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ACCA Applied Knowledge · Financial Accounting · The regulatory framework

Which of the following statements about the need for a regulatory framework is correct?

Legal requirements, accounting standards and stock exchange rules work together, because law alone seldom provides detailed recognition and measurement guidance. Standards fill that gap and listing rules add extra requirements. Audit checks compliance but does not replace standards, and no framework eliminates manipulation entirely.

  1. AA principles-based set of standards removes any possibility of manipulation
  2. BCompany law alone is always sufficient because it prescribes detailed measurement rules for every transaction
  3. CLegal requirements, accounting standards and stock exchange rules together provide the framework, because law alone seldom gives detailed recognition and measurement guidanceCorrect
  4. DAccounting standards are unnecessary where an entity is audited

Explanation

Company law usually sets filing, form and general duties but not detailed measurement rules, so accounting standards fill the gap and listing rules add further requirements. Principles-based standards still allow some judgement, and audit checks compliance rather than replacing standards.

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