There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?

There is a conflict of interest between stockholders and managers. In theory, stockholders are expected to exercise control over managers through the annual meeting or the board of directors. In practice, why might these disciplinary mechanisms not work?

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter6: Professional Roles

Section6.3: Hamilton Wong, In-charge Accountant

Problem 4Q

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Concept explainers

Managing Agency Conflict

Conflict is defined as an act of disagreement between two parties caused by uncertainties between them. The conflict has a negative outcome that affects both parties involved in the argument. Conflict arises when the parties' thoughts do not align or go in opposite directions. Conflicts have negative consequences for both the individual and the business. As a result, it should be avoided.

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