ASUPRIN Testbanks

1. The following statements relate to the accounting profession.

I. To merit public trust and confidence, the professional person must convince the
public that he will place public service ahead of personal reward.
II. A CPA certificate is evidence of basic competence in the discipline of accounting
at the time the certificate is granted.
III. A code of professional conduct is one of the most important distinguishing
characteristics of a profession.

State whether the foregoing statements are true or false.

A. All of the statements are true.
B. Only one of the statements are true.
C. Only two of the statements are true.
D. All of the statements are false.

2. The following are examples pf conditions and events that may indicate the existence of
risks of material misstatement, except:
A. Operations in regions that are economically unstable, for example, countries with
significant currency devaluation or highly inflationary economies.
B. Changes in the supply chain.
C. Changes in key personnel including departure of key executives
D. Low degree of complex regulation.

3. When an auditor is assessing the auditability of a small business client, the auditor
should focus upon:
A. The integrity of management and the adequacy of the client’s internal control
systems.
B. Whether the auditor has adequate resources to accomplish the audit.
C. The amount of risk the audit represents and the audit fee which can be collected.
D. Whether the client’s accounting personnel are well trained and professionally
qualified.

4. An external audit:
A. Complements an internal audit.
B. Overlaps an internal audit.
C. Contradicts an internal audit.
D. Confirms an internal audit.

5. Theoretically, it is possible to provide an infinite range of assurance from a very low

level of assurance to an absolute level of assurance. In practice, the professional
accountant cannot provide absolute assurance because of the following reasons,
except:
A. The lack of expertise of the CPA in performing the engagement process.
B. The inherent limitations of accounting and internal control systems.
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C. The use of judgement in gathering evidence and drawing conclusions based on that
evidence.
D. The use of selective testing.

6. The two most important qualities for an operational auditor are:

A. Independence and competence
B. Competence and technical training
C. Personality and appearance
D. Competence and sufficient experience

7. Which of the following is least likely to uncover fraud?

A. External auditors
B. Internal auditors
C. Internal controls
D. Management

8. Which of the following is incorrect regarding the general principles of audit?

A. The auditor should comply with the Code of Ethics for Professional Ethics for Certified
Public Accountants promulgated by the Philippine Professional Regulation Commission.
B. The auditor should conduct an audit in accordance with PSAs.
C. The auditor should plan and perform an audit with an attitude of professional
skepticism recognizing that circumstances may exist that cause the financial statements
to be materially misstated.
D. The auditor would ordinarily expect to find evidence to support management
representations and assume they are necessarily correct.

9. Professional judgment
A. Should be exercised in planning and performing an audit of financial statements but
need not be documented.
B. Can be used as the justification for the decisions made by the auditor that are not
supported by the facts and circumstances of the engagement.
C. Is necessary in the evaluation of management’s judgments in applying the entity’s
applicable financial reporting framework.
D. Is not used in making decisions about materiality and audit risk.

10. The auditor is required to comply with all PSAs relevant to the audit of an entity’s
financial statements. A PSA is relevant to the audit when
I. The PSA is in effect.
II. The circumstances addressed by the PSA exist.
A. I only
B. II only
C. Either I or II
D. Both I and II
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11. Which of the following factors most likely would influence an auditor’s determination of
the auditability of an entity’s financial statements?
A. The complexity of the accounting system.
B. The existence of related party transactions.
C. The adequacy of the accounting records.
D. The operating effectiveness of control procedures.

12. In any case in which the CPA or the CPA’s assistant are not qualified to perform the
work, a professional obligation exists to
A. Acquire the requisite knowledge and skills.
B. Suggest someone else who is qualified to perform the work.
C. Decline the engagement.
D. Any of the above.

13. The first standard of fieldwork, which states that the work is to be adequately planned,
and assistants, if any, are to be properly supervised, recognizes that
A. Early appointment of the auditor is advantageous both to the auditor and to the
client.
B. Acceptance of an audit engagement after the close of the client’s fiscal year is
generally not permissible.
C. Appointment of the auditor subsequent to the physical count of inventories requires
a disclaimer of opinion.
D. Performance of substantial parts of the engagement is necessary at interim dates.

14. The third general standards states that due care is to be exercised in the performance of
the examination. This standard should be interpreted to mean that a CPA who
undertakes an engagement assumes a duty of perform.
A. With reasonable diligence and without fault or error.
B. As a professional who will assume responsibility for losses consequent upon error of
judgment.
C. To the satisfaction of the client and third parties who may rely upon it.
D. As a professional possessing the degree of skill commonly possessed by others in the
field.

