1. Understandability criteria contribute to
Statement of the Board of Directors’
conclusions that are
A. Free from bias
B. Clear and comprehensive
C. Subject to different interpretations
D. Useful for decision making
2. Criteria that are embodied in laws or
regulations, or issued by authorized or
recognized bodies of experts that follow a
transparent due process are called
A. Suitable criteria
B. Established criteria
C. Specifically developed criteria
D. General criteria
3. For assurance engagements regarding
historical financial information, reasonable
assurance engagements are called
A. Audits
B. Reviews
C. Compilations
D. Examinations
4. Assurance services differ from consulting
services in that assurance services
I. Focus on providing advice
II. Focus on enhancing credibility of information
A. I only
B. II only
C. both I and II
D. neither I nor II
5. Which of the following has the power to
conduct an oversight into the quality of audits
of FS through the review of the quality control
measures instituted by auditors
A. Bureau of Internal Revenue
B. Securities and Exchange Commission
C. Board of Accountancy
D. Insurance Commission
6. The audited FS to be filed with the SEC shall
be accompanied by a
A. Management Report
B. Registration Statement
C. Statement of Management’s Responsibility
for Financial Statements
D.
Responsibility for FS
7. Competence as a CPA includes all of the
following except:
A. Having the technical qualifications to
perform an engagement
B. Possessing the ability to supervise and to
evaluate the quality of staff work
C. Warranting the infallibility of the work
performed
D. Consulting others if additional technical
information is needed
8. The principle of professional competence
and due care imposes which of the following
obligations on professional accountants
A. To maintain professional knowledge and skill
at the level required to ensure that clients or
employers receives 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 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 profession
D. Not to compromise professional or business
judgment because of bias, conflict of interest or
undue influence of others
9. According to the Code of Ethics, professional
competence may be divided into two phases:
attainment of professional competence and
maintenance of professional competence. The
attainment of professional competence
requires the following except
A. A high standard of general education
B. Specific education, training, and examination
in professionally relevant subjects
C. Whether prescribed or not, a period of work
experience
D. A continuing awareness and an
understanding of relevant technical
professional and business developments
10. Safeguards created by the profession,
legislation or regulation include the following
except
A. Continuing professional development
requirements
B. Professional standards
C. Firm-wide and engagement specific
safeguards
D. Educational, training and experience
requirements for entry into the profession
11. Which of the following is not a contingent
fee
A. A fee that is dependent upon the approval of
the assurance client’s loan application
B. An audit fee that is based on 5% of the
client’s adjusted net income for the current
year
C. A fee that is fixed by a court or other public
authority
D. An arrangement whereby no fee will be
charged unless a specified finding or result is
attained
12. These are fees calculated on a
predetermined basis relating to the outcome or
result of a transaction or the result of the work
performed
A. Contingent fees
B. Fixed fees
C. Predetermined fees
D. Commissions
13. As defined in PSQC 1,
______________________________ is process
comprising an ongoing consideration and
evaluation of the firm’s system of quality
control, including periodic inspection of
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
14. The following statements relate to the
engagement partner’s responsibility to conduct
timely reviews of the audit documentation to
be satisfied that sufficient appropriate evidence
has been obtained to support the conclusions
reached and for the auditor’s report to be
issued. Which is false?
A. The engagement partner’s review of the
audit documentation allows significant matters
to be resolved on timely basis to his/her
satisfaction before the auditor’s report is issued
B. The engagement partner should review all
audit documentation
C. The engagement partner should document
the extent and timing of the reviews
D. The reviews cover critical areas of judgment,
especially those relating to difficult or
contentious matters identified during the
course of the engagement, significant risks, and
other areas the engagement partner considers
important
15. The engagement partner should take
responsibility for the direction, supervision and
performance of the audit engagement in
compliance with professional standards and
regulatory and legal requirements, and for the
auditor’s report that is issued to be appropriate
in the circumstances. Supervision includes the
following, except
A. Tracking the progress of the audit
engagement
B. Addressing significant issues arising during
the audit engagement, considering their
significance, and modifying the planned
approach appropriately
C. Informing the members of the engagement
team of their responsibilities
D. Identifying matters for consultation or
consideration by more experienced
engagement team members during the audit
engagement
16. 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
17. Which of the following circumstances
would permit an independent auditor to accept
an engagement after the end of the reporting
period?
A. Expectation of the operating effectiveness of
controls
B. Issuance of a disclaimer of opinion as a result
of inability to conduct certain tests required by
PSAs due to the timing of the acceptance of the
engagement.
