The principle of 'manage by exception' in PRINCE2 involves setting tolerances for each project objective to establish clear limits of delegated authority. This allows for efficient use of management time and enables project managers to make decisions within the tolerance limits, while escalating issues that go beyond these limits. References: PRINCE2 Foundation Handbook, Manage by Exception section.

The approval needed to replace a Stage Plan with an Exception Plan must come from the Project Board. This is because the Exception Plan is created when a Stage Plan is forecast to exceed its tolerance levels, and the Project Board is responsible for approving such significant changes in the project's direction or management.
References: PRINCE2 Foundation official documentation and study materials.

According to the 'continued business justification' principle of PRINCE2, if a project can no longer be justified - meaning it no longer meets its original or updated justification for a viable return on investment
- the funds allocated to it should be returned to corporate, programme management, or the customer. This ensures that resources are not wasted on unjustifiable projects.References: = PRINCE2 7 Foundation handbook and online resources