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The Agency Concept Agency theory says that a company is not a single, unified entity.

Agency theory calls into question the claim that all of the stakeholders in the company (shareholders, managers, and creditors) have a single goal - value creation. Agency theory shows how, on the contrary, their interests may differ and some decisions related to borrowing for example or how products stock options come out of attempts to achieve convergence between the interests of managers and shareholders to protect creditors. Agency theory analyses the consequences of certain financial decisions in terms of risk, profitability and, more generally, the interests of the various parties. Agency theory is the intellectual basis of corporate governance (Corporate Finance by Vernimmen.com). The main driver for corporate governance is based on the agency concept. Here corporate bodies are overseen by directors who are appointed by the owners, i.e stakeholders. The directors formulate a corporate strategy to achieve set objectives and meet market expectations, and in turn, employ managers and staff to implement this strategy (The essential handbook of internal auditing by Spencer Pickett). The directors are considered as the brain of the company and the managers and staff are the body. It is the board of directors who make strategies for the company to achieve its objectives. They make decisions and form concepts or strategies for the companys objectives and create a team for implementation. The managers and staff are authorized employees who perform the established strategy that should be implemented. Agency theory is part of the positivist group theories which derives from the financial economics literature. It postulates that the firm consists of a nexus of contracts between the owners of economic resources (the principal) and managers (the agents) who are charged with using and controlling those resources (Managerial auditing journal by Adams, Michaels B.). A simple agency model suggests that, as a result of information asymmetries and self-interest, principals lack reasons to trust their agents and will seek to resolve these concerns by putting in place mechanisms to align the interests of agents with principals and to reduce the scope for information asymmetries and opportunistic behavior. (Agency theory and the role of audit ICA England and Wales 2005). It is having an influence to an agent to perform their task as it should be. To make sure that an agent will accomplish its task given by the principal. To ensure that all agents are trustworthy because being an agent are usually more knowledgeable than its principal. In this kind of relationship we cant avoid that sometimes the principal and the agent has a different interest that will trigger their trust. And having a different interest an agent can be

risky. He may corrupt the principal or worse he can destroy by telling to other people your controversial information. The essential factor on having executive or agent in an organization is on agency theory. These are executives who operate a company onto their own function. Executives are not the proprietor and not a partner but an agent that work for an organization. Agency theory has been the dominant economics based framework offered for understanding executive compensation issues. According to this theory, managers (executives) who are not also owners are shareholders agents and will not necessarily act in shareholders best interests. Rather, managers are assumed to choose actions to maximize their own expected utility. (Corporate Governance Reform and CEO Compensation: Intended and Unintended Consequences by Ella Mae Matsumura Jae Yong Shin).

Scope and delimitation of the study The researchers will study about the determinants of the implementation of IA function. It analyzes the difference between the companies with or without IA function. Determinants will include independent and dependent variables. It distinguishes in the variables the importance of IA function. This study will focus only to the top 50 PSE listed companies based on the scorecard given by Institute of Corporate Directors. It will focus the on the ratings and performance of the company to see the significance that IA function has a big effect in an organizations.