This peper reviews agency theory and its application to management accounting issues. In the prior paper (6), Subject by explaining how agency models are formulated to capture incentive problems caused by agency problems and represent agency theory results in the form of a mathematical model for the employment contracting setting of agent (management). Under this contract, specifies Performance evaluation system, the performance measures upon which the agent’s compensation will be based on and the form of function that links the performance measures to the agent’s compensation. In this part of paper describe the advantages and disadvantages of accounting-based and stock-based performance measures compensation contracts and the linear and nonlinear forms of those will be reviewed. Also, the long-term compensation contracts and multiperiod models will be discussed. This article implies the performance evaluation system for employment contracting setting of agent in order to achieve maximum utility of both the agent and the principal is particular as for the circumstances of the company's strategic, agent views on factors such as income, risk, effort, time horizon and also cultural effects. The paper ends by discussing common misconceptions regarding agency theory models and presenting areas for future research.