A decentralized organizational structure distributes decision-making authority across different business units or geographic regions. One major advantage is the ability to tap into a larger talent pool, as decision-making is not restricted to headquarters, and leadership opportunities exist at multiple levels.
(A) Greater cost-effectiveness.
Incorrect. A decentralized structure often increases costs due to duplicate resources, additional oversight, and inefficiencies from fragmented decision-making.
(B) Increased economies of scale.
Incorrect. Centralized organizations benefit more from economies of scale because they can standardize processes and consolidate purchasing power. Decentralization reduces these benefits by spreading decision-making across multiple locations.
(C) Larger talent pool. ✅
Correct. Decentralization allows organizations to recruit, develop, and retain talent in different locations, rather than relying solely on headquarters for leadership roles.
This aligns with IIA Standard 2110 – Governance, which emphasizes the importance of leadership distribution and talent management in organizations.
(D) Strong internal controls.
Incorrect. Centralized structures typically have stronger internal controls, as decision-making and risk management are closely monitored. Decentralization increases the risk of inconsistent controls across different units.
IIA Standard 2110 – Governance
COSO Framework – Organizational Structure and Risk Management
IIA GTAG – "Auditing Business Strategy Alignment"
Analysis of Answer Choices:IIA References:Thus, the correct answer is C, as decentralization expands the talent pool by enabling local decision-making and leadership development.