C. Remedy the limitations resulting from
accepting the engagement after the end of the
reporting period, such as those relating to the
existence of physical inventory
D. Receipt of an assertion from the predecessor
auditor that the entity will be able to continue
as a going concern
18. If the auditor is unable to agree to a change
of the engagement and is not permitted to
continue the original engagement, the auditor
should
A. Insist on continuing the original engagement
B. Express a qualified opinion
C. Express an adverse opinion
D. Withdraw from the engagement
19. Initial audit planning involves the following
matters, except
A. Identify the client’s reason for the
engagement
B. Schedule engagement staff and auditor’s
experts
C. Develop an overall audit strategy
D. Request that bank balances be confirmed
20. In performing an audit of financial
statements, the auditor should obtain a
sufficient knowledge of a client’s business and
industry to
A. Develop an attitude of professional
skepticism concerning management’s FS
assertions
B. Make constructive suggestions concerning
improvements to the clients internal control
C. Evaluate whether the aggregation of known
misstatements causes the FS taken as a whole
to be materially misstated
D. Understand the events and transactions that
may have an effect on the client’s FS
21. Which of the following should be included in
the audit plan?
I. The nature, timing and extent of planned risk
assessment procedures
II. The nature, timing and extent of planned
further audit procedures at the assertion level
A. I only
B. II only
C. both I and II
D. neither I nor II
22. In planning stage of an audit engagement,
the auditor is required to perform audit
procedures to obtain an understanding of the
entity and its environment, including its internal
control. These procedures are called:
A. Risk assessment procedures
B. Substantive tests
C. Tests of controls
D. Dual-purpose tests
23. In planning the audit engagement, the
auditor should consider each of the following
except:
A. The type of opinion that is likely to be
expressed
B. The entity’s accounting policies and
procedures
C Matters relating to the entity’s business and
the industry in which it operates
D. Materiality level and audit risk
24. In designing written audit programs, an
auditor should establish specific audit
objectives that relate primarily to the
A. Selected audit techniques
B. Cost-benefit of gathering audit evidence
C. Timing of audit procedures
D. Financial statement assertions
25. Before accepting an audit engagement, a
proposed auditor should make inquiries of the
previous auditor regarding the previous
auditor’s
A. Evaluation of all matters of continuing
accounting significance
B. Understanding as to the reasons for the
change of auditors
C. Awareness of the consistency in the
application of PAS/PFRS between periods
D. Opinion on any subsequent events occurring
since the previous auditor’s report was issued
26. What materiality level is used by the
auditor in determining which line items in the
FS are to be tested
A. Overall materiality
B. Performance materiality
C. Specific materiality
D. Individual materiality
27. Which of the required materiality level is
calculated by multiplying a certain percentage
by the appropriate benchmark which is either
an element or component of an entity’s FS
A. Overall materiality
B. Planning materiality
C. Scoping materiality
D. Specific materiality
28. Which of the following statements
concerning materiality is not correct
A. When establishing the overall audit strategy,
the auditor shall determine materiality for the
financial statements as a whole
B. If, in specific circumstances of the entity,
there is one or more particular classes of
transactions, account balances or disclosures
for which misstatements of lesser amounts than
materiality for the financial statements as a
whole could reasonably be expected to
influence the economic decisions user taken on
the basis of the FS, the auditor shall also
determine the materiality level or levels to
those particular classes of transactions, account
balances or disclosures
C. Determining materiality involves the exercise
of professional judgment
D. The materiality level for the FS as a whole
determined in the planning stage of the audit
should not be affected by changes in the
circumstances of the engagement
29. An auditor shall consider materiality when
I. Determining the nature, timing and extent of
audit procedures
II. Evaluating the effect of misstatements
A. I only
B. II only
C. both I and II
D. neither I nor II
30. In determining whether the work of the
internal auditor is likely to be adequate for
purposes of the audit, the external auditor shall
evaluate the internal auditor’s
A. Efficiency and experience
B. Independence and review skills
C. Training and supervisory skills
D. Competence and objectivity
31. An individual or organization possessing
expertise in field other than accounting or
auditing, whose work in that field is used by the
auditor to assist the auditor in obtaining
sufficient appropriate audit evidence.
A. Auditor’s expert
B. Management’s expert
C. Expert
D. Specialist
32. The auditor is required to maintain
professional skepticism throughout the audit.
Which of the following statements concerning
professional skepticism is false?
A. A belief that management and those
charged with governance are honest and have
integrity relieves the auditor of the need to
maintain professional skepticism
B. Maintaining professional skepticism
throughout the audit reduces the risk of using
inappropriate assumptions in determining the
nature, timing and extent of the audit
procedures and evaluating the results thereof
C. Professional skepticism is necessary to the
critical assessment of audit evidence
D. Professional skepticism is an attitude that
includes questioning contradictory audit
evidence obtained
33. The person, or class of persons, whether as
individuals or representatives of an entity,
responsible for the subject matter.
