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AUDI314 WITH ANSWERS Week 3 and 4 Regulatory Framework For Auditing in The Philippines
AUDI314 WITH ANSWERS Week 3 and 4 Regulatory Framework For Auditing in The Philippines
II. Regulatory Framework for Auditing in the Exchange Commission (SEC). This process
Philippines involves submitting necessary documentation,
The regulatory framework for auditing in the including details of the firm's structure,
Philippines is primarily governed by the Securities and ownership, qualifications of partners and
Exchange Commission (SEC) and the Board of employees, and compliance with relevant auditing
Accountancy (BOA) under the Professional Regulation standards.
Commission (PRC). Here's a sample outline of the 2. Licensing Requirements: The registration process
regulatory framework for auditing in the Philippines: includes obtaining the necessary licenses to
provide auditing services. The regulatory body,
I. Securities and Exchange Commission (SEC) such as the Board of Accountancy (BOA), ensures
A. Overview and Role of SEC in Auditing Regulation that the firm's partners and employees are
The Securities and Exchange Commission (SEC) plays a licensed Certified Public Accountants (CPAs) with
vital role in the regulation of auditing in the Philippines. valid and up-to-date credentials.
As the primary regulatory body overseeing capital markets 3. Professional Standards and Quality Control:
and corporate governance, the SEC ensures the credibility Auditing firms are required to demonstrate
and transparency of financial reporting through effective adherence to professional standards, such as the
auditing regulation. Philippine Standards on Auditing (PSAs) and
The SEC's role in auditing regulation includes several key International Standards on Auditing (ISAs). These
aspects: standards ensure that the firm conducts audits in
1. Supervision of Auditing Firms: The SEC is a consistent, transparent, and reliable manner.
responsible for the registration and supervision of 4. Independence and Objectivity: During the
auditing firms operating in the Philippines. It registration process, auditing firms must declare
ensures that these firms comply with professional their independence and objectivity in performing
standards and ethical guidelines while conducting audit engagements. They are expected to maintain
audits. impartiality and avoid any conflicts of interest that
2. Financial Reporting Requirements: The SEC could compromise the integrity of the audit
establishes and enforces financial reporting process.
requirements for publicly listed companies and 5. Continuing Professional Development (CPD):
other entities operating in the capital markets. Auditing firms are encouraged to invest in the
These reporting standards, such as the Philippine professional development of their partners and
Financial Reporting Standards (PFRS), guide employees. Compliance with CPD requirements
auditors in evaluating and ensuring compliance set by the regulatory bodies ensures that auditors
with the relevant accounting principles. stay updated with the latest developments in
3. Enforcement of Auditing Standards: The SEC auditing practices and standards.
enforces auditing standards, such as the 6. Peer Review: As part of the supervision process,
Philippine Standards on Auditing (PSAs) and auditing firms may undergo periodic peer reviews.
International Standards on Auditing (ISAs), to These reviews assess the quality of the firm's audit
maintain consistency and quality in the audit engagements and internal control systems. The
process. Auditors are expected to follow these objective is to identify areas for improvement and
standards when conducting engagements. maintain high-quality auditing services.
4. Code of Ethics: The SEC upholds a Code of Ethics 7. Regulatory Compliance and Enforcement: The
for auditors and accountants to maintain the regulatory bodies regularly monitor auditing firms
highest level of professional conduct and integrity to ensure compliance with the established
in their engagements. This code emphasizes regulations and standards. Any violations or
principles such as independence, objectivity, and discrepancies discovered during inspections may
confidentiality to preserve public trust in the lead to disciplinary actions, such as fines or
auditing profession. license revocation, to uphold the integrity of the
5. Protection of Investor Interests: One of the SEC's audit profession.
primary objectives is to protect investor interests By implementing a robust registration and supervision
and promote investor confidence in the financial process, the regulatory bodies in the Philippines aim to
markets. Effective auditing regulation ensures enhance the overall quality of auditing services, instill
that audited financial statements provide reliable public confidence in financial reporting, and safeguard the
and accurate information to stakeholders. interests of stakeholders in the country's capital markets.
6. Regulatory Enforcement: The SEC has the
authority to enforce auditing regulations and take C. Financial Reporting Requirements for Publicly Listed
disciplinary actions against auditors or auditing Companies
firms found in violation of professional standards Financial reporting requirements for publicly listed
or ethical guidelines. This enforcement companies in the Philippines are stringent and designed to
mechanism acts as a deterrent against non- ensure transparency, accuracy, and comparability of
compliance and strengthens the integrity of the financial information. These requirements are governed by
audit profession. the Securities and Exchange Commission (SEC) and aim
to provide investors and stakeholders with reliable
Overall, the SEC's oversight and regulation of auditing in information for making informed decisions.
the Philippines contribute to the stability and efficiency of Summary of Financial Reporting Requirements for Publicly
the capital markets, safeguarding public interest, and Listed Companies:
promoting confidence in financial reporting. Through its 1. Philippine Financial Reporting Standards (PFRS):
proactive approach to auditing regulation, the SEC fosters Publicly listed companies are required to prepare
a climate of trust and transparency, essential for the their financial statements in accordance with the
growth and development of the Philippine economy. Philippine Financial Reporting Standards (PFRS).
PFRS is based on the International Financial
B. Registration and Supervision of Auditing Firms Reporting Standards (IFRS) and ensures
The registration and supervision of auditing firms are consistency and comparability of financial
crucial components of the regulatory framework for statements both nationally and internationally.
auditing in the Philippines. The process involves oversight 2. Annual and Interim Financial Statements: Publicly
by regulatory bodies to ensure that auditing firms meet listed companies must prepare and publish
specific criteria, adhere to professional standards, and annual financial statements, including the
maintain ethical conduct in their operations. balance sheet, income statement, statement of
Summary of Registration and Supervision of Auditing changes in equity, and cash flow statement.
Firms: Additionally, they are required to disclose interim
1. Registration Process: Auditing firms wishing to financial statements on a quarterly basis.
operate in the Philippines must undergo a 3. Audited Financial Statements: The financial
registration process with the appropriate statements of publicly listed companies must
undergo an external audit by independent or revocation, depending on the severity of the
external auditors. The auditors' report provides violation.
assurance on the fairness and accuracy of the 5. Investigative Process: The regulatory bodies may
financial statements, enhancing their reliability for initiate investigations based on complaints or
investors and stakeholders. suspicious activities related to auditing
4. Timely Disclosure: Publicly listed companies must engagements. The investigative process aims to
adhere to strict timelines for submitting financial uncover any violations of auditing standards or
reports to the SEC and other regulatory bodies. ethical principles.
Timely disclosure ensures that investors receive 6. Reporting and Public Disclosure: The results of
updated information promptly, enabling them to quality control reviews, investigations, and
make well-informed investment decisions. disciplinary actions are documented and, if
5. Segment Reporting: Publicly listed companies with necessary, disclosed to the public. Public
multiple business segments are required to disclosure reinforces transparency and
provide segment reporting, disclosing financial accountability within the auditing profession.
information for each segment separately. This 7. Continuing Professional Development (CPD): To
facilitates a better understanding of the company's ensure ongoing compliance with standards and
diversified operations. ethical guidelines, CPAs are required to participate
6. Related Party Transactions: Companies must in CPD programs. CPD helps auditors stay
disclose related party transactions, including updated with the latest developments in auditing
those with directors, key management personnel, practices and regulations.
and their relatives. This disclosure ensures 8. Collaboration with Professional Organizations: The
transparency and mitigates potential conflicts of regulatory bodies collaborate with professional
interest. organizations, such as the Philippine Institute of
7. Management Discussion and Analysis (MD&A): Certified Public Accountants (PICPA), to promote
Publicly listed companies are encouraged to and enforce professional standards and ethical
include an MD&A section in their financial conduct among auditors.
reports. This narrative provides management's
insights into the financial performance, prospects, Through rigorous enforcement of auditing standards and
and challenges faced by the company. the code of ethics, the regulatory bodies protect the public
8. Corporate Governance Disclosures: Companies are interest, maintain the credibility of financial reporting, and
required to disclose information on their corporate uphold the reputation of the audit profession in the
governance practices, including the composition of Philippines. This commitment to enforcement fosters trust
the board of directors, executive compensation, between auditors, clients, and stakeholders and
and risk management policies. Transparent contributes to the stability and efficiency of the country's
corporate governance practices promote financial markets.
accountability and shareholder confidence.
