The agency relationship between an owner and manager produces a natural conflict ofinterest because of differences in the two parties’ goals and because of information asymmetry that exists between them. That is, the manager generally has more information about the ‘true’financial position and results of operations of the entity than the absentee owner does. If bothparties seek to maximize their own self-interest, it is likely that the manager will not act in thebest interest of the owner and may manipulate the information provided to the owneraccordingly