PRELIMS

1. There is a universal formula or pattern to achieve good governance.

True
False
2. A characteristic of good governance which ensures that all its members feel that they have a stake in it
and do not excluded from the mainstream of society.
Equity and Inclusiveness
3. It means the process of decision-making and the process by which decisions are implemented or not
implemented through the exercise of power or authority by leaders of the country and/or organizations.
Governance
4. The Board of Directors must be composed of an appropriate range and mix of expertise, diversity,
knowledge and added value.
True
False
5. It means that decisions taken and their enforcement are done in a manner that follows rules and
regulations.
Transparency
6. Accountability means doing what your job is asking you to do.
True
False
7. Being responsible means also being accountable at the same time.
True
False
8. To practice transparency, the Board of Directors must divulge all information to the shareholders.
True
False
9. As long as there are individuals that needs leading, governance will be seen.
True
False
10. The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management
that can deliver long-term success of the company.
True
False
11. Good governance only focuses on long-term goals.
True
False
12. These are the people interested in the organization/business.
Stakeholders
13. Responsiveness must be made to serve the needs of all stakeholders within a reasonable timeframe.
True
False
14. Partial enforcement of laws requires an independent judiciary and a partial and incorruptible police
force.
True
False
15. In achieving good governance, the top management down to the bottom employee must be on the same
page in doing their objectives and goals.
True
False
16. They set the accounting and auditing standards as well as their interpretations.
Board of Accountancy
17. Financial reporting is considered as one of management’s responsibilities.
True
False
18. External auditors only perform financial audits.
True
False
19. The company should ensure that both material and immaterial as well as reportable non-financial and
sustainability issues are disclosed.
True
False
20. It means “Doing the right things”.
Effectiveness
21. They are the ones who are in charge of the day-to-day operations of the business.
Employees
22. The body who is in charge of the CPA Licensure Examination.
Board of Accountancy
23. The rights of stakeholders established by law, by contractual relations and through voluntary
commitments must be respected.
True
False
24. They are the major representative of stockholders to ensure that the organization is run according to the
organization’s charter.
Board of Directors
25. These are the processes designed and effected by the board of directors, senior management, and all
levels of personnel to provide reasonable assurance on the achievement of objectives through efficient
and effective operations.
Internal Control
26. Any individual, organization or society at large who can either affect and/or be affected by the
company’s strategies, policies, business decisions and operations, in general.
Stakeholders
27. The company can be headed by an incompetent individual provided that this individual will undergo
series of trainings and workshops.
True
False
28. The one who is in charge with the regulations of both partnership and corporations in the Philippines.
Securities and Exchange Commission
29. They audit to evaluate efficiency of operations
Internal Auditors
30. Board of directors are in every way accountable to the shareholders and other stakeholders.
True
False

EXAM
1. This is a function of management which implies measurement of accomplishment against the standards
and correction of deviation if any to ensure achievement of organizational goals.
Planning
Organizing
Directing
Controlling

2. Compensation of executives has soared over the last forty plus years to more than 400 times the pay for
average workers. Suggested remedies to rein in executive compensation especially during time of
corporate wrong doing include each of the following except for:
Disgorgement
Limits on executive compensation
Say on Pay rules
Clawbacks

3. The Sustainability Accounting Standards Board provides standards to enhance

Accountability
Monitoring and control
Safeguards and internal control
Disclosure

4. Through this principle, each member shall put the broader interest of the profession above his personal
ambition
Service to others
Integrity and objectivity
Professional competence and socio civic responsibilities
Solidarity and teamwork

5. One of the duties of a board of directors is to protect the interests of stakeholders. Which of the
following is an example of protecting such interests?
Back dating options for executives
Deceptive business practices
Off balance sheet financing
Transparent financial reporting

6. Social responsibility is an ethical principle included in

Personal ethics
Professional ethics
Business ethics
Corporate ethics

7. The following are the most important characteristics of the professions, except:
Standard of admission to the profession
Professional competence
Public service
Public confidence