9. Electronic Filing: The SEC mandates publicly II. Board of Accountancy (BOA)
listed companies to file their financial reports A. Role and Responsibilities of BOA in Auditing
electronically, making them readily accessible to Regulation
the public through the SEC's online platform. The Board of Accountancy (BOA) in the
Philippines plays a pivotal role in the regulation of
By adhering to these financial reporting requirements, auditing and ensuring the competence and ethical
publicly listed companies in the Philippines uphold high conduct of Certified Public Accountants (CPAs).
standards of financial transparency, accountability, and Here's a sample summary of the role and
credibility. These requirements foster investor confidence, responsibilities of BOA in auditing regulation:
attract investments, and contribute to the overall growth
and stability of the capital markets in the country. Summary of Role and Responsibilities of BOA in
Auditing Regulation:
D. Enforcement of Auditing Standards and Code of Ethics
The enforcement of auditing standards and the code of 1. Licensing and Registration: BOA is
ethics is critical to maintaining the integrity and credibility responsible for the licensing and
of the audit profession in the Philippines. Regulatory registration of CPAs in the Philippines. It
bodies, such as the Securities and Exchange Commission sets the qualifications and requirements
(SEC) and the Board of Accountancy (BOA), play key roles for individuals seeking to become CPAs,
in ensuring compliance with these standards and ethical including educational attainment,
guidelines. Here's a sample summary of the enforcement practical experience, and passing the CPA
process: licensure examination.
Summary of Enforcement of Auditing Standards and Code
of Ethics: 2. Continuing Professional Development
1. Regulatory Oversight: The SEC and BOA are (CPD): BOA oversees the CPD program for
responsible for overseeing the auditing profession CPAs, which requires them to undergo
in the Philippines. They set and promulgate continuous training and education to stay
auditing standards, such as the Philippine updated with the latest developments in
Standards on Auditing (PSAs), and the Code of auditing practices, accounting standards,
Ethics for Professional Accountants. and regulatory requirements.
2. Mandatory Compliance: Auditing firms and
Certified Public Accountants (CPAs) are required 3. Development of Auditing Standards: BOA
to adhere to the established auditing standards is involved in the development and
and code of ethics during audit engagements and adoption of auditing standards applicable
other professional activities. in the Philippines. These standards, such
3. Quality Control Review: The regulatory bodies as the Philippine Standards on Auditing
conduct quality control reviews of auditing firms (PSAs), ensure consistency, quality, and
to assess their compliance with auditing transparency in audit engagements.
standards and the code of ethics. These reviews
help identify areas for improvement and ensure 4. Ethics and Professional Conduct: BOA
that audits are conducted in accordance with sets and enforces the Code of Ethics for
professional standards. Professional Accountants, which outlines
4. Disciplinary Actions: In cases of non-compliance the ethical principles and responsibilities
or ethical violations, the regulatory bodies have that CPAs must adhere to in their
the authority to take disciplinary actions against professional practice. This code
auditors or auditing firms. Disciplinary measures emphasizes independence, integrity, and
may include warnings, fines, license suspension, objectivity in auditing engagements.
5. Quality Control Review: BOA conducts continually enhance their knowledge and
quality control reviews of auditing firms to skills and stay up-to-date with the latest
assess their compliance with professional developments in the accounting
standards and ethics. The review process profession.
helps identify areas for improvement and
ensures that audit engagements are 4. Code of Ethics: CPAs are bound by a Code
conducted with competence and diligence. of Ethics for Professional Accountants,
established by the Board of Accountancy.
6. Regulatory Enforcement: BOA has the The code outlines ethical principles and
authority to investigate complaints and responsibilities that CPAs must uphold in
alleged violations of auditing standards or their professional practice, including
ethical guidelines by CPAs. If violations independence, integrity, and
are found, BOA may take disciplinary confidentiality.
actions, including sanctions, fines,
suspension, or revocation of CPA licenses. 5. Regulatory Compliance: The Board of
Accountancy ensures that CPAs comply
7. Collaboration with Professional with the regulatory requirements
Organizations: BOA collaborates with throughout their professional careers.
professional organizations, such as the CPAs are expected to adhere to the
Philippine Institute of Certified Public standards set by BOA and maintain their
Accountants (PICPA), to promote the licenses by fulfilling CPD obligations.
interests of the accounting profession and
align regulatory efforts with industry 6. Disciplinary Actions: In cases of
needs. professional misconduct or violations of
ethical guidelines, the Board of
8. Public Interest Protection: BOA's primary Accountancy has the authority to take
objective is to protect the public interest disciplinary actions against CPAs. These
by upholding high standards of actions may include sanctions, fines,
competence, integrity, and ethics in the suspension, or revocation of their CPA
audit profession. This commitment licenses, depending on the severity of the
ensures that auditors serve as trusted violation.
advisors in financial reporting and
corporate governance. 7. Collaboration with Professional
Organizations: The Board of Accountancy
Through its proactive approach to auditing collaborates with professional
regulation, BOA maintains the integrity and organizations, such as the Philippine
credibility of the CPA profession in the Philippines. Institute of Certified Public Accountants
By setting stringent licensing requirements, (PICPA), to promote the interests of the
enforcing ethical conduct, and fostering accounting profession and align
continuous professional development, BOA regulatory efforts with industry needs.
ensures that CPAs are well-equipped to meet the
challenges of auditing in a dynamic and evolving 8. Public Interest Protection: The licensing
business environment. and regulation of CPAs are designed to
B. Licensing and Regulation of Certified Public protect the public interest by ensuring
Accountants (CPAs) that individuals practicing as CPAs
The licensing and regulation of Certified Public possess the necessary qualifications,
Accountants (CPAs) in the Philippines are skills, and ethical standards to provide
overseen by the Board of Accountancy (BOA). This reliable and competent accounting
regulatory process ensures that CPAs meet services.
specific qualifications, demonstrate competence,
and adhere to ethical standards, thereby By overseeing the licensing and regulation of
upholding the integrity and credibility of the CPAs, the Board of Accountancy plays a crucial
accounting profession. Here's a sample summary role in maintaining the professional standards and
of the licensing and regulation of CPAs: ethical conduct of accountants in the Philippines.
This regulatory oversight enhances the credibility
Summary of Licensing and Regulation of Certified of the accounting profession and fosters public
Public Accountants (CPAs): trust in the financial reporting and assurance
services provided by CPAs.
1. Qualification Requirements: To become a
CPA in the Philippines, individuals must C. Continuing Professional Development (CPD)
meet specific qualification requirements Requirements for CPAs
set by the Board of Accountancy. These Continuing Professional Development (CPD) is a
requirements typically include completing vital aspect of the regulatory framework for
a bachelor's degree in accounting or Certified Public Accountants (CPAs) in the
related fields, passing the CPA licensure Philippines. The Board of Accountancy (BOA)
examination, and fulfilling practical requires CPAs to undergo continuous learning and
experience hours. professional development to enhance their
knowledge, skills, and competencies. Here's a
2. CPA Licensure Examination: The CPA sample summary of the CPD requirements for
licensure examination is conducted by the CPAs:
Board of Accountancy. The exam assesses
candidates' knowledge and competency in Summary of Continuing Professional Development
various areas of accounting, auditing, (CPD) Requirements for CPAs:
taxation, and business law. Successful
candidates are granted their CPA licenses, 1. Mandatory CPD Program: The Board of
allowing them to practice as professional Accountancy has implemented a
accountants. mandatory CPD program for all CPAs in
the Philippines. This program is designed
3. Continuing Professional Development to ensure that CPAs continually update
(CPD): After obtaining their CPA licenses, their knowledge and stay abreast of the
CPAs are required to participate in latest developments in accounting,
Continuing Professional Development auditing, taxation, and other relevant
(CPD) programs. CPD ensures that CPAs areas.
enforcement of professional standards and ethics for
2. CPD Credit Units: CPAs are required to CPAs:
earn a specified number of CPD credit Summary of Enforcement of Professional Standards and
units within a defined period to maintain Ethics for CPAs:
their professional licenses. These credit 1. Code of Ethics for CPAs: The Board of
units are earned through attending CPD Accountancy (BOA) has established a
seminars, workshops, conferences, comprehensive Code of Ethics for Professional
training sessions, and other relevant Accountants that outlines the ethical principles
educational activities. and responsibilities expected of CPAs. This code
emphasizes integrity, objectivity, confidentiality,
3. Different CPD Categories: The CPD and professional behavior in all aspects of their
program offers various categories of practice.
learning opportunities, allowing CPAs to 2. Regulatory Oversight: The BOA and the
choose activities that align with their Professional Regulation Commission (PRC) play a
professional interests and areas of key role in regulating and overseeing CPAs'
expertise. These categories may include professional conduct. They are responsible for
technical, ethical, managerial, and other enforcing the Code of Ethics and professional
subjects relevant to the accounting standards established for the accounting
profession. profession.
