ACCA Applied Knowledge · Business and Technology · Regulation and financial crime
A company has a compliance function that monitors adherence to laws and internal rules. Which of the following is the primary purpose of that function?
The primary purpose of a compliance function is to ensure the organisation follows relevant laws, regulations and internal policies, thereby reducing the risk of fines, legal sanctions and reputational damage. Profit maximisation and statutory accounts preparation are separate responsibilities of management and the finance function.
- ATo reduce the risk of legal sanctions and reputational damage from breachesCorrect
- BTo maximise short-term profit for the shareholders
- CTo prepare the statutory financial statements for the external auditor
Explanation
A compliance function checks that the organisation follows applicable laws, regulations and internal policies, thereby reducing the risk of fines, sanctions and loss of reputation. Profit maximisation and preparing financial statements are not its main purposes.
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