In the Context of Agency Theory,information Asymmetry Refers to the Idea

question 35

Multiple Choice

In the context of agency theory,information asymmetry refers to the idea that

• A) Information can vary in its reliability.
• B) Information can vary in its relevance.
• C) Management has more information about the entity's true financial position than do the absentee owners (i.e. stockholders).
• D) Management likely will not act in the best interests of the absentee owners.

---

Definitions:

Cumulative Effect

The total impact of a single event, policy change, or accounting principle applied retrospectively to previous periods’ financial statements.

Business Environment

The combination of internal and external factors that influence a company's operating situation, including economic, legal, and market conditions.

Unusual In Nature

An occurrence or characteristic that is not common or ordinary, often requiring special consideration or treatment.

Infrequent Occurrence

Events or transactions that are not expected to happen regularly or often within the normal course of business.