BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -PAT is based on the central economics-based assumption that all individuals’ actions are driven by self-interest and that individuals will always act in an opportunistic manner to the extent that the actions will increase their wealth.

Detailed explanation-2: -Positive accounting theory which consists of three hypotheses: bonus plan, debt covenant, and political cost hypothesis (Watts and Zimmerman, 1986), may be used as a basis of earnings management practice.

Detailed explanation-3: -The theory base of accounting consists of principles, concepts, rules and guidelines developed over a period of time to bring uniformity and consistency to the process of accounting and enhance its utility to different users of accounting information.

Detailed explanation-4: -Option C-Positive Accounting Theory (PAT) does not assume the objective of managers to maximise the wealth of the entity. However, PAT is based on assumptions based on individual behaviors.