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Chapter 4. Confirmation: A Powerful Anal... > Confirmation to Test the Reliability...

Confirmation to Test the Reliability of the Numbers

Referring again to the example of Wal-Mart, we can use confirmation to test the reliability of the information we are receiving. To the skeptical mind, the consistency of the numbers as reported by Wal-Mart might raise the question, Are the results being manipulated to create the very consistency that is so desirable?

Investors like consistency and predictability. It strengthens our belief that current trends will continue into the future. Wal-Mart's remarkable consistency is a good example of the fundamental outcome that investors and analysts like to see. At the same time, we need to look further to ensure that the indicated trend holds up under a more critical review. The purpose in this further investigation is to ensure that we are not being misled as a result of inflated numbers, accounting gimmicks, or timing of the booking of revenues or expenses.


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