Question

Why are accurate accounting and independent auditing so crucial in reducing the principal-agent problem?

Answer 1

Explanation:

Accurate accounts and independent auditing reflect the best intentions of company and reflect the better management of company. When company need to borrow money or loan from the creditor, creditor first of all check on the transparency of the company in financial department since they want to future problem regarding money with company. So the company who need to borrow money if they have accurate account data and independent auditing it get easy to get the loan and avoid rejection chances to get a loan at all.