Skip to content

ACCA Applied Knowledge · Business and Technology · Governance in business organisations

Which of the following is an advantage of a rules-based approach to governance compared with a principles-based approach?

A rules-based approach gives certainty because requirements are specific, making compliance easier to monitor and enforce consistently. Flexibility and emphasis on the spirit of good governance are features of a principles-based approach, while rigid rules can raise costs and encourage box-ticking.

  1. AIt allows companies flexibility to adapt governance to their own circumstances
  2. BIt gives certainty and makes compliance easier to monitor and enforceCorrect
  3. CIt reduces the cost of compliance for all companies
  4. DIt encourages companies to follow the spirit rather than the letter of the requirements

Explanation

Detailed rules are clear and objective, so compliance can be checked and enforced consistently. Flexibility and focus on the spirit of governance are advantages of a principles-based approach, while rules often raise compliance costs and may be met in letter only.

Did you get it right without looking?

One question tells you little. A timed set on Governance in business organisations shows your real accuracy, how long you take and where you lose marks.

Practise Governance in business organisationsFree diagnostic mock

More Governance in business organisations questions