The Misrepresentation of Earnings; by Dichev et al.

In a recent article in the Financial Analysts Journal, titled “The Misrepresentation of Earnings,” Ilia Dichev, John Graham, Campbell R. Harvey, and Shiva Rajgopal explore the defining characteristics of earnings quality and the misrepresentation of earnings. As part of their inquiry, they interviewed 12 CFOs and surveyed and additional 169 CFOs of public companies and 206 CFOs of private companies. Their reasoning for interviewing solely CFOs was, as they put it, that “CFOs know best the intersection of business operations and accounting rules, which determines earnings, and their choices largely determine the quality of earnings.”