Mindanao State University

College of Business Administration and Accountancy

DEPARTMENT OF ACCOUNTANCY
Marawi City

CHAPTER 13
THE CODE OF ETHICS AND REPUBLIC ACT 9298
PSA-BASED QUESTIONS

Multiple Choice Questions

Code of Professional Ethics

1. The code of professional ethics for CPAs promulgated by the Board of Accountancy applies to
a. All CPAs in public practice.
b. All CPAs in government.
c. All CPAs in public practice and employed in private business.
d. All CPAs in public practice, employed in private business and industry, in the government, and I edu-
cation.
2. The underlying reason for the code of professional ethics is
a. That it is required by legislation.
b. To provide the licensing agencies with the basis for measuring the performance of the practitioners.
c. The need for public confidence in the quality of service of the profession.
d. That it provides a safeguard against unscrupulous people.
3. The CPA profession deemed it necessary to established a code of ethics and a mechanism for its enforce-
ment because
a. An ethical conduct that stresses the CPA’s responsibility to clients and colleagues is a prerequisite to
success.
b. A requirement of law provides that CPAs establish a code of ethics.
c. Acceptance of responsibility to the public is distinguishing mark of a profession.
d. The establishment of flexible ethical standards provides self-protection for CPAs.
4. Which of the following is not one of the characteristics of a profession?
a. Mastery of a particular intellectual skill acquired by training and education
b. Adherence by its members to a common code of conduct
c. Acceptance of a duty to society as a whole.
d. A responsibility to protect exclusively the interest of a client or employer.
5. The principle of professional competence and due care imposes certain obligations on professional accoun-
tants. Which of the following is not one of those obligations required by this principle?
a. To act diligently in accordance with applicable technical and professional standards.
b. To be fair, intellectually honest and free of conflict of interest.
c. To become aware and understand relevant technical, professional and business developments.
d. To obtain professional knowledge and experience to enable them to fulfil their responsibilities.
6. Competence as a certified public accountant includes all of the following except
a. Having the technical qualifications to perform an engagement.
b. Possessing the ability to supervise and evaluate the quality of staff work.
c. Warranting the infallibility of the work performed.
d. Consulting others if additional technical information is needed.
7. An auditor who accepts an audit engagement and does not possess the industry expertise of the business en -
tity should
a. Engage financial experts familiar with nature of the business entity
b. Obtain knowledge of matters that relate to the nature of the entity’s business
c. Refer a substantial portion of the audit to another CPA who will act as the principal auditor
d. First inform management that an unqualified opinion cannot be issued
8. Professional competence should include
Attainment of professional competence Maintenance of professional competence
a. YES YES
b. NO YES
c. NO NO
d. YES NO

Page | 1
9. The phase of professional competence that requires a professional accountant to adopt a program designed
to ensure quality control in the performance of professional services consistent with technical and profes -
sional standard is:
a. attainment of professional competence
b. maintenance of professional competence
c. application of professional competence
d. review of professional competence
10. The essence of the due care principle is that the auditor should not be guilty of:
a. Bias.
b. Errors in judgement.
c. Fraud
d. Negligence.
11. The principle of confidentiality applies to:
a. Professional accountants in public practice.
b. Professional accountant in commerce and industry.
c. Professional accountant in government.
d. All professional accountants.
12. The principle of confidentiality imposes an obligation on professional accountants to refrain from:
a. Disclosing confidential information to another party even if the client authorizes the disclosure.
b. Using confidential information acquired as a result of professional and business relationships to their
personal advantage or the advantage of third parties.
c. Disclosing information to defend themselves in case of litigation.
d. Responding to an inquiry or investigation conducted by the Professional Regulatory Board of Ac-
countancy.
13. A CPA shall not disclose confidential information obtain during an audit engagement in which one of the
following situations?
a. When the security of the state is requires.
b. With the consent of the client.
c. In defense of himself when sued by his client.
d. To a successor auditor without the client’s consent.
14. The Code of Ethics for Professional Accountants states that a CPA shall not disclose any confidential in -
formation obtained in the course of professional engagement except with the consent of his client. In which
of the situations given below would a CPA be in violation of the principle of confidentiality?
a. Disclosing confidential information in order to properly discharge the CPA’s responsibilities in ac-
cordance with his professional standards.
b. Disclosing confidential information in compliance with a subpoena issued by a court.
c. Disclosing confidential information to another accountant interested in purchasing the CPA’s prac-
tice.
d. Disclosing of confidential information in an investigation conducted by the PRC thru the Board of
Accountancy.
15. Which of the following is considered a violation of rules on confidentiality?
a. The CPA discloses information to protect his own interest in the course of legal proceedings.
b. The CPA discloses information to a successor after obtaining the client’s permission.
c. The CPA discloses information to another CPA in compliance with quality control review conducted
by the Quality Review Committee (QRC).
d. The CPA divulges information disclosed to him by a prospective client.
16. In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any
confidential information obtained during the course of a professional engagement?
a. The CPA is issued a summon enforceable by a court order which orders the CPA to present confi -
dential information.
b. A major stockholder of a client company seeks accounting information from the CPA after the man-
agement declined to disclose the requested information.
c. Confidential client information is made available with the client’s permission.
d. An inquiry by the Professional Regulation Commission and the CPA needs the disclosure to defend
himself
17. May, a non-CPA has a law practice. Mike, CPA has agreed to pay May 10% of the fee for services ren -
dered by Mike to May’s client. Who, if anyone, is in violation of the code of ethics?
a. Mike
b. May
c. Both Mike and May