15. To exercise due professional care, the auditor should examine all available corroborating
evidences supporting management’s assertions.

The proper attitude of an auditor who is performing an examination in accordance with

GAAS should be professional responsiveness.

GAAS means rules acknowledged by the accounting profession because of their

universal application.
A B C D
First statement True False True True
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Second statement False False True False

Third statement False False True True

16. A CPA should comply with applicable generally accepted auditing standards on every
engagement
A. Without exception.
B. Except in examinations that results in a qualified report.
C. Except in engagements where the CPA is associated with unaudited financial
statements.
D. Except in examinations of interim financial statements.

17. Which of the following quality control procedures is a monitoring activity?

A. Evaluates the firm’s independence and its ability to serve the prospective client.
B. Reviews and tests compliance with the firm’s general quality control policies and
procedures.
C. Designates individuals as specialists to serve as authoritative sources and define their
authority in consultative situations.
D. Monitors continuing professional education programs and maintain appropriate
records, both on a firm and an individual audit engagement basis.

18. In pursuing its quality control objectives with respect to assigning personnel to
engagements, a public accounting firm may use policies and procedures such as
A. Rotating employees from assignment to assignment on a random basis to aid in the
staff training effort.
B. Requiring timely identification of the staffing requirements of specific engagements
so that enough qualified personnel can be made available.
C. Allowing staff to select the assignments of their choice to promote better client
relationships.
D. Assigning a number of employees to each engagement in excess of the number
required so as not to overburden the staff and interfere with the quality of the audit
work performed.

19. Which of the following types of auditing is performed most commonly by CPAs on a
contractual basis?
A. Internal auditing
B. BIR auditing
C. Government auditing
D. External auditing

20. The term “fraud” refers to an intentional act by one or more individuals among
management, those charged with governance, employees, or third parties, involving the
use of deception to obtain an unjust or illegal advantage. Which statement is correct
regarding fraud?
A. Auditors make legal determinations of whether fraud has actually occurred.
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B. Misstatement of the financial statements may not be the objective of some frauds.
C. Fraud involving one or more members of management or those charged with
governance is referred to as “employee fraud”.
D. Fraud involving only employees of the entity is referred to as “management fraud”.

21. An auditor is unable to obtain absolute assurance that misstatements due to fraud will
be detected for all of the following except
A. Employee collusion
B. Falsified documentation
C. Need to apply professional judgment in evaluating fraud risks factor
D. Professional skepticism

22. Which of the following statements does not properly describe an element of the
theoretical framework of auditing?
A. The data to be audited can be verified.
B. Short-term conflicts may exist between the managers who prepare the data and the
auditors who examine them.
C. Auditors act on behalf of management
D. An audit benefits the public.

23. Which of the following conditions or events may create incentives/pressures to commit
fraud?
A. Inadequate system of authorization and approval of transactions.
B. Lack of mandatory vacations for employees performing key control functions.
C. Excessive pressure on management or operating personnel to meet financial targets
established by those charged with governance, including sales or profitability incentive
goals.
D. Inadequate access controls over automated records.

24. If specific information comes to an auditor’s attention that implies the existence of
possible noncompliance with laws and regulations that could have a material, but
indirect effect on the financial statements, the auditor should next
A. Apply audit procedures specifically directed to ascertaining whether a noncompliance
with laws and regulations has occurred.
B. Seek the advice of an informed expert qualified to practice law as to possible
contingent liabilities.
C. Report the matter to an appropriate level of management at least one level above
those involved
D. Discuss the evidence with the client’s audit committee or others with equivalent
authority.

25. The auditor’s responsibility for the detection of client’s noncompliance with laws and
regulation is:
A. Greater than for errors or fraud.
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B. Less than for errors or fraud.

C. Restricted to information that comes to his attention.
D. The same as it is for errors or fraud.

26. The in-charge auditor most likely would have a supervisory responsibility to explain to
the staff assistants
A. That immaterial fraud is not to be reported to the client’s audit committee.
B. How the results of various auditing procedures performed by the assistants should be
evaluated.
C. What benefits may be attained by the assistants’ adherence to established time
budgets.
D. Why certain documents are being transferred from the current file to the permanent
file.

27. The decision as to how much evidence to be accumulated for a given set of
circumstances is
A. Provide by following the generally accepted accounting principles.
B. One requiring professional judgment
C. Determined by statistical analysis
D. Provided in the Philippine Standards on Auditing.