8. Assume you are an ethical person and feel uncomfortable about the way your company is reporting
earnings. You believe it is deliberately overstated. If you want to bring your concerns to upper
management, in which person-organization fit is it most likely that you will do so?
High organizational ethics, low individual ethics
Low organizational ethics, high individual ethics
Low organizational ethics, low individual ethics
High organizational ethics, high individual ethics

9. These are considered as shareholders engagement touch points in the company, except:
Corporate Communications Group
Office of the Corporate Secretary
Customer Relations Office
None of the above

10. To safeguard the integrity in financial reporting, the business firm should do the following except
Disclose the policy concerning trading in company securities by directors, officers and employees
Establish an audit committee
Disclose the functions reserved to the board and those delegated to management
Request the external auditor to attend the annual general meeting

11. The basic principle of “accountability” for effective governance answers the following questions
positively, except
Does the composition mix of the board membership ensure an appropriate range and risk of expertise diversity;
knowledge added value?
Does the board lay solid foundations for management oversight?
Does the board promote objective, ethical and responsible decision making?
Does the board recognize and manage risk? – Corporate Control

12. The characteristic of good governance where fair legal framework is enforced impartially is
Equity
Accountability
Participation
Rule of law

13. Each of the following is a pillar of corporate governance except for:

Responsibility
Accountability
Fairness
Independence

14. The corporate governance system includes each of the following elements except for:
Board of directors
Internal controls
Executive compensation policies
Monitoring by top management

15. To encourage enhanced performance by the board and management, it is recommended that the
following should be adopted except:
Distinguish between non-executive director’s remuneration from that of executives
Disclosure of the process for performance evaluation of the board, its committees, individual directors and by
executives.
Establish policies on risk oversight and management
A remuneration committee

16. “Transparency and full disclosure” principle advocates the following except
Meeting the information needs of investment communities
Sound disclosure policies and practices
Safeguards integrity in financial reporting
Solid foundations for management oversight - Accountability

17. Approving annual financial reports and other public documents are specific responsibilities of
Management
Board of Directors
Shareholders
External Auditors

18. Providing oversight of the internal and external audit function, the process of preparing the annual
financial statements and public reports on internal control are the responsibility of
Board of directors
Chief executive officer
Chief financial officer
Audit committee of the board of directors

19. Is responsible for ensuring the accuracy, timeliness of public reporting of financial and other
information for public companies.
External auditors
Securities and Exchange Commission
Shareholders
Management

20. Who performs audit of companies for compliance with company policies and laws, audits efficiency of
operations and periodic evaluation and test of controls?
External auditors
Internal auditors
Commission on Audit
Chief accountant
 21. An independent director is expected to except:
Apply expertise and skills in the corporation’s best interest
Asset management to keep performance objectives at the top of its agenda
Respect the collective, cabinet nature of the board’s decision
Act as conduit between the board and the organization

22. What are the four pillars of corporate governance?

Respect, accountability, fairness and transparency.
Responsibility, accountability, firmness and transparency.
Responsibility, accountability, fairness and transparency.
Respect, accountability, firmness and transparency.

23. A characteristic of good governance wherein the processes and institutions produce the best results that
meet the needs of society without wasting the resources.
Effectiveness and Efficiency
Equity and Inclusiveness
Participation
Transparency

24. They provide the effective oversight through election of board members, approval of major initiatives
such as buying or selling of stock and annual reports on management compensation.
Board of Directors
Stakeholders
Shareholders
Non-executive Directors

25. Strong corporate governance relies on a strong board of directors. Which of the following would be a
strong candidate to be a board director for XYZ, Inc.?
Community member who has already served on the board 15 years.
Investor who has a multi-million dollar joint venture with the CEO and CFO.
Retired controller of a Fortune 1000 company.
Community member who receives annual large consulting contracts from XYZ.

