Which of the following is NOT an assumption of agency theory?
A) Both owners and managers are trying to maximize their own wealth
B) The financial report provides a mechanism for owners to monitor managers
C) The appointment of auditors is considered a cost-effective monitoring mechanism
D) Managers do not benefit from the financial statements being audited.

Question

Quizplus · Accepted Answer

Agency theory assumes that managers may benefit from audited financial statements as it can enhance their credibility and reduce information asymmetry between them and the owners.

Which of the Following Is NOT an Assumption of Agency