3. Quality Control Reviews: The regulatory bodies
4. Accredited CPD Providers: The BOA conduct quality control reviews of auditing firms
accredits organizations and institutions as and CPAs to assess their compliance with
CPD providers to ensure the quality and professional standards and ethical guidelines.
relevance of the CPD activities offered to These reviews help identify any deficiencies or
CPAs. Accredited providers offer courses areas for improvement and ensure the delivery of
and programs that meet the standards set high-quality services.
by the BOA. 4. Investigative Process: The BOA and the PRC have
the authority to investigate complaints and
5. Compliance Reporting: CPAs are required reported violations of professional standards and
to document and keep records of their ethics by CPAs. The investigative process aims to
CPD activities, including certificates of uncover any misconduct, breaches of ethics, or
attendance or completion. They must non-compliance with standards.
submit reports of their completed CPD 5. Disciplinary Actions: In cases of proven violations,
credit units to the BOA during the license the regulatory bodies may take disciplinary
renewal process. actions against CPAs. These actions may include
warnings, fines, suspension, or revocation of the
6. Exemptions and Extensions: The BOA CPA license, depending on the gravity of the
may grant exemptions or extensions for offense.
CPD requirements in certain cases, such 6. Public Disclosure: The results of quality control
as medical reasons, military service, or reviews, investigations, and disciplinary actions
other valid reasons that hinder are documented and, if necessary, disclosed to the
compliance. However, CPAs must apply public. Public disclosure reinforces transparency
for exemptions or extensions and provide and accountability within the accounting
necessary documentation. profession.
7. Collaboration with Professional Organizations: The
7. Enforcement and Sanctions: Non- BOA collaborates with professional organizations,
compliance with CPD requirements may such as the Philippine Institute of Certified Public
result in sanctions by the BOA, ranging Accountants (PICPA), to promote and enforce
from warnings to the suspension or professional standards and ethical conduct among
revocation of the CPA license. Strict CPAs.
enforcement of CPD ensures that CPAs 8. Continuing Professional Development (CPD): The
maintain their competence and uphold CPD program also serves as a platform for
professional standards. reinforcing ethical principles and professional
standards. CPAs are encouraged to participate in
8. Professional Growth and Development: CPD activities that address ethical dilemmas and
CPD serves as a platform for CPAs to challenges in their profession.
enhance their skills, broaden their Enforcing professional standards and ethics for CPAs is
knowledge, and acquire new essential to safeguard the public interest, maintain trust
competencies. It helps CPAs remain in the accounting profession, and uphold the credibility of
relevant and competent in a dynamic and financial reporting. The regulatory bodies' commitment to
rapidly changing business environment. robust enforcement fosters accountability, transparency,
and ethical behavior among CPAs, ensuring that they
Continuing Professional Development (CPD) is an continue to serve as reliable and trusted financial
integral part of a CPA's professional journey, professionals in the Philippines.
ensuring that they remain well-informed,
adaptable, and proficient in their roles. By III. Philippine Financial Reporting Standards (PFRS)
participating in CPD activities, CPAs continually A. Adoption and Application of PFRS
enhance their value as trusted financial
professionals, contributing to the overall growth The adoption and application of the Philippine
and credibility of the accounting profession in the Financial Reporting Standards (PFRS) is a
Philippines. significant milestone in the accounting and
financial reporting practices of companies in the
D. Enforcement of Professional Standards and Ethics for
CPAs Philippines. PFRS aligns the country's accounting
The enforcement of professional standards and ethics is a standards with the International Financial
crucial aspect of maintaining the integrity and credibility Reporting Standards (IFRS), promoting
of Certified Public Accountants (CPAs) in the Philippines. consistency, comparability, and transparency in
Regulatory bodies, such as the Board of Accountancy financial reporting. Here's a sample summary of
(BOA) and the Professional Regulation Commission (PRC), the adoption and application of PFRS:
are responsible for overseeing and enforcing these
Summary of Adoption and Application of
standards to ensure CPAs' adherence to ethical principles
and professional conduct. Here's a sample summary of the Philippine Financial Reporting Standards (PFRS):
1. Convergence with IFRS: The Philippine Financial summary of the role of auditors in ensuring
Reporting Standards (PFRS) were introduced to compliance with PFRS:
converge with the International Financial Summary of the Role of Auditors in Ensuring
Reporting Standards (IFRS). This convergence Compliance with Philippine Financial Reporting
aimed to enhance the credibility of financial Standards (PFRS):
reporting in the Philippines and facilitate cross- 1. Conducting Audits: Auditors are engaged by
border investment and comparison of financial companies to perform financial statement audits.
information globally. During these audits, auditors review and examine
2. Adoption Timeline: The adoption of PFRS occurred the financial records, transactions, and
in several phases, with the full adoption completed accounting practices of the entity to ensure
over a specific timeline. Companies were required compliance with PFRS.
to transition from the previous accounting 2. Evaluating Accounting Policies: Auditors assess
standards (Philippine Generally Accepted whether the entity's accounting policies are in
Accounting Principles or P-GAAP) to PFRS. accordance with the relevant PFRS requirements.
3. Financial Statement Presentation: PFRS outlines They verify that the selected accounting policies
the framework for the preparation and are applied consistently and result in accurate
presentation of financial statements. It provides financial reporting.
guidance on the format, content, and classification 3. Fair Value Assessments: When financial
of financial information to ensure consistency and instruments or assets are measured at fair value
comparability across entities. under PFRS, auditors evaluate the entity's fair
4. Accounting Policies: PFRS sets out the principles value assessments to ensure they are based on
and requirements for selecting and applying reliable and relevant information.
accounting policies. Entities must use judgment 4. Disclosure Verification: Auditors verify the
in applying these policies to present financial adequacy and accuracy of the disclosures made by
information that faithfully represents their the entity in its financial statements as required
financial position, performance, and cash flows. by PFRS. They ensure that all material
5. Fair Value Measurement: PFRS introduces the information is properly disclosed for stakeholders'
concept of fair value measurement for certain understanding.
assets, liabilities, and financial instruments. Fair 5. Assessment of Financial Statement Presentation:
value measurement enhances the relevance of Auditors evaluate the overall presentation of the
financial information and reflects market-based financial statements to confirm that they conform
values. to the prescribed formats and classifications
6. Disclosure Requirements: PFRS includes under PFRS.
comprehensive disclosure requirements, ensuring 6. Going Concern Assumption: Auditors assess
that entities provide sufficient and relevant whether the entity's financial statements are
information to users of financial statements. prepared on a going concern basis, as required by
These disclosures help stakeholders understand PFRS. They evaluate the entity's ability to
the company's financial position, performance, continue its operations for the foreseeable future.
and risks. 7. Auditor's Report: After completing the audit, the
7. Impact on Businesses: The adoption of PFRS auditor issues an audit report expressing their
required companies to undertake significant professional opinion on the fairness of the
changes in their accounting policies, systems, and financial statements in accordance with PFRS.
reporting processes. This transition involved The audit report provides stakeholders with
extensive training and adjustments to ensure assurance on the reliability of the financial
compliance with the new standards. information.
8. Continuing Updates and Amendments: PFRS is 8. Communication with Management and Audit
subject to updates and amendments to keep pace Committee: Throughout the audit process,
with changes in the global accounting landscape. auditors maintain communication with
Companies are required to stay informed about management and the audit committee to address
these updates and incorporate them into their any identified issues and provide
financial reporting. recommendations for improvement.
The adoption and application of PFRS in the 9. Ethical Considerations: Auditors adhere to a strict
Philippines have improved the quality and code of ethics, including independence, objectivity,
reliability of financial reporting, providing and confidentiality, while performing their audit
stakeholders with more meaningful and engagements to maintain the integrity and
comparable information. By aligning with credibility of their work.
international accounting standards, PFRS has By diligently fulfilling their role, auditors
enhanced the country's attractiveness to global contribute to the trust and confidence that
investors and strengthened its position in the stakeholders place in financial reporting. Their
international business community. independent and objective assessments help
ensure that entities comply with PFRS, enabling
B. Role of Auditors in Ensuring Compliance with stakeholders to make informed decisions based on
PFRS reliable financial information.
Alex: Yes, I noticed those misstatements during my audit MULTIPLE CHOICE QUESTIONS
procedures. It's concerning and could have a significant Which regulatory body is responsible for overseeing the
impact on the financial statements. practice of accountancy in the Philippines?
a. Philippine Securities and Exchange Commission (SEC)
Andrea: Absolutely, it's crucial to address this issue b. Professional Regulations Commission (PRC)
appropriately. However, the company's management has c. Board of Accountancy (BOA)
requested us not to report these misstatements and to d. Philippine Institute of Certified Public Accountants
adjust the figures to make them look more favorable. They (PICPA)
argue that their competitors are doing the same, and it's Answer: b. Professional Regulations Commission (PRC)
necessary for the company's survival.
