Correct Answer: A

The exclusion of recurring expenses from non-GAAP financial measures is strictly prohibited by the SEC and should prompt an analyst to perform further scrutiny. This practice can mislead stakeholders and distort the true financial performance of a company.

Incorrect Answers:

• B: While non-GAAP measures in SEC filings require equal prominence of comparable GAAP measures and a reconciliation, their use alone does not necessarily warrant additional analysis if properly disclosed.
• C: LIFO to FIFO changes are transparently reported in financial notes, allowing analysts to adjust their evaluations without requiring further investigation.