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.

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Definitions:

Low-Amplitude Brain Waves

Brain waves with small fluctuations, typically associated with wakefulness, attention, and normal everyday consciousness.

Alpha Waves

Brain waves detected by an EEG that represent a state of wakeful relaxation, typically associated with calm and creativity.

Relaxation

The state of being free from tension and anxiety, often achieved through techniques such as meditation or deep-breathing exercises.

Selective Attention

The cognitive process of focusing on a particular object or task while ignoring irrelevant information.