Page | 2
 d. Neither Mike nor May
18. Identify the incorrect statement. “A professional accountant rendering tax service is entitled to put forward
the best position in favor of a client or an employer, provided….”
a. It does not impair the accountant’s integrity and objectivity.
b. It is rendered with professional competence.
c. It is consistent with the law.
d. The professional accountant assumes responsibility for the content of the tax return.
19. A professional accountant’s name can be associated with information that:
a. Contains a misleading statement.
b. Intentionally omits or obscure information.
c. Uses estimates.
d. Contains information without any real knowledge of whether they are true or false.
20. When a professional accountant performs several services in a country other than the home country and
differences in specific matters exist between ethical requirement of the two countries, the professional ac-
countant should apply
a. The ethical requirements of his or her home country.
b. The ethical requirements of the country of which services are being performed.
c. The stricter of the two ethical requirements.
d. The less strict ethical requirements.
21. One of the major differences between auditors and other professionals is that most professionals
a. Do not have to pass rigorous examination to be admitted in the profession.
b. Are not expected to act in the best interest of the public.
c. Need not be concerned about independence.
d. Do not need the confidence of the public.
22. Independence in auditing means
a. Not having any financial or economic relationship with the client.
b. Being an advocate of the assurance client.
c. Taking an unbiased viewpoint.
d. Not having a loan to or from an assurance client.
23. Which of the following most accurately states how objectivity has been defined by the Code of Ethics?
a. Being honest and straight forward in all professional and business relationship.
b. A state of mind that permits the provision of an opinion without being affected by influences that
compromise professional judgement.
c. A combination of impartiality, intellectual honesty and a freedom from conflict of interest.
d. Avoiding facts and circumstances that could reduce the public confidence in the professional ac -
countant’s report
24. A CPA, while performing an audit, strives to achieve independence in appearance in order to
a. Reduce risk and liability.
b. Become independent in mind.
c. Maintain public confidence in the profession.
d. Comply with the generally accepted standards of fieldwork.
25. The concept of materiality would be least important to an auditor in determining
a. Transaction that should be reviewed.
b. The need for disclosing a particular transaction or event.
c. The extent of audit work planned for particular accountant.
d. The effect of an auditor’s direct financial interest in a client.
26. The primary factor to distinguishes a direct from an indirect financial interest is the
a. Materiality of the amount involves.
b. Control over investment decisions.
c. Risk associated with such investment.
d. Relationship between the investor and investee.
27. Ultimately, the decision as to whether the CPA is independent or not, will be made by the
a. Client
b. Audit committee
c. Public
d. Auditor

Page | 3
28. The Philippine Code of Ethics for professional accountants requires independence
Of mind In appearance
a. YES YES
b. YES NO
c. NO NO
d. NO YES
29. Which of the following is an example of a circumstance imposed scope limitation relating to the nature or
timing of the auditor’s work?
a. The entity’s accounting records have been destroyed.
b. The auditor determines that a substantive test alone is not sufficient but the internal control is not re -
liable.
c. Management prevents the auditor from observing the counting of physical inventory.
d. The entity is required to use the equity method of accounting for investment in associates but the
client uses the fair value method.
30. Which of the following is the correct order of steps that the auditor should not follow if, after accepting the
engagement, the auditor becomes aware that management has imposed a limitation on the scope of the au -
dit that likely to result in a modification of opinion on the financial statements?
I. The auditor shall request the management to remove the limitation.
II. The auditor shall communicate the matter to those charged with governance.
III. The auditor shall determine whether it is possible to perform alternative procedures.
a. I,II,III
b. III,I,II
c. II,I,III
d. III,II,I