26. It is the system of stewardship and control to guide organizations in fulfilling their long-term economic,
moral, legal and social obligations towards their stakeholders.
Public Governance
Global Governance
Corporate Governance
Project Governance

27. Internal control over financial reporting includes each of the following elements except for:
Maintaining accurate financial records
Providing reasonable assurance that receipts and expenditures are recorded based on proper authorization by
management
External audit conducted in accordance with generally accepted auditing standards
Adhering to company policies and procedures

28. An ethical principle which requires a professional to be straightforward and honest in all professional
and business relationships.
Professional Competence
Solidarity
Integrity
Socially Responsible

29. Unless obligated by law, a professional should not disclose or use such information unless specific
authority has been given.
Professional Competence
Confidentiality
Integrity
Professional Behavior

30. Ethics is simply making the moral and right decisions while engaging in business activities.
True
False

31. What is the main purpose of business ethics?

To help business and would-be business to determine what business practices are right and what are wrong.
To make businessmen realize that they cannot employ double standards to the actions of other people and to
their own actions
To show businessmen that common practices which they have though to be right because they see other
businessmen doing it, are really wrong.
To serve as a standard or ideal upon which business conduct should be based.

32. A party that has an interest in a company and can either affect or be affected by the business.
Shareholders
Management
Employees
Stakeholders

33. They set accounting and auditing standards dictating underlying financial reporting and auditing
concepts, set the expectations of audit and accounting quality.
Audit Committee
External Auditors
Board of Accountancy
Management

34. The governing body elected by the stockholders that exercises the corporate powers of a corporation,
conducts all its business and controls its procedures.
Board of Directors
Governance
Management
Stockholders

35. A shareholder is a stakeholder; but not all stakeholders are shareholders.

True
False

36. These shall cover the company’s subsidiaries, as well as affiliates and any party that the company exerts
direct or indirect control over the company.
Shareholder
Related Party
Conglomerate
Third Party

37. These are the mechanisms, rules, and procedures implemented by a company to ensure the integrity of
financial and accounting information, promote accountability, and prevent fraud.
Internal Control
Ethical Principles
Code of Governance
Values and Philosophies

38. This is a function of management which implies measurement of accomplishment against the standards
and correction of deviation if any to ensure achievement of organizational goals.
Planning
Organizing
Directing
Controlling

39. This is the key requirement of good governance as it is the willingness to accept and take responsibility
for one's actions.
Transparency
Stewardship
Accountability
Corporate Control

40. Anesku is the chief accounting officer of XYZ Co. He believes the financial statements are accurate but
he has been asked by the CFO to accelerate the recording of revenue at the end of the year to push a
material amount that should be reported next year into the current year. If Anesku is an ethical
accountant he should react by:
Going along with the request as a one-time concession to the CFO.
Refuse to go along with the request and report the matter to the board of directors
Discuss the matter with the CEO
Firing the CFO

MIDTERMS
1. Which of the following statements about business ethics is true?
a. A firm that has ethical management will succeed financially.
b. Codes of ethics should cover every business ethics issue.
c. Business ethics focuses more on laws than on values.
d. Individuals apply the same ethical rules in business as they do at home.
e. Conflict or trade-offs do not exist between profits and business ethics.

2. Employees' perceptions of their firm as having an ethical climate lead to which of the following?
a. Lack of focus on goals
b. Greater focus on education
c. Increased community involvement
d. Improved relationships with competitors
e. Performance-enhancing outcomes
3. Investors are concerned about business ethics because they know that misconduct can _______.
a. harm the ability to monitor changes
b. increase prices of consumer products
c. cause delays in government intervention
d. lower stock prices
e. complicate business financial reporting

4. When an organization has a strong ethical environment, it usually focuses on the core value of placing
whose interests first?
a. Customers'
b. Employees'
c. Stockholders'
d. Suppliers'
e. Distributors'

5. What happens when society deems a particular business action as wrong or unethical?
a. Legislation usually follows.
b. The guilty individual is jailed.
c. Self-regulation is deemed a failure.
d. The company goes bankrupt.
e. Fines automatically follow.