A. Professional Accountant
B. Responsible Party
C. Intended user/s
D. None of the above
34. Which of the following is an assurance
engagement
A. Compliance audit
B. Agreed-upon procedures engagement
C. Management consulting
D. Preparation of tax returns where no
conclusion is expressed
35. Persons who hold valid certificates as CPAs,
whether they be in public practice, commerce &
industry, government, or education
A. Professional accountant
B. Senior accounting practitioner
C. Auditor
D. Personnel in CPA firms
36. Auditing includes both a (an):
A. Documentation process and an evaluation
process
B. Evaluation process and a reporting process
C. Investigative process and a reporting process
D. Documentation process and a reporting
process
37. Professional judgment
A. Should be exercised in planning and
performing an audit of FS 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
38. Independent auditing can be best described
as:
A. A branch of accounting
B. A professional activity that measures and
communicates financial and business data
C. A discipline which attests to the result of
accounting the business transactions that are
financial in nature
D. A regulatory function that prevents the
issuance of improper financial information
39. The primary orientation of operational
auditing is towards
A. Future improvements to accomplish the
goals of management
B. The accuracy of the data reflected in
management’s financial records
C. The verification that a company’s financial
report is fairly presented
D. Past protection provided by existing internal
control
40. The main objective of operations audit is:
A. To evaluate the integrity of the accounting
information
B. To verify fulfillment of plans and sound
business requirements
C. To measure and evaluate the effectiveness of
controls
D. To produce results as desired or directed
41. Which of the following types of audit are
most similar
A. Operational audits and compliance audit
B. Independent financial statement audit and
operational audits
C. Compliance audits and independent financial
statement audits
D. Internal audits and independent financial
statement audits
42. Which of the following best describes the
operational audit
A. It requires the constant review by internal
auditors of the administrative controls as they
relate to operations of the company
B. It concentrates on implementing financial
and accounting control in a newly organized
company
C. It attempts and is designed to verify the fair
presentation of a company's results of
operations
D. It concentrates on seeking out aspects of
operations in which waste would be reduced by
the introduction of controls
43. Internal auditing relates to an
A. Audit which serves the needs of the
management
B. Audit which is performed by a professional
practitioner as an independent contractor
C. Audit which is incidentally concerned with
the detection and prevention of fraud
D. Audit wherein the auditor should be
independent of management both in fact and in
mental attitude
44. An audit can have significant effect on:
A. Information risk
B. Business risk
C. The risk-free interest rate
D. All of these
45. Which of the following statements
concerning a CPA’s disclosure of confidential
client information is ordinarily correct?
A. Disclosure may be made to any party on
consent of the client
B. Disclosure should not be made even if such
disclosure will protect the CPA’s professional
interests in legal proceedings
C. Disclosure should be made only if there is a
legal or professional duty to make the
disclosure
D. Disclosure may be made to any government
agency without subpoena
46. The primary objective of this government
agency is to maintain price stability conducive
to a balanced and sustainable economic
growth. It also aims to promote and preserve
monetary stability and convertibility of the peso
A. Bureau of Internal Revenue
B. Securities and Exchange Commission
C. Philippine Deposit and Insurance
Corporation
D. Bangko Sentral ng Pilipinas
47. A profession is distinguished by certain
characteristics including:
A. Mastery of a particular intellectual skill,
acquired by training and education
B. Adherence by its members to a common
code of values and conduct established by its
administrating body, including maintaining an
outlook which is essentially objective
C. Acceptance of a duty to a society as a whole
D. All of these
48. This body is created to assist the BOA in the
attainment of the objective to continually
upgrade accounting education in the
Philippines, thus making Filipinos CPAs globally
competitive
A. PICPA CPD Council
B. Education Technical Council
C. Accounting Teachers’ Conference
D. Association of CPAs in Education
49. A certificate under seal, bearing a
registration number, issued to an individual, by
the PRC, upon recommendation by the BOA,
signifying that the individual has complied with
all the legal and procedural requirements for
such issuance is known as certificate of:
A. Registration
B. Accreditation
C. Identification
D. Quality review
50. The following are regarded by RA 9298 as
CPA services in public practice if offered or
rendered on a fee basis and to more than one
client except:
A. Preparation and signing of audit reports
B. Preparation of income tax returns when
related to accounting procedures
C. Representation of clients before
governmental agencies on matters about
business regardless of its relation to accounting
D. Design and installation of accounting system
51. The government agency tasked by law of
implementing and enforcing the regulatory
policies of the national government with
respect to the regulation and licensing of the
various professions and occupations under its
jurisdiction
A. Professional Regulation Commission
B. Professional Regulatory Board of
Accountancy
C. Commission on Audit
D. Department of Justice
52. The latest CPA board exam was divided into
how many subjects.