1. What is the primary objective of the Philippine
Alex: That puts us in a difficult position. As auditors, we Accountancy Act?
have a duty to report any material misstatements and act a. To promote fair competition among accounting firms
in the public interest. Overlooking these misstatements b. To protect the interests of accounting professionals
would compromise our independence and objectivity. c. To regulate the practice of accountancy in the
Philippines
Andrea: I completely agree. Upholding the Code of Ethics d. To ensure consistent financial reporting by all
for Professional Accountants is essential for our integrity companies
and credibility. We must consider the ethical principles of Answer: c. To regulate the practice of accountancy in the
integrity, objectivity, professional competence, and due Philippines
care in handling this situation.
2. The Code of Ethics for Professional Accountants in the
Alex: Yes, and we must also comply with the Philippine Philippines is based on which international ethics
Accountancy Act and the guidelines set by the Board of framework?
Accountancy (BOA) in setting auditing standards. a. International Code of Ethics for Accountants (ICAEW)
b. International Financial Reporting Standards (IFRS)
Andrea: Precisely. The BOA's standards, such as the c. International Ethics Standards Board for Accountants
Philippine Standards on Auditing (PSAs), provide the (IESBA)
framework for conducting our audits and ensure d. International Standards on Auditing (ISA)
consistent and high-quality practices. Answer: c. International Ethics Standards Board for
Accountants (IESBA)
Alex: So, what should we do in this situation? How do we
balance the company's request with our ethical 3. The Code of Ethics for Professional Accountants in the
responsibilities? Philippines applies to which of the following professionals?
a. Lawyers and attorneys
Andrea: Our duty is to act in the public interest and b. Certified Public Accountants (CPAs)
maintain our independence and objectivity. We cannot c. Doctors and medical practitioners
compromise the integrity of the audit process. We need to d. Engineers and architects
discuss this matter with our engagement partner and Answer: b. Certified Public Accountants (CPAs)
inform them about the misstatements. If the company
refuses to make the necessary adjustments, we might have 4. The Board of Accountancy (BOA) is a regulatory body
to consider withdrawing from the engagement and, if under the supervision of the:
necessary, report our findings to the appropriate a. Department of Trade and Industry (DTI)
authorities. b. Securities and Exchange Commission (SEC)
c. Professional Regulations Commission (PRC)
Alex: I understand the importance of acting ethically and d. Department of Finance (DOF)
professionally. I will support your decision, and we should Answer: c. Professional Regulations Commission (PRC)
document all our discussions and the steps we take to
address this issue. 5. What is the role of the Board of Accountancy (BOA) in
the regulatory framework for auditing?
a. Setting financial reporting standards for companies d. Conducting the audit in a timely manner and within
b. Overseeing the Philippine Stock Exchange (PSE) budget constraints
c. Conducting inspections of audit firms Answer: c. Conducting the audit with the highest level of
d. Setting auditing standards in the Philippines professional judgment and diligence
Answer: d. Setting auditing standards in the Philippines
14. A professional accountant who is aware of illegal acts
6. Which of the following is responsible for adopting and committed by their client but fails to report the matter to
implementing the Philippine Standards on Auditing the appropriate authorities may face a threat to their
(PSAs)? compliance with which ethical principle?
a. Philippine Institute of Certified Public Accountants a. Professional Competence and Due Care
(PICPA) b. Integrity
b. Securities and Exchange Commission (SEC) c. Objectivity
c. Professional Regulations Commission (PRC) d. Professional Behavior
d. Board of Accountancy (BOA) Answer: b. Integrity
Answer: d. Board of Accountancy (BOA)
15. What is the primary purpose of the Code of Ethics for
7. The Philippine Standards on Auditing (PSAs) provide Professional Accountants in the Philippines?
guidance on which of the following? a. To ensure accountants comply with tax regulations
a. Financial reporting for non-profit organizations b. To set guidelines for financial reporting
b. Conducting audits of financial statements c. To provide principles and ethical standards for
c. Setting ethical standards for auditors accountants to follow
d. Implementing tax regulations for businesses d. To regulate the registration of Certified Public
Answer: b. Conducting audits of financial statements Accountants (CPAs)
Answer: c. To provide principles and ethical standards for
8. Which ethical principle requires accountants to be accountants to follow
straightforward and honest in all professional and
business relationships? 16. In the Philippines, who has the authority to investigate
a. Professional Competence and Due Care and discipline professional accountants for violations of
b. Objectivity the Code of Ethics?
c. Confidentiality a. Securities and Exchange Commission (SEC)
d. Integrity b. Professional Regulations Commission (PRC)
Answer: d. Integrity c. Philippine Institute of Certified Public Accountants
(PICPA)
9. When faced with a conflict of interest, what ethical d. Board of Accountancy (BOA)
principle requires accountants to maintain their Answer: b. Professional Regulations Commission (PRC)
independence of mind and not allow bias, conflict of
interest, or undue influence to override their professional 17. A professional accountant who is offered gifts or
judgment? excessive hospitality from a client may face a threat to
a. Integrity their compliance with which ethical principle?
b. Objectivity a. Integrity
c. Professional Behavior b. Objectivity
d. Professional Competence and Due Care c. Professional Competence and Due Care
Answer: b. Objectivity d. Professional Behavior
Answer: d. Professional Behavior
10. The Code of Ethics for Professional Accountants in the
Philippines is primarily based on the ethical framework 18. What is the primary objective of the Philippine
provided by: Standards on Auditing (PSAs)?
a. International Financial Reporting Standards (IFRS) a. To regulate the licensing of accountants in the
b. International Ethics Standards Board for Accountants Philippines
(IESBA) b. To provide guidance on financial reporting for public
c. International Accounting Standards Board (IASB) companies
d. Philippine Financial Reporting Standards (PFRS) c. To promote consistent and high-quality audit practices
Answer: b. International Ethics Standards Board for in the country
Accountants (IESBA) d. To enforce compliance with international auditing
standards
11. A professional accountant who has a significant Answer: c. To promote consistent and high-quality audit
financial interest in a client entity may face a threat to practices in the country
their independence known as:
a. Advocacy threat 19. A professional accountant who has a close family
b. Self-interest threat member employed by a client may face a threat to their
c. Familiarity threat independence known as:
d. Intimidation threat a. Advocacy threat
Answer: b. Self-interest threat b. Self-interest threat
c. Familiarity threat
12. Which regulatory body has the authority to suspend or d. Intimidation threat
revoke the license of a Certified Public Accountant (CPA) Answer: c. Familiarity threat
found guilty of misconduct?
a. Securities and Exchange Commission (SEC) 20. The Philippine Accountancy Act is a legislative act that
b. Philippine Institute of Certified Public Accountants falls under which branch of the Philippine government?
(PICPA) a. Legislative Branch
c. Professional Regulations Commission (PRC) b. Executive Branch
d. Board of Accountancy (BOA) c. Judicial Branch
Answer: c. Professional Regulations Commission (PRC) d. Regulatory Branch
Answer: a. Legislative Branch
13. The Philippine Accountancy Act requires auditors to
conduct their engagements with due professional care. 22. Which regulatory body in the Philippines is responsible
What does "due professional care" mean in this context? for regulating and supervising auditing firms?
a. Exercising professional skepticism in all audit a. Professional Regulations Commission (PRC)
procedures b. Securities and Exchange Commission (SEC)
b. Performing the audit in compliance with international c. Philippine Institute of Certified Public Accountants
standards (PICPA)
c. Conducting the audit with the highest level of d. Board of Accountancy (BOA)
professional judgment and diligence Answer: b. Securities and Exchange Commission (SEC)
b. All professional accountants, whether in public practice,
23. The primary purpose of the Code of Ethics for business, the public sector, or academia
Professional Accountants in the Philippines is to: c. Only Certified Public Accountants (CPAs) who are in
a. Provide guidelines for financial reporting of publicly public practice
listed companies d. Only accountants working for publicly listed companies
b. Establish ethical standards for accountants to follow in Answer: b. All professional accountants, whether in public
their professional practice practice, business, the public sector, or academia
c. Regulate the licensing and registration of accountants in
the country 31. The Code of Ethics for Professional Accountants in the
d. Set guidelines for the taxation of businesses and Philippines requires accountants to comply with all
individuals relevant laws and regulations. Which ethical principle does
Answer: b. Establish ethical standards for accountants to this requirement align with?
follow in their professional practice a. Integrity
b. Objectivity
24. Which ethical principle requires professional c. Professional Competence and Due Care
accountants to refrain from disclosing confidential d. Professional Behavior
information obtained during the course of their Answer: d. Professional Behavior
professional duties?
