ACCA AA Syllabus A. Audit Framework And Regulation - Accountability, Stewardship and Agency - Notes ^{3 / 8}

Go on big boy, tell me all about them

1. Accountability

   Accountability means holding those in charge accountable for their actions.

   In the context of a company, it means holding the directors who manage the company responsible for explaining their actions to the shareholders who own the company.

2. Stewardship

   Stewardship is when a person is responsible for taking care of something on behalf of another.

   This is known as a ‘Fiduciary Relationship’ and exists between directors and shareholders as directors are responsible for the management of the shareholders property.

3. Agency

   Agency is where an agent acts on behalf of a principle to perform tasks for them.

   In the context of a company, the directors are the agents of the shareholders (principles) who entrust them to manage the running of the business.

   This separation of ownership and management is often referred to as the ‘Agency Problem’.