6. Specific and pervasive boundaries for behavior that should not be violated are known as _______.
a. philosophy
b. values
c. principles
d. business ethics
e. morals

7. The term that comprises organizational principles, values, and norms that may originate from
individuals, organizational statements, or from the legal system that primarily guides individual and
group behavior in business is defined as _______.
a. stakeholder orientation
b. values
c. principles
d. business ethics
e. integrity management

8. As more than a compliance program, what is business ethics becoming?

a. An integral part of management’s efforts to achieve competitive advantage
b. A guaranteed way to earn higher financial returns
c. Mainly a government regulatory issue
d. An initiative led by nonprofit organizations
e. A program that decreases profits but increases societal benefits
 9. Employees who view their organizational culture as ethical are more likely to _______.
a. ask for a raise
b. use their personal moral philosophies in decision making
c. make personal sacrifices for the organization
d. gain more organizational training
e. have a greater desire to become managers themselves

10. When building long-term relationships between businesses and consumers, which of the following is
essential for success?
a. Profit
b. Governance
c. Trust
d. Knowledge
e. A code of ethics

11. The following are examples of unethical practices of employers except

A. Acceptance of gifts from a customer of business as his employer in exchange for a favor that is
detrimental to its interest of his employer
B. Engagement in the same type of business as his employer
C. Disclosure of confidential company information to someone else for personal gain
D. Application for a loan from his employer to settle personal liabilities

12. Examples of direct misrepresentation about the product include the following except:
A. False advertising
B. Deceptive packaging
C. Mislabeling
D. Caveat emptor

13. Sustainability can broadly be defined as

A. The short-term maintenance of systems according to environmental, economic and social considerations
B. The long-term maintenance of processes according to environmental, economic and cultural
considerations.
C. The short-term maintenance of systems according to environmental, political and social considerations.
D. The long-term maintenance of systems according to environmental, economic and social considerations.

14. Which of the following statements is correct?

A. Business ethics is not a real concept as the rules and ethics of everyday life don't apply to the world of
business.
B. Business Ethics is the study of business situations, activities and decisions where issues of right and
wrong are addressed.
C. Business ethics cannot be defined as a real concept as it is an oxymoronic term.
D. Business ethics is concerned with the study of assessing the activities of a business based on their
profitability.

15. What does the importance of ethical behavior, integrity and trust call into question?
A. What to do next
B. The extent to which managers should attempt to change the underlying beliefs and values of individual
followers
C. Who does what
D. None of the above
E. All of the above

1. Businesses have _____ within society and have the potential to provide a ____ to society while
____ has the potential to inflict enormous harm on individuals, communities and the environment.
A. Little power, Small contribution, Business malpractice
B. Little power, Major contribution, Corporate social responsibility
C. Huge power, Small contribution, Corporate social responsibility
D. Huge power, Major contribution, Business malpractice

2. Examples of direct misrepresentation about the product include the following except
A. Adulteration
B. Short merging
C. Short measurement
D. Over persuasion

3. The following constitute unfair labor practices of an employer except

A. To restrain employees to a form a union
B. To violate a collective bargain or agreement
C. To terminate employment of employees found to have violated company policy or employment contract
D. To discriminate with regard to wages, hours of work

4. The following are examples of dishonest acts of an employee toward his employer except
A. Working overtime upon instruction of his supervisor
B. Bringing home office supplies for personal use
C. Overstating business trip expenses by submitting false receipts
D. Doing personal errands during office hours

5. Among the commitments of the “Finance and Accounting Section of an organization” is

A. To have appropriate tools to receive, monitor and act on internal and external complaints of employees
B. To pay taxes in compliance with all laws
C. To communicate rules and guidelines or giving gifts, entertainment tokens of hospitality and contributes
to/from public or private organizations
D. To prohibit contracting a third party to bribe or commit corrupt practices in behalf of the company

