(a) Differentiate a normative theory from a positive theory. Provide an example of each. One of the ways to reduce agency costs is to align an agent's interest with a principal's interest, because the agency problem arises due to divergent interests. Do you support this statement? Why? [ 13 marks]

(b) Legitimacy theory is widely used by accounting researchers, particularly to explain the voluntary disclosure made by the organizations. Briefly explain how the legitimate behavior of an organization leads to the profitability of the firm. [ 12 marks].