Stewardship
Mng (managers) look after shareholder (owner) resources.
FAU syllabus
Why Audit Summary 8 / 9
Stewardship
Mng (managers) look after shareholder (owner) resources.
Fiduciary relationship
It is the relationship between managers (who manage the company) and shareholders (who own it).
Managers have to work in the best interest of the owners and are accountable to shareholders.
The owners aren't there day-to-day and have to trust the managers.
Fiduciary relationship
It is the relationship between managers (who manage the company) and shareholders (who own it).
Managers have to work in the best interest of the owners and are accountable to shareholders.
The owners aren't there day-to-day and have to trust the managers.
Agency problem
Principals (owners) have to rely on the agents (managers) to do the work for them.
They should have the same goal. But they don't.
Managers' goal is to earn as much money as possible.
Owners' goal is to increase the share price.
Solution: Give part of manager's pay in share options.
Agency problem
Principals (owners) have to rely on the agents (managers) to do the work for them.
They should have the same goal. But they don't.
Managers' goal is to earn as much money as possible.
Owners' goal is to increase the share price.
Solution: Give part of manager's pay in share options.
Auditor's role
Reports on accounts (prepared by mng) to shareholders.
Auditor's role
Reports on accounts (prepared by mng) to shareholders.