Accounting Theory and Practice

Running head: ACCOUNTING THEORY AND PRACTICE
Accounting Theory and Practice
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ACCOUNTING THEORY AND PRACTICE
Table of Contents
Summary of the article:..............................................................................................................2
Chosen theory for the article:.....................................................................................................2
Application of agency theory to the article:...............................................................................3
References:.................................................................................................................................4

2ACCOUNTING THEORY AND PRACTICE
Summary of the article:
This article focuses on the decline in the share price of CSR Limited, which is a
renowned building material supplier in Australia. The reasons identified behind such decline
include weak construction market and low prices of aluminium in the nation. However, the
organisation has defended the performance of its management despite such performance. This
has created issues among the various shareholders of the organisation and they have asked to
review the remuneration policies of the board. In addition, at the annual general meeting, the
shareholders have raised the carbon tax issue and repeated write-offs from its glass business,
Viridian, has resulted in huge loss money for CSR Limited (Investsmart.com.au, 2019).
Chosen theory for the article:
In order to evaluate the chosen article, the theory selected is agency theory. This
theory describes the association between agents and principals in business. This theory lays
stress on resolving issues, which could take place in agency relationships owing to unaligned
objectives or different risk aversion levels. The most apparent agency relationship in
accounting takes place between shareholders and business executives. The shareholders are
the principals, while business executives are the agents (Bosse & Phillips, 2016).
Agency theory is involved in addressing issues arising because of differences between
the desires or goals between agents and principals. This situation might take place, as the
principal is not aware of the agents’ actions or the resources restrict them from acquisition of
information. For instance, business executives might have the aim of diversifying the
organisation into other markets. As a result, the short-term profit margin of the organisation
would be sacrificed as well as increased earnings in future (Christensen, Nikolaev &