Wiley CPAexcel Exam Review 2014 Study Guide, Regulation

Module 32: Agency

Overview

Agency is a relationship in which one party (agent) is authorized to act on behalf of another party (principal). The law of agency is concerned with the rights, duties, and liabilities of the parties in an agency relationship. Important to this relationship is the fact that the agent has a fiduciary duty to act in the best interest of the principal. A good understanding of this module is important because business structures (Module 25) apply the concepts of agency frequently.

A. Characteristics

B. Examples of Principals and Agents

C. Methods of Creation

D. Duties (Obligations) and Rights

E. Liability to Third Parties

F. Termination of Principal-Agent Relationship

Key Terms

Multiple-Choice Questions

Multiple-Choice Answers and Explanations

Simulation

Simulation Solution

The CPA exam emphasizes the creation and termination of the agency relationship, the fiduciary duties that the agent owes to the principal, the undisclosed as well as the disclosed principal relationship, unauthorized acts or torts committed by the agent within the course and scope of the agency relationship and principal’s liability for agent’s unauthorized contracts. Before beginning the reading you should review the key terms at the end of the module.

A. Characteristics

1. Agency is a relationship between two parties, whereby one party (agent) agrees to act on behalf of the other party (principal) with respect to third parties. A contract is not required but is frequently present. ...