The Problem of Asymmetric Information

            For this discussion, your focus will be to think through what asymmetric information, moral hazard, and adverse selection have to do with corporate hiring staff accountants. As we saw in the week 7 discussion in contracts there maybe something called the agency problem. In employment contracts we have a principal, the organization hiring, and the agent, the potential employee. When hired, the employee is expected to carry out/act on behalf, of the agent's best interest. I can be very hard and costly for principal to ensure that the agent is conducting the principal business in the best interest of the principal. Instructions Consider the following policy: Many corporations require all staff accountants to hold not only a degree in accounting but also to have a CPA license. There is a substantial higher cost to hiring CPAs. Assignment In your discussion post, address the following: Speculate on why corporations do not lower their explicit payroll cost by hiring accountants without a CPA. Consider how asymmetric information, moral hazard, and adverse selection may the perception of risk?