A principal-agent problem is most likely to arise when _____

Question

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A principal-agent problem arises when one party (the principal) hires another party (the agent) to perform a task on their behalf, but the agent may have different incentives or interests than the principal. In the case of outsourcing tax computation to a consultancy, there is a risk that the consultancy may not have the company's best interests in mind and may prioritize their own profits or interests, leading to a potential conflict of interest. The other choices do not necessarily involve a hired party with conflicting incentives or interests.

A Principal-Agent Problem Is Most Likely to Arise When _____