What Is the Most Common Way That Agency Conflict Problems

question 11

Multiple Choice

What is the most common way that agency conflict problems are addressed in most corporations?

• A) by minimizing the number of decisions that a manager makes where there is a conflict between the managers interests and those of the shareholders
• B) by terminating the employment of employees who are found to have put their own interests above those of the company
• C) by using disinterested outside bodies to adjudicate between managers and shareholders when such conflicts arise
• D) by prosecuting managers who have been found to have illegally used company moneys for their own benefit

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Definitions:

Accounting System

A structured process of collecting, recording, summarizing, and reporting financial transactions of a business or individual.

Accrual Basis of Accounting

An accounting method where income and expenses are recorded when they are earned or incurred, regardless of when the cash transactions occur.

Cash Basis

An accounting method where revenue is recorded when cash is received, and expenses are recorded when cash is paid out.

Adjusting Entries

Journal entries made at the end of an accounting period to update account balances for accruals and deferrals that are not recorded through regular transactions.