Accounting Multiple Choice Question – 24 April 2025

The agency problem is a driving force behind the growing importance attached to sound corporate governance.

In this context, the ‘principal’ is?

Select ONE answer:

1. The body of customers
2. The body of shareholders
3. The body of managers
4. The company

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct == > The separation of ownership and control creates a situation where managers act as the agents of owners (shareholders), who are, therefore, the principals.
3. Not correct
4. Not correct

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