ABSTRACT
The agency relationship that binds the shareholders to the managers stems from conflicts of interest arising mainly from the information asymmetry benefiting managers. If further we consider that managers also seek to maximize their own interests, it becomes likely they will not always act in their shareholders’ interest, and the situation justifies the existence of the financial audit as an incentive for getting managers to act in the best interests of shareholders. Thus, making managers’ behavior publicly known to outsiders through financial disclosure will enhance corporate image and reassure investors. The primary responsibility of the quality and completeness of financial disclosure goes primarily to the management team, even though several parties are actually involved in such process and in the forefront we have the financial audit process.
