§ Quality and accounting
Accounting quality
Glossary version 2026-07-12.v1 · reviewed July 12, 2026
How faithfully reported earnings reflect sustainable economics and cash generation. Strong quality is supported by cash conversion, conservative accruals, consistent policies, and transparent reconciliations.
Accounting quality asks whether reported profit is repeatable and supported by cash. Analysts compare operating cash flow with net income, inspect accruals, working capital, non-recurring items, and stock-based compensation, and reconcile management-adjusted measures with filed accounts. Weak quality does not automatically mean fraud, but it reduces how much confidence a valuation should place on headline earnings.