When Analyzing Financial Statements It Is Important to Recognize That

Multiple Choice

When analyzing financial statements it is important to recognize that accounting distortions can arise. Accounting distortions are those things that cause deviations in accounting information from the underlying economics. Which of the following statements is not correct? Accounting distortions:

A) can arise as management may deliberately manipulate financial statements.
B) arise often through application of (correct) accounting principles.
C) can affect the quality of earnings.
D) arise if the stock market is not efficient.