Answer: Both Action 1 and Action 2

## Explanation Both actions are useful for evaluating the quality of financial reports: **Action 1: Learn about the company's management** - Management's integrity, competence, and incentives affect financial reporting quality - Aggressive management may engage in earnings management or manipulation - Understanding management's background and track record helps assess reporting reliability **Action 2: Comparing accounting policies with competitors** - Helps identify if the company uses more aggressive accounting policies - Reveals differences in revenue recognition, expense capitalization, or reserve policies - Allows assessment of whether the company's policies are consistent with industry norms **Both actions** provide complementary information about financial reporting quality. Management quality (Action 1) addresses the "people" aspect, while accounting policy comparison (Action 2) addresses the "methodology" aspect. **Correct Answer: C - Both Action 1 and Action 2**

Author: LeetQuiz Editorial Team