6. Corruption spread when there are opportunities, when risk is minimal in comparison to benefits
obtained or when one is confronted with issues like:
A. Career advancement
B. Financial problems
C. Authority
D. Contentment in life
 7. These are examples of unfair labor practices, except
A. To interfere with, restrain or coerce employees in the exercise of their right to self-organization
B. To pay each and every employee of their overtime pay including their night differential
C. To initiate, dominate, assist or otherwise in with the formation or administration of any labor
organization, including the giving of financial or other support to it
D. To violate a collective bargaining agreement

8. It occurs when a broker or another person with access to confidential information uses that
information to trade in shares and securities of a corporation, thus giving him an unfair advantage
over the other purchasers of securities.
A. Insider Trading
B. Investment in stocks
C. Caveat emptor
D. Plain Graft

9. Examples of indirect misrepresentation about the product include the following except:
A. Caveat emptor
B. Deliberate withholding adverse information
C. Business ignorance
D. False advertising

10. This Act was passed to check the legality of the money being deposited.
A. Anti-Money Laundering Act
B. Anti-Graft and Corrupt Practices Act
C. Anti-Red Tape Act
D. Revised Penal Code

11. Corruptions in the Philippines is widely practice in these offices except

A. Judicial System
B. Public Procurement
C. Tax Administration
D. Education Services

12. These are measures in which businesses and organizations can adopt to help prevent corruption in
the workplace, except
A. Defined/clear business practices
B. Lavish gifts and entertainment
C. Declaration of conflict of interest
D. Convenient Corruption Reporting system

13. Corruption may take place in any of the following forms/ways, except:
A. When a public official does his job in helping the less fortunate ones
B. When a company is paying a bribe to win the public contact to build the local highway, despite
proposing a sub-standard offer
C. A salesman bribing the purchasing manager of a company to give preference to his products
D. A politician redirecting investments to his hometown rather than to the region most in need

14. A situation where a person is faced with multiple choices, all of which are undesirable as defined by
that person, is known as a(n) _______.
a. value dilemma
b. integrity management
c. philosophical dilemma
d. legal dilemma
e. moral dilemma

15. Why is the public more tolerant of consumer misconduct than business misconduct?
a. Businesses are expected to have a better idea of right and wrong.
b. The decisions of individuals have little to do with ethics in the business world.
c. There are big differences in wealth and success between businesses and consumers.
d. More organizations commit misconduct than individual consumers.
e. There is a large income disparity among professional businesspeople.

EXAM
1. Advertisement with pictures or statements that convey exaggerated impression of the product’s
reliability or quality is considered false advertising.
True
False

2. Persuasion is the process of appealing to the emotions of a prospective customer and urging him to buy
an item of merchandise he needs.
True
False

3. It occurs when a broker or another person with access to confidential information uses that information
to trade in shares and securities of a corporation, thus giving him an unfair advantage over the other
purchasers of securities.
Insider Trading
Caveat emptor
Investment in stocks
Plain Graft

4. Examples of direct misrepresentation about the product include the following except:
False advertising
Deceptive packaging
Mislabeling
Caveat emptor
 5. Examples of indirect misrepresentation about the product include the following except:
Caveat emptor
Deliberate withholding adverse information
Business ignorance
False advertising

6. Examples of direct misrepresentation about the product include the following except
Adulteration
Short merging
Short measurement
Over persuasion

7. Interlocking directorship can be committed by

Rank and file employees
Members of the board of directors
Top executive officers
Middle-level managers

8. The following constitute unfair labor practices of an employer except

To restrain employees to a form a union
To violate a collective bargain or agreement
To discriminate with regard to wages, hours of work
To terminate employment of employees found to have violated company policy or employment contract

