Really Big Co

Multiple Choice

Really Big Co.is a publicly traded company that has consistently reported increasing profits each year.However,during this year's audit,it was discovered that the CEO and CFO conspired to falsify the financial statements.This discovery resulted in a large correction to both the current and prior year's net income.It is believed that management was motivated to falsify the statements to maximize bonus and stock option compensation.Such a situation reflects which problem of economic theory?

A) Conflict of interest
B) Agency Problem
C) Three-party accountability
D) The "Dozy Watchdog"