3)Question (3): Discuss the contribution of agency theory and its impactions on accounting standards?
2)Explain the meaning of the term standard overload?
1)Question (1): Describe the accounting information within the Efficient Market Hypothesis (EMH) and highlight the role of the financial analysts?

3  Agency theory explains the relationship/conflict of interest between principals (Stakeholders etc.) and agents (managers, employees). Principals hire agents to work for them (their profitability), conflict of interest arises when agents start to make decisions that benefit them rather than the principals. e.g. Stakeholders may want the manager to invest in high risk projects to gain more return but manger could be reluctant to do so.

Agency theory with regards to organisations is a group of concepts concerned with resolving the problems caused by the separation of ownership and control between the principles who are the shareholders and agents who are the directors of the organisation.

Problems caused by the separation of ownership and control are conflict of interests and attitudes to risk

2) The term "standards overload" is one that has been used off and on over the years by the FASB’s various constituent groups to describe their concerns about not only the volume of accounting rules and the level of complexity and detail of those rules, but also the resulting profusion of footnote disclosures and the difficulty of finding all the accounting rules on a particular subject

1)

The efficient market hypothesis (EMH) is essentially a stock market theory that states that any new information in the market is quickly reflected in the prices of the stocks and securities being traded. In other words, it says that the market is so efficient that it instantly incorporates all known information into the prices of the assets.

And since the share prices already reflect all the relevant information, no amount of analysis or research can give an investor an edge over another investor. According to this theory, investors can never hope to outperform the market irrespective of how expertly they select their stocks or how accurately they time the market. This hypothesis is also referred to as the efficient market theory and market efficiency theory.

There are three forms of the Efficiency Market Hypothesis, each representing a different level of market efficiency.

1. Weak form: This form assumes that the stock prices reflect all available public information. It also disregards the assumption that past information regarding stock prices and trading volumes has any impact on future prices. So, it negates the validity of technical analysis and implies that technical trading strategies cannot provide significant returns because past prices cannot predict future trends.
2. Semi-strong form: According to the semi-strong form, any new information that becomes publicly available is quickly and almost instantaneously, reflected in the prices of stocks. This form dismisses the use of fundamental analysis because such research does not have any power to predict the future movements in stock prices.
3. Strong form: The strong form of EMH assumes that the stock prices factor in all information – both public and private. This includes all existing public information, newly available public information and private or insider information. In other words, no investor, not even those who have insider knowledge of new developments, can gain an edge over other investors.