The difference between Positive Accounting Theory and Legitimacy Theory is that:
A) Legitimacy Theory does not rely on the assumption that all action is driven by individual self-interest.
B) Legitimacy Theory makes no assumptions about the efficiency of markets.
C) Legitimacy Theory suggests that organisations have a 'social contract' with society.
D) All of the given options are correct.

Question

Quizplus · Accepted Answer

All the given options correctly differentiate between Positive Accounting Theory and Legitimacy Theory. Positive Accounting Theory often assumes actions are driven by self-interest and focuses on the relationships within financial practices, while Legitimacy Theory emphasizes an organization's broader social obligations and its 'social contract' with society, not necessarily assuming market efficiency or self-interest as primary motivators.

The Difference Between Positive Accounting Theory and Legitimacy Theory Is