What is the difference between a positive and a normative theory of financial accounting, and is one better than the other?

QUESTION 2:

What is anagency relationshipand what is anagency cost? How can agency costs be reduced?

QUESTION 3:

Would managers who have negotiated debt contracts with accounting-based covenants based around 'rolling GAAP' be relatively more likely to lobby an accounting standard-setter about a proposed accounting standard than would a manager from a firm who has negotiated accounting-based debt covenants that use 'frozen GAAP'?Why or why not?

QUESTION 4:

If senior managers within a company were rewarded by way of accounting-based bonus plans then would they, or the owners/shareholders (or both), prefer the use of conservative accounting methods? Explain the reasoning for your answer.

QUESTION 6

In the article entitled "Earnings management through real activities manipulation" Roychowdhury considers three specific manipulation methods.Briefly explain why these three methods are reasonable choices for management to consider. (200 words)

The answers to this question will be discussed in class during the workshop.