Answer all parts of the question

a) Define the following terms used in economics-based theories such as agency theory:

Principal

Agent

Goal congruence

Information asymmetry

Moral hazard

b) In relation to financial reporting, three main agency relationships are examined. Of these, one relates to the relationship between regulators and the company and another to the relationship between lenders and the company. What is the other relationship examined under agency theory?For this relationship, identify the parties involved and explain the agency problem being analysed.

c) For the agency relationship analysed in part b), explain how information derived from financial reports is used in the contract between the parties identified. Explain also the difficulties the use of financial information causes and how they may be mitigated.