Purpose – The purpose of this paper is to explore the role of accounting discretion in a principal-agent setting, wherein accounting information is used in performance evaluation. The agent may choose one from among several allowable accounting methods. However, limited audit resources allow...

Purpose – The purpose of this paper is to explore the role of accounting discretion in a principal-agent setting, wherein accounting information is used in performance evaluation. The agent may choose one from among several allowable accounting methods. However, limited audit resources allow...

This study investigates the effect of a principal's choice on the availability of discretionary controls, where discretionary controls are defined as those not supported by enforceable explicit contracts. In contrast to prior findings on explicit controls, we find that agent reciprocity is not...