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The contract efficiency role of accounting is associated with which of the following?
The contract efficiency role of accounting is associated with which of the following?1) Allowing potential stock investors to assess the future prospects of the company
2) Communicating private information to people outside the company
3) Determining the amount of bonuses to be paid to managers
4) Allowing a new lender to determine the risk of the company
Final answer:Accounting's contract efficiency role is key in determining bonuses for managers by measuring their performance. It is a verification tool that links managerial achievements to compensation incentives like bonuses, rather than external valuation or risk assessment. Hence option C is correct.Explanation:The contract efficiency role of accounting is primarily associated with determining the amount of bonuses to be paid to managers. This is because the financial statements and other accounting documents are a source of verification of the manager's performance, directly affecting potential compensation incentives such as bonuses. Accounting facilitates the measurement of management performance against contractual terms or organizational goals, thereby serving as a pivotal tool in assessing whether managers have achieved the benchmarks necessary to warrant bonus payouts.The provision of financial information for external parties, such as potential stock investors or lenders, while vitally important, is more closely related to roles such as valuation or financial reporting. These functions of accounting help external parties in assessing the future prospects, risk, and overall financial health of an organization, which consequently enables investment and lending decisions. Hence option C is correct....