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What is the central assumption of Positive Accounting Theory (PAT)?
What is the central assumption of Positive Accounting Theory (PAT)?
- Managers are primarily motivated by ethical considerations.
- Managers always make decisions based on the best interest of the company.
- Managers are indifferent to financial incentives.
- Managers are motivated by self-interest and seek to maximize their own utility. (correct)
What is the perceived role of accounting in minimizing the transaction costs of an organization?
What is the perceived role of accounting in minimizing the transaction costs of an organization?
- To reduce the need for contractual agreements. (correct)
- To facilitate efficient communication between stakeholders.
- To align the interests of managers and shareholders.
- To provide accurate financial information for decision-making.
Why can an organization be usefully referred to as a 'nexus of contracts'?
Why can an organization be usefully referred to as a 'nexus of contracts'?
- To illustrate the complex web of formal and informal agreements within the organization. (correct)
- To emphasize the role of accounting in enforcing contractual obligations.
- To highlight the importance of formal written contracts in business operations.
- To emphasize the legal nature of business relationships within the organization.
What influences management's accounting policy choices according to Positive Accounting Theory (PAT)?
What influences management's accounting policy choices according to Positive Accounting Theory (PAT)?
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What is the primary reason for the existence of 'creative accounting'?
What is the primary reason for the existence of 'creative accounting'?
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