Which one is false? A. The agency is defined as a relationship by consent between two parties, whereby one party agrees to act on behalf of the other B. Agency theory assumes that a conflict of interest exists between the owners of a firm and the managers C. Generally agency costs of a firm are not controlled by firm itself D. Financial r

Which one is false? A. The agency is defined as a relationship by consent between two parties, whereby one party agrees to act on behalf of the other B. Agency theory assumes that a conflict of interest exists between the owners of a firm and the managers C. Generally agency costs of a firm are not controlled by firm itself D. Financial r

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 2MC: Which of the following does not describe a management control system? A. establishes a companys...

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Which of the following does not describe a management control system? A. establishes a companys strategic goals B. implements a companys strategic goals C. monitors a companys strategic goals D. a system that only measures profitability
What is an agent, and what is a principal? Whatkinds of situations in companies give rise to conflicts between these two, called agency conflicts?
A According to shankman(1999), two features make agency relations special. One of this is inherent conflict of interest between shareholders and managers. What is the other? a- limited communication between owners and managers b- large difference in defined rights and obligations c- informational asymmetry between principal and agents d- short term focus of the ownership goals
Which of the following are characteristics of economic agents?a. They participate in economic events, but do not assume control of the resources.b. They participate in economic events, but not in support events.c. Internal agents are employees of the company whose system is being modeled.d. External agents are not employees of the company whose system is being modeled.e. All of the above describe agents.
What is a basic precept under the independence rules that always applies when a firm performs nonattest services for an attWhat is a basic precept under the independence rules that always applies when a firm performs nonattest services for an attest client? a) The firm should supervise its personnel and perform technical reviews of its work. b) The firm should supervise the client's personnel as they perform their duties. c) The firm and its personnel must not perform management responsibilities for the client. d) The firm and its personnel must agree to assist with management responsibilities as needed.
Define agency problems, and describe how they give rise to agency costs. Explain how a firm’s corporate governance structure can help avoid agency problems.
In order to decide whether the firm will be better off joining two distinct activities under unified control or keeping these activities under different firms and relying on market arrangements and contracts, the firm’s management focuses on some key treadeoffs. Briefly explain how issues related to incentives and information are relevant when deciding whether to join multiple activities within the same firm? Briefly explain how issues related to uncertainty and opportunism are relevant when deciding whether to join multiple activities within the same firm?
1. Which of the following best describes agency cost?A) Costs involved with any effort to minimize the conflict between the principal's interest and the 2/3.B) Cost incurred by an agent to facilitate the creation of an agency relationship with theirprincipal.C) Cost incurred by a principal to establish an agency.D) Agency costs are irrelevant costs that are not measurable nor recognized in the face of the Financial Statement and is therefore not a cost to a company. in the long-term. 2. Which of the following is a valid reason why Financial Managers should put emphasis on long-term growth rather than short-term profit maximization?A) A manager should focus on profit maximization because it adds to the wealth of shareholdersB) A manager should focus on long-term growth because short-term profit maximization does not add to the wealth of shareholders on the long-term.C) There is no difference between focusing on short-term profit maximization and emphasis on agents interestD) Emphasis…
Any situation where a potential conflict can arise between the firm's owners and its managers is referred to as a(n): Group of answer choices organisational problem. compensation issue. agency problem. personnel conflict. control issue.
Within the context of financial management, it is important that organizations attempt to align their managers' interests with that of the shareholders. In Chapter 16, Berk and DeMarzo (2020) provide several examples of agency conflict or a conflict between the owners and the management of a firm. Examples of these are: (a) at times managers will take on less (greater) risk than they would if they were the owners of the firm and (b) due to the separation of ownership and control managers are able to entrench themselves within firms and have little risk of being replaced. Provide a few examples of mechanisms that organizations could use to align the interests of both the owners of the firm and its managers.
Agency problem arises due to the divergence or divorce of interest between the principal and the agent. Discuss shareholders-management agency relationship, conflict and resolution
Which of the following circumstances may create intimidation threats? a) Threat of dismissal or replacement of the member, or a close or immediate family member, over a disagreement about the application of an accounting principle or the way in which financial information is to be reported b) Being responsible for the employing organisation’s financial reporting when an immediate or close family member employed by the entity makes decisions that affect the entity’s financial reporting c) A dominant personality attempting to influence the decision making process for example the application of an accounting principle. d) Participating in incentive compensation arrangements offered by the employing organisation Only a) and b) Only a) Only a) , b) and c) Only a) and c)