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Part A -

a) Explain agency theory and contracts in the context of Positive Accounting Research (PAT)?

b) What is the bonus hypothesis of PAT?

c) Explain what 'creative accounting' is and can it explain the behaviour of contracting parties in PAT

Part B -

a) What is the main purpose of simplifying assumptions of Positive Accounting Theory (PAT)?

b) Explain why PAT assumes 'problems' between managers and shareholders? Suggest ways shareholders can minimise these "problems"

c) Define 'creative accounting', and its relationship with ethical dilemma for managers.

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