Information Quality (20 points) You have come across a chunk of cash you want to invest in a company. Being a do-it- yourselfer, home-fixer-upper. You are seriously considering buying stock in Home Depot or Lowes. In the context of whether you should purchase either Home Depot or Lowes stock, demonstrate your understanding of the elements of information quality (IQ) listed below by providing concrete examples of information that clearly illustrate the presence and/or absence of each IQ element in your decision. For example, if you were discussing the element of completeness, you might provide this example: If I only had the companies’ balance sheet and income statement, I would have an incomplete picture of the company because I would not understand how they manage their cash flows. REMEMBER! IQ IS ABOUT INFORMATION! Not about processes, or companies, or anything else. It’s about the quality of information. So your descriptions below should apply to how the element is present or absent it the available information. Relevance – Verifiability – Reliability – Timeliness – Understandability - Solution Relevance: It is the concept that the information generated by an Accounting system in a timely manner should impact the decision- making For example, When the management is trying to replace the equipment, it is irrelevant to see its original cost. What is relevant is Cost of new equipment and savings in replacement cost of old one. Verifiability: It is the ability to see how a company arrives at a certain result from the data it provides. Verifiability helps to assure users that information represents faithfully what it purports to represent. In other words, information is verifiable if it can be audited. For example, If the management says a particular asset worth $10,000 and for the same amount you could able to get confimation from outside accountant. If not, the result isn\'t verifiable. Reliability: Accounting Information is reliable if a user can depend upon it to be materially accurate and if it faithfully represents the information that it purports to present.Omissions or misstatements in financial statements reduce the reliability of information contained in them. Reliability is acheived when thee information is verifiable and objective. For example, company XYZ ltd is being sued for damages by a rival firm, settlement of which could threaten the financial stability of the company. Non-disclosure of this information would render the financial statements unreliable for its users. Timeliness: Timeliness principle in accounting refers to the need for accounting information to be presented to the users in time to fulfill their decision making needs. For example, Users of accounting information must be provided financial statements on a timely basis to ensure that their financial decisions are based on up to date information Understandability: Understandability is the concept that financial information should be presented so that a reader can .

1. Information Quality (20 points)
You have come across a chunk of cash you want to invest in a company. Being a do-it-
yourselfer, home-fixer-upper. You are seriously considering buying stock in Home Depot or
Lowes.
In the context of whether you should purchase either Home Depot or Lowes stock, demonstrate
your understanding of the elements of information quality (IQ) listed below by providing
concrete examples of information that clearly illustrate the presence and/or absence of each IQ
element in your decision. For example, if you were discussing the element of completeness, you
might provide this example: If I only had the companies’ balance sheet and income statement, I
would have an incomplete picture of the company because I would not understand how they
manage their cash flows.
REMEMBER! IQ IS ABOUT INFORMATION! Not about processes, or companies, or anything
else. It’s about the quality of information. So your descriptions below should apply to how the
element is present or absent it the available information.
Relevance –
Verifiability –
Reliability –
Timeliness –
Understandability -
Solution
Relevance: It is the concept that the information generated by an Accounting system in a timely
manner
should impact the decision- making
For example, When the management is trying to replace the equipment, it is irrelevant
to see
its original cost. What is relevant is Cost of new equipment and savings in replacement
cost of old one.
Verifiability: It is the ability to see how a company arrives at a certain result from the data it
provides.
Verifiability helps to assure users that information represents faithfully what it
purports to represent.
In other words, information is verifiable if it can be audited.
For example, If the management says a particular asset worth $10,000 and for the

2. same amount
you could able to get confimation from outside accountant. If not, the result isn't
verifiable.
Reliability: Accounting Information is reliable if a user can depend upon it to be materially
accurate and if it
faithfully represents the information that it purports to present.Omissions or
misstatements in financial
statements reduce the reliability of information contained in them.
Reliability is acheived when thee information is verifiable and objective.
For example, company XYZ ltd is being sued for damages by a rival firm, settlement
of which could
threaten the financial stability of the company. Non-disclosure of this information
would render the
financial statements unreliable for its users.
Timeliness: Timeliness principle in accounting refers to the need for accounting information to
be presented to the
users in time to fulfill their decision making needs.
For example, Users of accounting information must be provided financial
statements on a timely
basis to ensure that their financial decisions are based on up to date information
Understandability: Understandability is the concept that financial information should be
presented so that a reader
can easily comprehend it. In order to be understandable, information should be
presented complete,
concise, clear and organized.