a. Integrity 32. The primary objective of the Philippine Accountancy
b. Objectivity Act is to:
c. Confidentiality a. Regulate the financial reporting of publicly listed
d. Professional Behavior companies
Answer: c. Confidentiality b. Establish the qualifications and standards for the
practice of accountancy in the Philippines
25. The Code of Ethics for Professional Accountants in the c. Set the tax rates for businesses and individuals in the
Philippines is primarily based on the principles of: country
a. Competence, Confidentiality, and Objectivity d. Oversee the operations of the Philippine Stock Exchange
b. Integrity, Objectivity, and Professional Behavior (PSE)
c. Integrity, Objectivity, Professional Competence, and Due Answer: b. Establish the qualifications and standards for
Care the practice of accountancy in the Philippines
d. Integrity, Objectivity, and Confidentiality
Answer: c. Integrity, Objectivity, Professional Competence, 33. A professional accountant who performs an audit for a
and Due Care close friend may face a threat to their independence
known as:
26. The primary role of the Board of Accountancy (BOA) is a. Advocacy threat
to: b. Self-interest threat
a. Set and implement financial reporting standards for c. Familiarity threat
companies in the Philippines d. Intimidation threat
b. Oversee the financial operations of publicly listed Answer: c. Familiarity threat
companies
c. Set and implement auditing standards for professional 34. The Board of Accountancy (BOA) is responsible for
accountants in the Philippines issuing which of the following licenses to qualified
d. Regulate the licensing and registration of accountants individuals?
in the country a. Certified Public Accountant (CPA) license
Answer: c. Set and implement auditing standards for b. Business Permit license
professional accountants in the Philippines c. Securities and Exchange Commission (SEC) license
d. International Standards on Auditing (ISA) license
27. In the Philippines, auditors are required to conduct Answer: a. Certified Public Accountant (CPA) license
their engagements in compliance with which set of
auditing standards? 35. A professional accountant who is under significant
a. Philippine Financial Reporting Standards (PFRS) pressure to agree to the conclusions of a client's
b. Philippine Standards on Auditing (PSAs) management may face a threat to their compliance with
c. International Financial Reporting Standards (IFRS) which ethical principle?
d. International Standards on Auditing (ISAs) a. Integrity
Answer: b. Philippine Standards on Auditing (PSAs) b. Objectivity
c. Professional Competence and Due Care
28. Which of the following best describes the role of the d. Professional Behavior
Board of Accountancy (BOA) in the regulatory framework Answer: b. Objectivity
for auditing?
a. Setting auditing standards and providing guidance for 36. The Philippine Accountancy Act and the Code of Ethics
audit engagements for Professional Accountants in the Philippines are both
b. Overseeing the financial operations of publicly listed aimed at:
companies a. Promoting fair competition among accounting firms
c. Regulating the licensing and registration of professional b. Protecting the interests of investors in publicly listed
accountants in the Philippines companies
d. Enforcing compliance with international accounting c. Ensuring compliance with tax regulations for
standards businesses
Answer: a. Setting auditing standards and providing d. Regulating the practice of accountancy and maintaining
guidance for audit engagements high ethical standards for accountants
Answer: d. Regulating the practice of accountancy and
29. A professional accountant who performs an audit for maintaining high ethical standards for accountants
an entity where they have a financial interest may face a
threat to their independence known as: 37. The Code of Ethics for Professional Accountants in the
a. Advocacy threat Philippines requires accountants to exercise due
b. Self-interest threat professional care in their professional activities. What does
c. Familiarity threat "due professional care" mean in this context?
d. Intimidation threat a. Exercising the highest level of professional judgment
Answer: b. Self-interest threat and diligence
b. Avoiding conflicts of interest in all professional and
30. The Code of Ethics for Professional Accountants in the business relationships
Philippines applies to which of the following individuals? c. Complying with all relevant laws and regulations
a. All employees of a company, regardless of their role d. Providing services with competence, diligence, and
objectivity
Answer: a. Exercising the highest level of professional with information that they believe contains a materially
judgment and diligence false or misleading statement. Which ethical principle does
this requirement align with?
38. A professional accountant who has a close family a. Integrity
member serving as a key management personnel in a b. Objectivity
client entity may face a threat to their independence c. Confidentiality
known as: d. Professional Behavior
a. Advocacy threat Answer: a. Integrity
b. Self-interest threat
c. Familiarity threat 47. The Code of Ethics for Professional Accountants in the
d. Intimidation threat Philippines requires accountants to be straightforward and
Answer: c. Familiarity threat honest in all professional and business relationships.
Which ethical principle does this requirement align with?
39. The Board of Accountancy (BOA) is responsible for the a. Integrity
setting, implementation, and enforcement of which of the b. Objectivity
following standards? c. Confidentiality
a. International Financial Reporting Standards (IFRS) d. Professional Behavior
b. Philippine Financial Reporting Standards (PFRS) Answer: a. Integrity
c. International Standards on Auditing (ISAs)
d. Philippine Standards on Auditing (PSAs) 48. A professional accountant who is under pressure to
Answer: d. Philippine Standards on Auditing (PSAs) compromise their independence to maintain a long-
standing client relationship may face a threat to their
40. A professional accountant who is offered a job at a compliance with which ethical principle?
client entity may face a threat to their independence a. Integrity
known as: b. Objectivity
a. Advocacy threat c. Professional Competence and Due Care
b. Self-interest threat d. Professional Behavior
c. Familiarity threat Answer: b. Objectivity
d. Intimidation threat
Answer: d. Intimidation threat 49. The Philippine Accountancy Act empowers the
Professional Regulations Commission (PRC) to investigate
41. The Code of Ethics for Professional Accountants in the and discipline Certified Public Accountants (CPAs) for
Philippines applies to professional accountants in all violations of the Act and the Code of Ethics. What
sectors, including those working in: disciplinary actions can the PRC take in such cases?
a. Public practice, business, and the public sector a. Impose fines and penalties
b. The public sector and academia, but not public practice b. Suspend or revoke the CPA's license
or business c. Issue a warning letter to the CPA
c. Public practice and academia, but not the public sector d. Require the CPA to undergo additional training
or business Answer: b. Suspend or revoke the CPA's license
d. The public sector and business, but not public practice
or academia
Answer: a. Public practice, business, and the public sector 50. The Professional Regulations Commission (PRC) is
responsible for regulating the practice of which of the
42. The Philippine Accountancy Act empowers the following professions in the Philippines?
Professional Regulations Commission (PRC) to perform a. Medicine
which of the following tasks? b. Engineering
a. Issuing licenses for publicly listed companies c. Law
b. Regulating the stock market operations d. All of the above
c. Regulating the practice of accountancy and issuing Answer: d. All of the above
licenses to qualified accountants
d. Setting financial reporting standards for businesses 51. The Philippine Accountancy Act is embodied in which
Answer: c. Regulating the practice of accountancy and Republic Act?
issuing licenses to qualified accountants a. Republic Act No. 9298
b. Republic Act No. 7942
43. Which ethical principle requires professional c. Republic Act No. 9165
accountants to provide services with competence, d. Republic Act No. 11223
diligence, and objectivity to clients? Answer: a. Republic Act No. 9298
a. Integrity
b. Objectivity 52. The Code of Ethics for Professional Accountants in the
c. Professional Competence and Due Care Philippines requires accountants to maintain which of the
d. Professional Behavior following principles while discharging their professional
Answer: c. Professional Competence and Due Care responsibilities?
a. Professional Independence
44. The Philippine Standards on Auditing (PSAs) are b. Professional Skepticism
primarily aimed at providing guidance to auditors on: c. Professional Integrity
a. Taxation regulations for businesses d. Professional Competence
b. Conducting audits of financial statements Answer: c. Professional Integrity
c. Setting financial reporting standards for companies
d. Performing risk assessments for publicly listed 53. The primary function of the Securities and Exchange
companies Commission (SEC) in the regulatory framework for
Answer: b. Conducting audits of financial statements auditing is to:
a. Set the Philippine Financial Reporting Standards (PFRS)
45. A professional accountant who is pressured to change b. Regulate the financial reporting of publicly listed
the conclusions of an audit report may face a threat to companies
their compliance with which ethical principle? c. Enforce the Code of Ethics for Professional Accountants
a. Integrity d. Regulate the practice of accountancy in the Philippines
b. Objectivity Answer: b. Regulate the financial reporting of publicly
c. Professional Competence and Due Care listed companies
d. Professional Behavior
Answer: b. Objectivity 54. A professional accountant who has a close
relationship with a director of a client entity may face a
46. The Code of Ethics for Professional Accountants in the threat to their independence known as:
Philippines requires accountants to avoid being associated a. Advocacy threat
b. Self-interest threat 63. The Code of Ethics for Professional Accountants in the
c. Familiarity threat Philippines requires accountants to avoid any
d. Intimidation threat subordination of their judgment to others. Which ethical
Answer: c. Familiarity threat principle does this requirement align with?
a. Integrity
55. The Code of Ethics for Professional Accountants in the b. Objectivity
Philippines is issued by which of the following bodies? c. Professional Competence and Due Care
a. Philippine Institute of Certified Public Accountants d. Professional Behavior
(PICPA) Answer: b. Objectivity
b. Professional Regulations Commission (PRC)
c. Securities and Exchange Commission (SEC) 64. A professional accountant who is threatened with
d. Board of Accountancy (BOA) dismissal for disagreeing with a client's management may
Answer: d. Board of Accountancy (BOA) face a threat to their compliance with which ethical
principle?
