Which of the following statements about agency theory is TRUE?
A) It focuses on the internal control system.
B) Conflicts of interest are regarded as unnatural.
C) It tends to focus on the future-oriented, decision-making role of accounting information.
D) It is concerned with contractual relationships among people.

Question

Quizplus · Accepted Answer

Agency theory is concerned with the contractual relationships among people, particularly the relationship between principals (such as shareholders) and agents (such as managers). It examines conflicts of interest that may arise between principals and agents and suggests ways to align their interests. It is not focused on the internal control system or the decision-making role of accounting information, and conflicts of interest are seen as natural rather than unnatural.

Which of the Following Statements About Agency Theory Is TRUE