In the Situation Where a Contractual Arrangement Has Been Negotiated

question 62

Multiple Choice

In the situation where a contractual arrangement has been negotiated that provides managers with a bonus based on the profits generated by the entity:

• A) The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent.
• B) The opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation.
• C) The underlying premise of PAT is that agents (managers) aim to act in the best interests of the organisation, so the bonus is recognition of those efforts.
• D) The efficiency perspective identifies this as a way of minimising agency costs by aligning the interests of the principal and the agent and the opportunistic perspective predicts that managers will seek to adopt accounting methods that best reflect the performance of the organisation.

---

Definitions:

Ticket Splitting

The practice of voting for candidates of different political parties for different offices in the same election.

Big Government

A term often used to describe a government that is seen as overly involved in the daily lives of its citizens, especially in terms of regulation and taxation.

Small Government

A political ideology advocating for a minimal role of the government in economic affairs and limited regulatory oversight.

Election Laws

Regulations and legal standards governing the conduct of elections and the selection of public officials.