9. The following are examples of unethical practices of employers except

Acceptance of gifts from a customer of business as his employer in exchange for a favor that is detrimental to
its interest of his employer
Engagement in the same type of business as his employer
Disclosure of confidential company information to someone else for personal gain
Application for a loan from his employer to settle personal liabilities

10. The following are examples of dishonest acts of an employee toward his employer except
Working overtime upon instruction of his supervisor
Bringing home office supplies for personal use
Overstating business trip expenses by submitting false receipts
Doing personal errands during office hours

11. Corruption is the abuse of entrusted power and elected authority for private profit.
True
False

12. One of the high-risk types of corruption is found in the police authority.
True
False
 13. This Act was passed to check the legality of the money being deposited.
Anti-Money Laundering Act
Anti-Graft and Corrupt Practices Act
Anti-Red Tape Act
Revised Penal Code

14. Risk management is a systematic approach in identifying, analyzing and controlling areas or events with
a potential for causing unwanted change.
True
False

15. Top management’s commitment in the “Unified Code of Conduct for Business” included the following
except
To lead by example in conducting business with integrity
To communicate within the company and the general public the company’s position against bribery, corruption
and unethical business practice
To institute training programs or business ethics covering all levels of the organization
To support strategy integrity practices and efforts and allocate sufficient resources for their implementation

16. Among the commitments of the “Finance and Accounting Section of an organization” is
To pay taxes in compliance with all laws
To have appropriate tools to receive, monitor and act on internal and external complaints of employees
To communicate rules and guidelines or giving gifts, entertainment tokens of hospitality and contributes to/from
public or private organizations
To prohibit contracting a third party to bribe or commit corrupt practices in behalf of the company

17. In the “Unified Code of Conduct for Business” the logistics department commits to do the following
except
Not to penalize employees for refusing to pay bribes or facilitation payments even if it results in failure to meet
deadlines or revenue is lost.
Not to tolerate any breaches or violation of existing laws in exchange for undue advantage and unethical
concessions a favor.
To pay correct duties and taxes based on transparent assessment of goods and services.
To protect employees from retaliation when complaints are failed against them.

18. The risk that refers to uncertainty about the rate of return caused by the nature of the business is
Default risk
Business risk
Liquidity risk
Financial risk

19. The risk associated with the uncertainty created by the inability to turn investment quickly for cash
Interest rate risk
Business risk
Liquidity risk
Default risk

20. The risk that the real rate of return will be lesser than the nominal or stated rate of return due to inflation
is referred to as
Purchasing power risk
Liquidity risk
Default risk
Business risk

21. Operations risk is manifested in all of the following except

Interest rate volatility
Process stoppage
Technological obsolescence
Management fraud

22. Financial risk associated with Financial Institution include the following except
Liquidity risks
Credit risks
Market liquidity risks
Environment risk

23. Non-financial risks associated with Financial Institutions include the following except
Derivative risk
Integrity risk
Leadership risk
Regulatory risk

24. ISO 31000 suggests that once risks have been identified and assessed, techniques to manage risks should
be applied. These techniques include the following except
Retention
Sharing
Reduction
Complete disregard

25. The technique of eliminating or reducing risk which could mean losing out on the potential gain is
called
Risk sharing
Risk retention
Risk avoidance
Risk reduction

26. ________ involves accepting the loss or benefit of gain from when it occurs.
Risk avoidance
Risk reduction
Risk sharing
Risk retention

27. This is used to monitor and manage the results of past decisions, assess the current situation and
highlight solutions.
Assessment of Market Entry and Exit Barriers
Variance Analysis
Break-even Analysis
Controlling Costs

28. It is the point where sales cover the costs in which neither a profit or loss is made.
Break-even Point
Operating Leverage
No Gain, No Loss
Proper Budgeting

29. It is the lifeblood of any business, heavily influencing strategies and decisions at entry level.
Taxation
Accounting
Finance
Management

30. It is one of the risk catalysts which focuses on new hardware, software or system configurations as new
demands on existing information systems.
Organizational change
People
Processes
Technology