28. The Philippine Standards on Auditing issued by the Auditing and Assurance Standards
Council (AASC)
A. Are interpretations of generally accepted auditing standards.
B. Are the equivalent of laws for audit practitioners.
C. Must be followed in all situations.
D. Are optional guidelines which an auditor may choose not to follow when conducting
an audit.

29. Firm includes the following, except

A. A sole practicing professional accountant
B. An entity that controls a partnership of professional accountants.
C. An entity controlled by a partnership of professional accountants.
D. A sole practitioner, partnership or corporation of professional accountants.

30. Which of the following is a distinguishing mark of the accountancy profession?

A. A drive to excellence.
B. Acceptance of the responsibility to act in the public interest.
C. Professional objectivity
D. Professional skepticism

31. When obtaining an understanding of the entity and its environment, including its
internal control, the auditor may identify events or conditions that indicate an incentive
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or pressure to commit fraud or provide an opportunity to commit fraud, such events or

conditions are referred as
A. Fraud conditions
B. Fraud risk factors
C. Fraudulent activities
D. Fraud environment

32. A procedure in which a quality control partner periodically tests the application of
quality control procedures is most directly related to which quality control element?
A. Engagement performance
B. Independence, integrity and objectivity
C. Monitoring
D. Personnel management

33. The principle of professional competence and due care imposes which of the following
obligations on professional accountants?
A. To maintain a professional knowledge and skill at the level required to ensure that
clients or employees receive competent professional service.
B. To refrain from disclosing confidential information obtained as a result of professional
and business relationships without proper and specific authority unless there is a legal
or professional right or duty to disclose.
C. To comply with relevant laws and regulations and avoid any situation that may bring
discredit to the provision.
D. Not to compromise professional or business judgement because of bias, conflict of
interest or undue influence of others.

34. This quality control element requires a firm to establish policies and procedures to
provide it with reasonable assurance that engagements are performed in accordance
with professional standards and regulatory and legal requirements, and that the firm or
the engagement partner issue reports that are appropriate in the circumstances.
A. Ethical requirements
B. Engagement performance
C. Monitoring
D. Human resources

35. As defined in PSQC 1, ____________________ is a process comprising an ongoing

consideration and evaluation of the firm’s system of quality control, including a periodic
inspection of a selection of completed engagements, designed to provide the firm with
reasonable assurance that its system of quality control is operating effectively.
A. Monitoring
B. Inspection
C. Engagement quality control review
D. Supervision
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36. Who should take responsibility for the overall quality on each audit engagement?
A. Engagement quality control reviewer
B. Engagement partner
C. Engagement team
D. CPA firm

37. The implementation of quality control procedures that are applicable to the individual
audit engagement is the responsibility of the
A. CPA firm
B. Engagement quality control reviewer
C. Engagement team
D. Expert contracted by the firm in connection with the audit engagement

38. Which of the following characteristics most likely would heighten an auditor’s concern
about the risk of material misstatement arising from fraudulent financial reporting?
A. Excessive interest by management in increasing stock price or earnings trend through
aggressive accounting practices.
B. Effective accounting and internal control systems.
C. Low turnover of senior management, legal counsels, or those charged with
governance.
D. Management is dominated by a single person or a small group with compensating
controls such as effective oversight by those charged with governance.

39. Which of the following circumstances most likely would cause an auditor to consider
whether material misstatements exist in an entity’s financial statements?
A. Those charged with governance exercise oversight of management’s processes for
identifying and responding to the risks of fraud in the entity and the internal control that
management has established to mitigate these risks.
B. Significant, unusual, or highly complex transactions, especially those close to an
entity’s financial year-end that pose difficult “substance over form” questions.
C. Operating profits making the threat of bankruptcy, foreclosure, or hostile takeover.
D. Low vulnerability to changes in technology, product obsolescence, or interest rate.

40. Which of the following statements describes why an audit that is properly planned and
performed in accordance with PSAs may not detect a material misstatement resulting
from fraud?
A. Fraud may involve carefully laid out plans of concealment.
B. The auditor did not consider audit risk factors for accounts having pervasive effects
on the financial statement.
C. An audit is designed to provide reasonable assurance of detecting misstatements
arising from errors, but there is no similar responsibility concerning material
misstatements resulting from fraud.
D. The risk of the auditor not detecting a material misstatement resulting from
employee fraud is greater than for management fraud.