56. The Philippine Standards on Auditing (PSAs) are a. Integrity
based on which international auditing standards? b. Objectivity
a. International Standards on Auditing (ISAs) c. Professional Competence and Due Care
b. International Financial Reporting Standards (IFRS) d. Professional Behavior
c. International Ethics Standards Board for Accountants Answer: a. Integrity
(IESBA)
d. International Accounting Standards (IAS) 65. The Securities and Exchange Commission (SEC) in
Answer: a. International Standards on Auditing (ISAs) the Philippines is responsible for regulating and
supervising which of the following entities?
57. A professional accountant who is offered an expensive a. Banks and financial institutions
gift from a client may face a threat to their independence b. Publicly listed companies
known as: c. Non-profit organizations
a. Advocacy threat d. Private educational institutions
b. Self-interest threat Answer: b. Publicly listed companies
c. Familiarity threat
d. Intimidation threat 66. The Code of Ethics for Professional Accountants in the
Answer: b. Self-interest threat Philippines requires accountants to avoid conflicts of
interest. Which ethical principle does this requirement
58. The Code of Ethics for Professional Accountants in the align with?
Philippines requires accountants to have which of the a. Integrity
following skills and knowledge to perform their b. Objectivity
professional duties competently? c. Professional Competence and Due Care
a. Technical knowledge of taxation laws d. Professional Behavior
b. Ability to prepare complex financial reports Answer: b. Objectivity
c. Knowledge of relevant auditing standards
d. Familiarity with legal and regulatory requirements 67. A professional accountant who is offered an
Answer: c. Knowledge of relevant auditing standards opportunity to invest in a client's business may face a
threat to their independence known as:
59. Which regulatory body has the authority to inspect a. Advocacy threat
and assess the quality of audit services provided by b. Self-interest threat
auditing firms in the Philippines? c. Familiarity threat
a. Professional Regulations Commission (PRC) d. Intimidation threat
b. Securities and Exchange Commission (SEC) Answer: b. Self-interest threat
c. Board of Accountancy (BOA)
d. Philippine Institute of Certified Public Accountants 68. The Professional Regulations Commission (PRC) is
(PICPA) responsible for the issuance and renewal of licenses for
Answer: b. Securities and Exchange Commission (SEC) Certified Public Accountants (CPAs). How often must CPAs
renew their license in the Philippines?
60. The Philippine Accountancy Act grants the a. Every two years
Professional Regulations Commission (PRC) the power to b. Every three years
suspend the license of a Certified Public Accountant (CPA) c. Every five years
for a period not exceeding: d. Every ten years
a. Two years Answer: b. Every three years
b. Three years
c. Five years 69. The Code of Ethics for Professional Accountants in the
d. Ten years Philippines requires accountants to comply with relevant
Answer: c. Five years laws and regulations and avoid any conduct that might
discredit the profession. Which ethical principle does this
61. Which ethical principle requires accountants to treat requirement align with?
all information acquired during the course of their work as a. Integrity
confidential and not disclose it to a third party without b. Objectivity
proper and specific authority unless there is a legal or c. Professional Competence and Due Care
professional right or duty to disclose? d. Professional Behavior
a. Integrity Answer: d. Professional Behavior
b. Objectivity
c. Professional Competence and Due Care 70. Which ethical principle requires accountants to be
d. Confidentiality objective and not allow bias, conflict of interest, or undue
Answer: d. Confidentiality influence to override their professional judgment?
a. Integrity
62. The Board of Accountancy (BOA) is responsible for b. Objectivity
establishing which of the following accounting standards c. Confidentiality
in the Philippines? d. Professional Behavior
a. International Financial Reporting Standards (IFRS) Answer: b. Objectivity
b. Philippine Financial Reporting Standards (PFRS)
c. Philippine Standards on Auditing (PSAs) 71. The Code of Ethics for Professional Accountants in the
d. Generally Accepted Accounting Principles (GAAP) Philippines requires accountants to maintain their
Answer: c. Philippine Standards on Auditing (PSAs) professional knowledge and skill at a level required to
ensure competent professional service. Which ethical
principle does this requirement align with?
a. Integrity d. Accept gifts or hospitality that might impair their
b. Objectivity independence
c. Professional Competence and Due Care Answer: d. Accept gifts or hospitality that might impair
d. Professional Behavior their independence
Answer: c. Professional Competence and Due Care
80. The Philippine Accountancy Act grants the
72. A professional accountant who is pressured to Professional Regulations Commission (PRC) the authority
manipulate financial statements may face a threat to their to suspend the license of a Certified Public Accountant
compliance with which ethical principle? (CPA) in case of:
a. Integrity a. Negligence in the practice of accountancy
b. Objectivity b. Violation of the Code of Ethics for Professional
c. Professional Competence and Due Care Accountants
d. Professional Behavior c. Failure to submit annual audit reports to the SEC
Answer: a. Integrity d. Non-compliance with tax regulations
Answer: b. Violation of the Code of Ethics for Professional
73. The Securities and Exchange Commission (SEC) in Accountants
the Philippines has the authority to investigate and
discipline: 81. Which ethical principle requires accountants to be
a. All accountants practicing in the country honest and straightforward in their professional and
b. Only Certified Public Accountants (CPAs) who work for business relationships?
publicly listed companies a. Integrity
c. Only Certified Public Accountants (CPAs) who are in b. Objectivity
public practice c. Professional Competence and Due Care
d. Only Certified Public Accountants (CPAs) who are d. Professional Behavior
members of PICPA Answer: a. Integrity
Answer: b. Only Certified Public Accountants (CPAs) who
work for publicly listed companies 82. The Securities and Exchange Commission (SEC) in
the Philippines is responsible for enforcing compliance
74. The Professional Regulations Commission (PRC) is with financial reporting standards for which type of
composed of how many commissioners? companies?
a. Three commissioners a. Sole proprietorships
b. Five commissioners b. Private limited companies
c. Seven commissioners c. Publicly listed companies
d. Nine commissioners d. Non-profit organizations
Answer: b. Five commissioners Answer: c. Publicly listed companies
75. A professional accountant who has a close personal 83. A professional accountant who is under pressure to
relationship with a director of a client entity may face a disclose confidential client information to the public may
threat to their independence known as: face a threat to their compliance with which ethical
a. Advocacy threat principle?
b. Self-interest threat a. Integrity
c. Familiarity threat b. Objectivity
d. Intimidation threat c. Confidentiality
Answer: c. Familiarity threat d. Professional Behavior
Answer: c. Confidentiality
76. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to refrain from disclosing 84. The Board of Accountancy (BOA) in the Philippines is
any confidential information obtained during the course of composed of members who are appointed by the:
their work. Which ethical principle does this requirement a. Securities and Exchange Commission (SEC)
align with? b. Professional Regulations Commission (PRC)
a. Integrity c. Philippine Institute of Certified Public Accountants
b. Objectivity (PICPA)
c. Confidentiality d. Department of Finance (DOF)
d. Professional Behavior Answer: b. Professional Regulations Commission (PRC)
Answer: c. Confidentiality
85. The Philippine Standards on Auditing (PSAs) are
77. A professional accountant who is threatened with designed to ensure that auditors comply with which of the
legal action for disagreeing with a client's management following principles while conducting an audit
may face a threat to their compliance with which ethical engagement?
principle? a. Professional Independence
a. Integrity b. Professional Skepticism
b. Objectivity c. Professional Integrity
c. Professional Competence and Due Care d. Professional Competence
d. Professional Behavior Answer: a. Professional Independence
Answer: a. Integrity
86. A professional accountant who is pressured to
78. The Philippine Standards on Auditing (PSAs) are misrepresent financial information may face a threat to
formulated to ensure that auditors conduct their audits their compliance with which ethical principle?
