ACCA Applied Knowledge · Business and Technology · Regulation and financial crime
Which of the following is an example of a compliance cost that a company bears as a result of regulation, as opposed to a benefit of regulation?
Audit fees and staff time spent preparing mandatory disclosures are compliance costs, because they are resources used to meet regulatory requirements. Investor confidence, fair competition and lower fraud risk are benefits of regulation, not costs borne by the company.
- AFees paid to external auditors and staff time spent preparing mandatory disclosuresCorrect
- BGreater investor confidence in published financial statements
- CA level playing field among competitors who face the same rules
- DReduced risk of fraud going undetected in the market
Explanation
Compliance costs are the resources spent meeting regulatory requirements, such as audit fees and preparing disclosures. The other options are benefits of regulation: confidence, fair competition and reduced fraud risk.
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