ACCA Applied Knowledge · Business and Technology · Governance in business organisations
Which of the following is an agency cost borne by shareholders in seeking to ensure that directors act in their interests?
External audit fees are an agency cost. They are a monitoring cost incurred so that shareholders can gain assurance that directors have reported honestly and acted in shareholders' interests. Depreciation, dividends and tax are ordinary business items not related to controlling the agent.
- AFees paid for an external audit of the financial statementsCorrect
- BDepreciation on the head office building
- CDividends paid to shareholders
- DTax paid on company profits
Explanation
Monitoring costs, such as audit fees, are incurred to check that agents act in the principals' interests. Depreciation, dividends and tax are not costs of controlling agent behaviour.
Did you get it right without looking?
One question tells you little. A timed set on Governance in business organisations shows your real accuracy, how long you take and where you lose marks.
More Governance in business organisations questions
- Milton Co publishes a sustainability report claiming that it is a leader in reducing carbon emissions. In fact, it has only reduced emission…
- In a listed company, which of the following is the main role of non-executive directors on the board?
- Which of the following is the best example of a business ethics code being used to support ethical behaviour within an organisation?
- Karvel Co publishes a sustainability report in which it states only the positive outcomes of its environmental programmes and omits a recent…
- A manufacturer publishes a voluntary report each year showing its energy use, carbon emissions and waste recycled, compared with targets it …
- A listed company's governance code uses 'comply or explain'. The company has not appointed a majority of independent non-executive directors…