quality of equity analysis rather than the quality of the accounting. How does the analyst recognize the imperfections of accounting—some of which are inevitable, I will argue—and adapt to them? Quality analysis deals with deficiencies in the accounting to produce a quality equity product.
Penman, Stephen. "Quality Accounting for Equity Analysis." Emanuel Saxe Lecture, Baruch College, March 3, 2003.
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