31. One way of reducing costs is to (choose the exception)

Focus on the big items of expenditures
Use budgets for dynamic financial management
Maintain a balance between costs and quality
Focus decision-making on the most profitable areas

32. These principles will help avoid flawed financial decision-making, except:
Strengthen budgetary control
Know where the risk lies
Ignore the impacts of financial decisions as it will become time-consuming
Financial expertise must be widely available

33. Corruptions in the Philippines is widely practice in these offices except

Judicial System
Public Procurement
Tax Administration
Education Services

34. The government corruption has allowed mining companies to evade government regulations, which has
resulted in large scale deforestation, flattened mountaintops and water pollution.
True
False

35. These are measures in which businesses and organizations can adopt to help prevent corruption in the
workplace, except
Defined/clear business practices
Lavish gifts and entertainment
Declaration of conflict of interest
Convenient Corruption Reporting system

36. Corruption spread when there are opportunities, when risk is minimal in comparison to benefits obtained
or when one is confronted with issues like:
Career advancement
Financial problems
Authority
Contentment in life

37. Corruption may take place in any of the following forms/ways, except:
When a public official does his job in helping the less fortunate ones
When a company is paying a bribe to win the public contact to build the local highway, despite proposing a sub-
standard offer
A salesman bribing the purchasing manager of a company to give preference to his products
A politician redirecting investments to his hometown rather than to the region most in need

38. Claiming a business trip to be a vacation trip is considered unethical.

True
False

39. Not attending board meetings is considered an unethical practice.

True
False

40. These are examples of unfair labor practices, except

To interfere with, restrain or coerce employees in the exercise of their right to self-organization
To pay each and every employee of their overtime pay including their night differential
To initiate, dominate, assist or otherwise in with the formation or administration of any labor organization,
including the giving of financial or other support to it
To violate a collective bargaining agreement

FINALS
1. The Chief Audit Executive directly reports administratively to the
Board of Directors
Chief Executive Officer
Chief Finance Officer
Audit and Finance Committee

2. Which of the following control procedures could prevent or detect payment of goods not received?
Counting goods when received
Matching the purchase order, receiving report and vendor’s invoice
Comparing goods received with goods requisitioned
Verifying vouchers for accuracy and approval

3. For control purposes, the quantities of materials ordered may be omitted from the copy of the purchase
order that is
Forwarded to the accounting department.
Retained in the purchasing department’s files.
Returned to the requisitioner
Forwarded to the receiving department.

4. Examples of indirect misrepresentation about the product include the following except:
Caveat emptor
Deliberate withholding adverse information
Business ignorance
False advertising

5. The least crucial element of control over cash is

Separation of cash record keeping from custody of cash.
Preparation of the monthly bank reconciliation
Separation of cash receipts from cash disbursements.
Batch processing of checks

6. Through this principle, each member shall put the broader interest of the profession above his personal
ambition
Service to others
Integrity and objectivity
Professional competence and socio civic responsibilities
Solidarity and teamwork

7. Which of the following creates an opportunity for fraud to be committed in an organization?

Management demands financial success.
Poor internal control
Commitments tied to debt covenants.
Management is aggressive in its application of accounting rules.

8. Which of the following is not a universal rule for achieving control over cash?
Separate the cash-handling and record-keeping functions
Deposit each day’s cash receipts by the end of the day.
Have bank reconciliations performed by employees who do not handle cash.
Decentralize the receiving of cash as much as possible

9. Examples of direct misrepresentation about the product include the following except
Adulteration
Short merging
Short measurement
Over persuasion

10. The following are the most important characteristics of the professions, except:
Standard of admission to the profession
Professional competence
Public service
Public confidence

11. Inherent risks related to debt obligations primarily include which of the following?
Debt is not properly authorized
Interest expense is not properly accrued.
Debt covenants are not properly disclosed.
Debt is not appropriately classified as short or long-term.
All of the above are inherent risks related to debt obligations.