with: a. Integrity
a. Due professional care b. Objectivity
b. Highest level of skepticism c. Professional Competence and Due Care
c. Independence and objectivity d. Professional Behavior
d. Professional skepticism Answer: a. Integrity
Answer: c. Independence and objectivity
87. The Code of Ethics for Professional Accountants in the
79. The Code of Ethics for Professional Accountants in the Philippines requires accountants to provide professional
Philippines requires accountants to avoid conflicts of services diligently and in accordance with:
interest, which means they should not: a. The International Ethics Standards Board for
a. Have any financial interest in a client entity Accountants (IESBA) Code of Ethics
b. Be associated with information they believe contains a b. The Philippine Financial Reporting Standards (PFRS)
false statement c. The International Standards on Auditing (ISAs)
c. Perform audit engagements for friends or close family d. The Philippine Standards on Auditing (PSAs)
members Answer: d. The Philippine Standards on Auditing (PSAs)
96. The Code of Ethics for Professional Accountants in the
88. A professional accountant who is under pressure to Philippines requires accountants to comply with the
issue an unqualified audit opinion when the financial fundamental principles of:
statements contain material misstatements may face a a. Integrity, Objectivity, and Independence
threat to their compliance with which ethical principle? b. Integrity, Objectivity, Professional Competence, and Due
a. Integrity Care
b. Objectivity c. Integrity, Objectivity, Professional Competence, and
c. Professional Competence and Due Care Confidentiality
d. Professional Behavior d. Integrity, Objectivity, Independence, and Professional
Answer: b. Objectivity Behavior
Answer: c. Integrity, Objectivity, Professional Competence,
89. The Securities and Exchange Commission (SEC) in the and Confidentiality
Philippines is responsible for promoting:
a. Competition among accounting firms 97. The Securities and Exchange Commission (SEC) in
b. Fair competition among publicly listed companies the Philippines has the authority to impose sanctions and
c. Transparency and accountability in financial reporting penalties on publicly listed companies that fail to comply
d. The use of international accounting standards in the with financial reporting requirements. What type of
country sanctions can the SEC impose?
Answer: c. Transparency and accountability in financial a. Imprisonment for company directors
reporting b. Fines and penalties
c. Suspension of company operations
90. A professional accountant who is pressured to change d. Revocation of the company's business license
audit procedures to reduce the extent of testing may face a Answer: b. Fines and penalties
threat to their compliance with which ethical principle?
a. Integrity 98. A professional accountant who is under pressure to
b. Objectivity issue an adverse audit opinion when the financial
c. Professional Competence and Due Care statements are fairly presented may face a threat to their
d. Professional Behavior compliance with which ethical principle?
Answer: b. Objectivity a. Integrity
b. Objectivity
91. The Philippine Standards on Auditing (PSAs) are c. Professional Competence and Due Care
developed by the Board of Accountancy (BOA) in d. Professional Behavior
collaboration with which of the following organizations? Answer: b. Objectivity
a. Philippine Institute of Certified Public Accountants
(PICPA) 99. The Code of Ethics for Professional Accountants in the
b. Professional Regulations Commission (PRC) Philippines requires accountants to avoid any action that
c. Securities and Exchange Commission (SEC) may discredit the profession. Which ethical principle does
d. Philippine Financial Reporting Standards Council this requirement align with?
(FRSC) a. Integrity
Answer: a. Philippine Institute of Certified Public b. Objectivity
Accountants (PICPA) c. Professional Competence and Due Care
d. Professional Behavior
92. A professional accountant who is under pressure to Answer: d. Professional Behavior
issue a qualified audit opinion when the financial
statements contain no material misstatements may face a TRUE OR FALSE
threat to their compliance with which ethical principle?
a. Integrity 1. True or False: The Philippine Accountancy
b. Objectivity Act is a law that regulates the practice of
c. Professional Competence and Due Care accountancy in the Philippines.
d. Professional Behavior Answer: True
Answer: b. Objectivity
2. True or False: The Professional
93. The Code of Ethics for Professional Accountants in the Regulations Commission (PRC) is
Philippines requires accountants to act diligently in responsible for regulating various
accordance with applicable technical and professional professions in the Philippines, including
standards. Which ethical principle does this requirement accountancy.
align with? Answer: True
a. Integrity
b. Objectivity 3. True or False: The PRC is composed of five
c. Professional Competence and Due Care commissioners who are appointed by the
d. Professional Behavior President of the Philippines.
Answer: c. Professional Competence and Due Care Answer: True
94. The Securities and Exchange Commission (SEC) in 4. True or False: The Code of Ethics for
the Philippines is responsible for ensuring the accuracy Professional Accountants in the
and completeness of financial statements of which type of Philippines is issued by the Securities and
companies? Exchange Commission (SEC).
a. Sole proprietorships Answer: False
b. Partnership firms
c. Corporations and publicly listed companies 5. True or False: The Code of Ethics for
d. Non-governmental organizations (NGOs) Professional Accountants in the
Answer: c. Corporations and publicly listed companies Philippines applies only to Certified Public
Accountants (CPAs) in public practice.
95. A professional accountant who is threatened with Answer: False
legal action for refusing to violate professional standards
may face a threat to their compliance with which ethical 6. True or False: The Code of Ethics for
principle? Professional Accountants in the
a. Integrity Philippines requires accountants to
b. Objectivity comply with all relevant laws and
c. Professional Competence and Due Care regulations.
d. Professional Behavior Answer: True
Answer: a. Integrity
7. True or False: The Code of Ethics for 20. True or False: The Code of Ethics for
Professional Accountants in the Professional Accountants in the
Philippines requires accountants to Philippines requires accountants to be
exercise due professional care in their honest and straightforward in all
professional activities. professional and business relationships.
Answer: True Answer: True
8. True or False: The Code of Ethics for 21. True or False: The Code of Ethics for
Professional Accountants in the Professional Accountants in the
Philippines requires accountants to avoid Philippines requires accountants to avoid
conflicts of interest in all professional and being associated with information they
business relationships. believe contains a materially false or
Answer: True misleading statement.
Answer: True
9. True or False: The Code of Ethics for
Professional Accountants in the 22. True or False: The Philippine Accountancy
Philippines requires accountants to Act grants the Professional Regulations
refrain from disclosing any confidential Commission (PRC) the authority to
information obtained during the course of suspend or revoke the license of a
their work. Certified Public Accountant (CPA) for a
Answer: True specified period.
Answer: True
10. True or False: The Board of Accountancy
(BOA) is responsible for issuing licenses to 23. True or False: The Philippine Accountancy
qualified Certified Public Accountants Act requires all accountants, regardless of
(CPAs) in the Philippines. their role, to be licensed by the PRC to
Answer: True practice accountancy in the Philippines.
Answer: True
11. True or False: The BOA is composed of
seven commissioners who are appointed 24. True or False: The Philippine Accountancy
by the Professional Regulations Act empowers the PRC to investigate and
Commission (PRC). discipline CPAs for violations of the Act
Answer: False and the Code of Ethics.
Answer: True
12. True or False: The BOA is responsible for
setting and implementing auditing 25. True or False: The Code of Ethics for
standards in the Philippines. Professional Accountants in the
Answer: True Philippines requires accountants to
disclose confidential information if it is in
13. True or False: The BOA works closely with the public interest to do so.
the Philippine Institute of Certified Public Answer: False
Accountants (PICPA) to develop
accounting and auditing standards. 26. True or False: The PRC is responsible for
Answer: True regulating the financial reporting of
publicly listed companies in the
14. True or False: The BOA has the authority Philippines.
to inspect and assess the quality of audit Answer: False
services provided by auditing firms in the
Philippines. 27. True or False: The Code of Ethics for
Answer: True Professional Accountants in the
Philippines requires accountants to avoid
15. True or False: The BOA is responsible for any action that may discredit the
enforcing compliance with financial profession.
reporting standards for publicly listed Answer: True
companies in the Philippines.
Answer: False 28. True or False: The BOA has the authority
to issue the Philippine Financial Reporting
16. True or False: The Philippine Standards Standards (PFRS).
on Auditing (PSAs) are based on the Answer: False
International Standards on Auditing (ISAs)
issued by the International Auditing and 29. True or False: The PSAs are formulated to
Assurance Standards Board (IAASB). ensure that auditors conduct their audits
Answer: True with professional skepticism.
Answer: True
17. True or False: The PSAs provide guidance
to auditors on how to conduct an audit 30. True or False: The PSAs apply only to
engagement and issue an audit report. auditors in public practice and do not
Answer: True cover auditors working in the public
sector or business.
