Costs for producing and analysing internal performance reports are an example of which type of agency costs?
A) Goal alignment costs
B) Losses from poor decisions
C) Monitoring costs
D) Contracting costs

Question

Quizplus · Accepted Answer

Monitoring costs refer to the costs incurred by the principal (owners) in monitoring the actions of the agent (management) to ensure that they are aligned with the goals of the organization. Internal performance reports help management keep track of their own performance and the resources used, in turn helping owners monitor their agents. Therefore, costs for producing and analyzing internal performance reports fall under monitoring costs.

Costs for Producing and Analysing Internal Performance Reports Are an Example