Curreny Issues in Accounting

Topics: Corporate governance, Corporation, Management Pages: 6 (1775 words) Published: May 15, 2013
Project outline:


Agency theory & its problems with management

Corporate governance

Role of financial reporting in corporate governance

Role of ethics in corporate governance

Application about corporate governance




In an agency relationship, one party acts on behalf of another. It is curious that a concept that could not be more profoundly sociological does not have a niche in the sociological literature. This essay begins with the economics paradigm of agency theory, which casts a very long shadow over the social sciences, and then traces how these ideas diffuse to and are transformed (if at all) in the scholarship produced in business schools, political science, law, and sociology. We cut a swathe through the social fabric where agency relationships are especially prevalent and examine some of the institutions, roles, forms of social organization, deviance, and strategies of social control that deliver agency and respond to its vulnerabilities, and we consider their impact. Finally, we suggest how sociology might make better use of and contribute to agency theory.

Agency theory
A supposition that explains the relationship between principals and agents in business. Agency theory is concerned with resolving problems that can exist in agency relationships; that is, between principals (such as shareholders) and agents of the principals the two problems that agency theory addresses are: 1.) The problems that arise when the desires or goals of the principal and agent are in conflict, and the principal is unable to verify (because it difficult and/or expensive to do so) what the agent is actually doing 2.) The problems that arise when the principal and agent have different attitudes towards risk. Because of different risk tolerances, the principal and agent may each be inclined to take different actions. Problems with the management of corporations

Corporations may take actions that shareholders may not consider desirable. •Those managing a company my use resources to benefit themselves, this can involve fraud •Corporations may hide or provide false information to shareholders to avoid consequences Corporate governance

Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations. In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise The importance of corporate governance system

Corporate governance rules and prescriptions is needed because of the nature of the company structure. Means that the people who have provided the resources of the company do not actually run the company directly. This capital contributors need to relay on managers. Corporate governance practices

The increased focus on directors' and executives' roles and responsibilities calls for systematic frameworks to implement critical corporate governance principles on ethics, codes of conduct, compensation, financial policies, and financial reporting. Organizations are looking for sophisticated corporate governance solutions to set business priorities and develop risk management strategies. Role of financial reporting in corporate governance

We review recent literature on the role of financial reporting transparency in reducing governance-related agency conflicts among managers, directors, and shareholders, as...
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