18. True or False: The PSAs are primarily Answer: False
aimed at providing guidance to companies
on how to prepare their financial 31. True or False: The Philippine Accountancy
statements. Act grants the BOA the authority to issue
Answer: False licenses to individuals who have met the
qualification requirements for Certified
19. True or False: The Code of Ethics for Public Accountants (CPAs).
Professional Accountants in the Answer: True
Philippines requires accountants to
maintain their professional knowledge and 32. True or False: The BOA is composed of
skill at a level required to ensure nine commissioners who are appointed by
competent professional service. the President of the Philippines.
Answer: True Answer: False
33. True or False: The Code of Ethics for 45. True or False: The Philippine Accountancy
Professional Accountants in the Act empowers the PRC to suspend or
Philippines requires accountants to revoke the license of a Certified Public
disclose any confidential information Accountant (CPA) permanently for
obtained during the course of their work if violations of the Act.
required by law or authorized by the Answer: False
client.
Answer: True 46. True or False: The Code of Ethics for
Professional Accountants in the
34. True or False: The BOA is responsible for Philippines requires accountants to avoid
regulating the financial reporting of any relationship that may compromise
publicly listed companies in the their independence.
Philippines. Answer: True
Answer: False
47. True or False: The BOA has the authority
35. True or False: The PSAs are based on the to issue licenses to qualified Certified
Philippine Financial Reporting Standards Public Accountants (CPAs) and oversee
(PFRS) issued by the Philippine Financial the accountancy profession in the
Reporting Standards Council (FRSC). Philippines.
Answer: False Answer: True
36. True or False: The PSAs are designed to 48. True or False: The BOA is responsible for
ensure that auditors comply with the setting financial reporting standards for
fundamental principles of integrity, publicly listed companies in the
objectivity, professional competence, and Philippines.
confidentiality. Answer: False
Answer: True
49. True or False: The Philippine Accountancy
37. True or False: The PSAs provide guidance Act empowers the PRC to investigate and
to auditors on how to prepare financial discipline accountants for violations of the
statements and disclosures for various Act, but it does not have the authority to
types of entities. revoke their licenses permanently.
Answer: False Answer: True
38. True or False: The Code of Ethics for 50. True or False: The PSAs are designed to
Professional Accountants in the ensure that auditors conduct their audits
Philippines requires accountants to be with due professional care and objectivity.
independent and avoid any relationship Answer: True
that may compromise their objectivity.
Answer: True FILL IN THE BLANK
1. The ___________ is a law that regulates the practice
39. True or False: The BOA has the authority of accountancy in the Philippines.
to suspend or revoke the license of a Answer: Philippine Accountancy Act
Certified Public Accountant (CPA)
permanently for violations of the 2. The ___________ is responsible for regulating
Philippine Accountancy Act. various professions in the Philippines, including
Answer: True accountancy.
Answer: Professional Regulations Commission (PRC)
40. True or False: The Philippine Accountancy
Act empowers the BOA to inspect and 3. The PRC is composed of _________ commissioners
assess the quality of audit services who are appointed by the President of the
provided by auditing firms in the Philippines.
Philippines. Answer: five
Answer: True
4. The ___________ is issued by the Professional
41. True or False: The Philippine Accountancy Regulations Commission (PRC) and provides
Act grants the BOA the authority to guidance to professional accountants in the
investigate and discipline CPAs for Philippines.
violations of the Act and the Code of Answer: Code of Ethics for Professional Accountants
Ethics.
Answer: True 5. The Code of Ethics for Professional Accountants in
the Philippines applies to all Certified Public
42. True or False: The Code of Ethics for Accountants (CPAs) in __________.
Professional Accountants in the Answer: all roles, whether in public practice, business, or
Philippines requires accountants to public sector
provide services with professional
competence and due care. 6. The Code of Ethics for Professional Accountants in
Answer: True the Philippines requires accountants to comply
with all relevant __________ and __________.
43. True or False: The BOA has the authority Answer: laws, regulations
to impose sanctions and penalties on
publicly listed companies that fail to 7. The Code of Ethics for Professional Accountants in
comply with financial reporting the Philippines requires accountants to exercise
requirements. due __________ in their professional activities.
Answer: False Answer: professional care
44. True or False: The PSAs are developed by 8. The Code of Ethics for Professional Accountants in
the BOA in collaboration with the the Philippines requires accountants to avoid
Philippine Institute of Certified Public conflicts of __________ in all professional and
Accountants (PICPA). business relationships.
Answer: True Answer: interest
9. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to refrain 24. The Code of Ethics for Professional Accountants in
from disclosing any __________ information the Philippines requires accountants to disclose
obtained during the course of their work. ___________ information if it is in the ___________
Answer: confidential interest to do so.
Answer: confidential, public
10. The ___________ is responsible for issuing licenses
to qualified Certified Public Accountants (CPAs) in 25. The PRC is responsible for regulating the financial
the Philippines. ___________ of ___________ in the Philippines.
Answer: Board of Accountancy (BOA) Answer: reporting, publicly listed companies
11. The BOA is composed of ___________ 26. The Code of Ethics for Professional Accountants in
commissioners who are appointed by the the Philippines requires accountants to avoid any
___________. ___________ that may compromise their
Answer: seven, Professional Regulations Commission ___________.
(PRC) Answer: relationship, independence
12. The BOA is responsible for setting and 27. The BOA has the authority to ___________ or
implementing ___________ standards in the ___________ the license of a Certified Public
Philippines. Accountant (CPA) permanently for violations of the
Answer: auditing Philippine Accountancy Act.
Answer: suspend, revoke
13. The BOA works closely with the ___________ to
develop accounting and auditing standards. 28. The Code of Ethics for Professional Accountants in
Answer: Philippine Institute of Certified Public the Philippines requires accountants to avoid any
Accountants (PICPA) action that may ___________ the profession.
Answer: discredit
14. The BOA has the authority to inspect and assess
the quality of ___________ provided by auditing 29. The PSAs are designed to ensure that auditors
firms in the Philippines. conduct their audits with due professional
Answer: audit services ___________ and ___________.
Answer: care, objectivity
15. The ___________ are formulated to ensure that
auditors conduct their audits with professional 30. The PSAs apply to auditors in ___________ practice,
skepticism. as well as auditors working in the public
Answer: Philippine Standards on Auditing (PSAs) ___________ or business.
Answer: public, sector
16. The PSAs provide guidance to auditors on how to
conduct an ___________ engagement and issue an 31. The PSAs provide guidance to auditors on how to
audit report. prepare financial statements and ___________ for
Answer: audit various types of ___________.
Answer: disclosures, entities
17. The PSAs are based on the ___________ issued by
the ___________. 32. The Philippine Accountancy Act grants the BOA
Answer: International Standards on Auditing (ISAs), the authority to issue ___________ to individuals
International Auditing and Assurance Standards Board who have met the qualification requirements for
(IAASB) Certified Public Accountants (CPAs).
Answer: licenses
18. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to maintain 33. The BOA is composed of ___________
their professional ___________ and ___________ at a commissioners who are appointed by the
level required to ensure competent professional ___________.
service. Answer: nine, Professional Regulations Commission (PRC)
Answer: knowledge, skill
34. The Code of Ethics for Professional Accountants in
19. The Code of Ethics for Professional Accountants in the Philippines requires accountants to disclose
the Philippines requires accountants to be honest any confidential information obtained during the
and ___________ in all professional and business course of their work if required by ___________ or
relationships. authorized by the ___________.
Answer: straightforward Answer: law, client
20. The Code of Ethics for Professional Accountants in 35. The BOA is responsible for regulating the financial
the Philippines requires accountants to avoid reporting of ___________ in the Philippines.
being associated with information they believe Answer: publicly listed companies
contains a materially ___________ statement.
Answer: false or misleading 36. The PSAs are based on the Philippine Financial
Reporting ___________ (PFRS) issued by the
21. The Philippine Accountancy Act grants the PRC Philippine Financial Reporting Standards
the authority to ___________ the license of a ___________ (FRSC).
Certified Public Accountant (CPA) for a specified Answer: Standards, Council
period.
Answer: suspend 37. The PSAs are designed to ensure that auditors
conduct their audits with fundamental ___________
22. The Philippine Accountancy Act requires all of integrity, objectivity, professional competence,
accountants, regardless of their role, to be and confidentiality.
___________ by the PRC to practice accountancy in Answer: principles
the Philippines.
Answer: licensed 38. The PSAs provide guidance to auditors on how to
conduct an audit engagement and issue an
23. The Philippine Accountancy Act empowers the ___________ report.
PRC to ___________ and ___________ CPAs for Answer: audit
violations of the Act and the Code of Ethics.
Answer: investigate, discipline
39. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to be
___________ and avoid any relationship that may
compromise their ___________.
Answer: independent, objectivity