12. Which of the following is an example of fraud in the acquisition and payment cycle?
Theft of inventory by an employee
Employee schemes involving fictitious vendors as means to transfer payments to themselves.
Executives recording fictitious inventory or inappropriately recording higher values for existing inventory
All of the above.

13. Which of the following would an auditor typically not perform as part of gaining an understanding of
the client’s control related to debt obligations?
Review the client’s documentation of controls.
Recalculate interest expense.
Inquire of management about the process for reviewing compliance with debt covenants.
Review policies related to approval required for new debt.

14. To safeguard the integrity in financial reporting, the business firm should do the following except
Disclose the policy concerning trading in company securities by directors, officers and employees
Establish an audit committee
Disclose the functions reserved to the board and those delegated to management
Request the external auditor to attend the annual general meeting

15. Top management’s commitment in the “Unified Code of Conduct for Business” included the following
except
To lead by example in conducting business with integrity
To communicate within the company and the general public the company’s position against bribery, corruption
and unethical business practice
To institute training programs or business ethics covering all levels of the organization
To support strategy integrity practices and efforts and allocate sufficient resources for their implementation

16. Being responsible means also being accountable at the same time.
True
False

17. Accountability means doing what your job is asking you to do.
True
False

18. As long as there are individuals that needs leading, governance will be seen.
True
False

19. Risk sharing with another party the burden of loss or the benefit of gain, from a risk, and the measures to
reduce a risk.
True
False

20. Partial enforcement of laws requires an independent judiciary and a partial and incorruptible police
force.
True
False

21. Good governance only focuses on long-term goals.

True
False

22. The company can be headed by an incompetent individual provided that this individual will undergo
series of trainings and workshops.
True
False

23. Decisions made by a firm’s management and board of directors materially affect the risk faced by
investors and this is an example of management risk.
True
False

24. There is no way to assess risk since it is uncertain.

True
False
 25. Avoiding risks does not means losing out on the potential gain that accepting (retaining) the risk may
have allowed.
True
False

26. It is an intentional act involving the use of deception that results in a material misstatement of the
financial statements. *
Fraud

 The intentional manipulation of reported financial results to misstate the economic condition of the
organization is called fraudulent financial reporting.
Fraudulent Financial Reporting

 The Fraud Triangle characterizes incentives, opportunities and risks that enable fraud to exist.
True
False

27. These are the dominant fraud scheme perpetrated against small business and the perpetrators are usually
employees.
Asset Misappropriation

28. It is the process designed and effected by those charged with governance, management and other
personnel to provide reasonable assurance about the achievement of the entity’s objectives with regard
to reliability of financial reporting, effectiveness and efficiency of operations and compliance with
applicable laws and regulations.
Internal Control

29. It means all the policies and procedures (internal controls) adopted by the management of an entity to
assist in achieving management’s objective of ensuring, as far as practicable, the orderly and efficient
conduct of its business.
Internal Control System

30. It refers to those people charged with governance.

Board of Directors

31. It means the overall attitude, awareness and actions of directors and management regarding the internal
control system and its importance in the entity.
Control Environment

32. It means that management considers the competence levels for particular jobs in determining the skills
and knowledge required of each employee and that it hires employees competent to perform the tasks.
Commitment to Competence

33. Each person, regardless of race and ethnicity, has only one management philosophy and business style
since all are after the objective of maximizing profit.
True
False

34. Error has lesser impacts than fraud.

True
False

35. As auditors, we ought to uncover both fraud and errors in the financial statements.
True
False

36. It is the final component of internal control which is also the process that an entity uses to assess the
quality of internal control over time.
Monitoring Controls

37. Gain access to cash and manipulate accounts to cover up cash thefts is an example of fraudulent
financial reporting.
True
False

38. Intentional misapplication of accounting principles is an example of fraudulent financial reporting.

True
False