A. 7
B. 8
C. 6
D. 5
53. Which of the following names illustrates a
firm name, as contrasted to the name of an
individual CPA and a partnership name
A. Juan D. Cruz, CPA
B. Jose D. Cruz and Associates
C. Cruz and Reyes, CPAs
D. Cruz, Reyes and Company
54. Which of the following is not true
A. A registered professional shall be
permanently exempted from CPD requirements
upon reaching the age 65 years old
B. A CPA who studied abroad shall be
exempted from compliance with CPD provided
he/she has been out of the country for at least
two years immediately prior to the date of
renewal
C. PRC CPD Council shall accept, evaluate, and
approve applications for accreditation of CPD
providers
D. None of the above
55. Regarding advertising, the following are not
allowed, except:
A. Self-laudatory statements
B. Discrediting, disparaging, or attacking other
firms or CPA practitioners
C. Referring to, using or citing actual or
purported testimonials by third parties
D. Publishing the contact details of the CPA
firm
56. The CPA shall be required to indicate which
of the following numbers on the documents
he/she signs, uses or issues in connection with
the practice of the profession
A. CPA certificate of registration number
B. Professional Identification Card
C. Professional tax receipt
D. All of these are required to be indicated
57. Under this method of billing a client, the
external auditors charges on the basis of actual
time spent by principals/partners, supervisors,
seniors and juniors at predetermined rates
agreed upon with the client, subject to a
maximum amount
A. Maximum fee basis
B. Per diem basis
C. Flat fee basis
D. Retainer basis
58. CPAs may practice under the following
forms of organization except:
A. Sole proprietorship
B. General Partnerships
C. Limited Partnership
D. Corporation
59. The familiarity threat that may be created
by using the same senior personnel on an
assurance engagement over a long period of
time and the safeguards that might be
appropriate to address such a threat.
Accordingly, safeguards may include:
A. Rotation of senior personnel
B. Engagement quality control review
C. Both a and b
D. Neither a nor b
60. In relation to completed engagements,
these are proceduraes designed to provide
evidence of compliance by engagement teams
with the firm’s quality control policies and
procedures
A. Peer review
B. Engagement quality control review
C. Inspection
D. Monitoring
61. A CPA should maintain objectivity and free
of conflicts of interest when performing:
A. All audits, but not any other professional
services
B. All attestation services, but not other
professional services
C. All attestation and tax services, but not
other professional services
D. All professional services
62. Les, CPA-Lawyer, has a law practice. Les has
recommended one of her clients to Lee, CPA.
Lee has agreed to pay Les 12% of the fee for
services rendered by Lee to Les' clients. Who, if
anyone, is in violation of the Code of Ethics?
A. Les and Lee
B. Les only
C. Lee only
D. Neither of them
63. The rendering of two or more types of
professional services concurrently:
A. Is a violation of the code of ethics
B. Does not by itself impair objectivity
C. Would impair independence
D. Is inconsistent with the practice of public
accountancy
64. Inherent and control risk differ from
detection risk in that detection risk is
A. Elements of audit risk while inherent and
control risks are not
B. Change at the auditor’s discretion while
inherent and control risks are not
C. Functions of the client and its environment
and while inherent and control risks are not.
D. None of the above
65. The independent auditor is most concerned
with which of the following:
A. Accuracy and reliability
B. Promotion of operational efficiency
C. Adherence to prescribed managerial policies
D. Attainment of the organization’s objective
66. An auditor obtains knowledge about a new
client’s business and its industry to
A. Make constructive suggestions concerning
improvements to the client’s internal control
B. Develop an attitude of professional
skepticism concerning management’s FS
assertions
C. Evaluate whether the aggregation of known
misstatements causes the FS taken as a whole
to be materially misstated
D. Understand the events and transactions that
may have an effect on the client’s FS
67. One of the following refers to an ethical
responsibility of the auditor
A. Confirm the cash balances
B. Exercise due professional care
C. Join professional society
D. Destroy confidential relationship with client
68. Test of controls are used to test whether
controls are:
A. Operating effectively
B. Placed in operation or implemented
C. Properly incorporated in the FS
D. Properly documented by the client
69. According to PSA 315, the following
procedures are used to obtain an understanding
of the entity and its environment, except:
A. Inquiries of management
B. Confirmation of accounts receivables
C. Observation and inspection
D. Analytical procedures
70. These are the operational approaches by
which management intends to achieve its
objectives
A. Strategies
B. Planning methods
C. Business risk approaches
D. Operational plans