31. If requested to perform a review engagement for a nonpublic entity in which an accountant has an
immaterial direct financial interest, the accountant is
A. independent and, therefore, may issue a review report.
B. not independent and, therefore, may not issue a review report.
C. not independent and, therefore, may issue a review report.
D. not independent and, therefore, may not be associated with the financial statements.
32. The networks firms are required to be independent of the client
a. for assurance engagements provided to an audit client.
b. for assurance engagements provided to clients that are not audit clients, when the report is not
expressly restricted for use by identified users.
c. for assurance engagements provided to clients that are not audit clients, when the assurance
report is expressly restricted for use by identified users.
d. for non-assurance engagements.
33. Which of the following should be independent of the financial statement audit client?
A. B. C. D.
The members of the assurance team Yes Yes Yes Yes
The firm Yes Yes No No
Network firms Yes No No Yes
34. For assurance engagements provided to clients that are not audit clients, when the assurance report is
expressly restricted for use by identified users, the following should be independent of the client:
A. B. C. D.
The members of the assurance team Yes Yes Yes Yes
The firm Yes Yes No No
Network firms Yes No No Yes
35. Which of the following statements is not correct about independence requirements?
A. for assurance engagements provided to audit client, the members of the assurance team, the
firm and network firms are required to be independent of the client.
B. for assurance engagements provided to non-audit clients, the members of the assurance team
and the firm are required to be independent of the client.
C. for assurance engagements provided to non-audit clients, where the distribution of the
assurance report is limited only to specified users, the members of the assurance team are required
to be independent of the client.
D. for assurance engagements provided to non-audit clients, where the distribution of the
assurance report is limited only to specified users, the firm should be independent of the client.
36. Which of the following professional services does not require independence?
A. Direct reporting engagements
B. Examination of financial forecast
C. Tax consultancy services
D. Assertion-based engagements

Page | 4
37. The member of the assurance team and the firm should be independent of the assurance client during
the period of the assurance engagement. For this purpose, the period of the engagement:
A. Starts when the assurance team begins to perform assurance services and ends when the
assurance report is issued.
B. Starts when the assurance team begins to perform assurance services and ends when the
fieldwork is completed.
C. Starts when the engagement letter is prepared and ends when the fieldwork is completed.
D. Starts when the engagement letter is prepared and ends when the assurance report is issued.
38. This occurs as a result of the financial or other interests of a professional accountant or of an immediate
or close family member.
A. self-interest threat C. advocacy threat
B. self-review threat D. familiarity threat
39. This occurs when, because of a close relationship, a professional accountant becomes too sympathetic
to the interests of others.
A. self-interest threat C. advocacy threat
B. self-review threat D. familiarity threat
40. According to the Philippine Code of Ethics, compliance with fundamental principles is potentially
affected by self-interest, self-review, advocacy, familiarity and intimidation threats. Which of the following
best describes “advocacy threat”?
A. This occurs when a firm or a member of the assurance team could benefit from financial
interest in an assurance client.
B. This occurs when any product or judgment of a previous engagement need to be re-evaluated in
reaching conclusions on the assurance engagement.
C. This occurs when a member of assurance team was previously a director or officer of the
assurance client.
D. This occurs when a firm, or a member of the assurance team, promotes, or may be perceived to
promote, an assurance client’s position or opinion to the point that objectivity may, or may be
perceived to be, compromised.
41. This occurs when any product or judgment of a previous assurance engagement or non-assurance
engagement needs to be revaluated in reaching conclusions on the assurance engagement or when a
member of the assurance team was previously a director or officer of the assurance client, or was an
employee in a position to exert direct and significant influence over the subject matter if the assurance
engagement.
A. self-interest threat C. advocacy threat
B. self-review threat D. familiarity threat
42. This threat occurs when a member of the assurance team may be deterred from acting objectivity and
exercising professional skepticism by threats, actual or perceived, from the directors, officers or employees
of an assurance client.
A. intimidation threat
B. familiarity threat
C. advocacy threat
D. self-interest threat
43. Which of the following circumstances would least likely create self-interest threat?
A. Contingent fees relating to assurance engagements
B. A direct financial interest or material indirect financial interest in an assurance client
C. A loan or guarantee to or from an assurance client or any of its directors or officers
D. Having a close personal relationship between a member of the assurance team and the
assurance client, its directors, officers or employees
44. Which of the following would least likely create “self-interest threat”?
A. Undue dependence on total fees from an assurance client
B. Concern about the possibility of losing the engagement
C. Having a close business relationships with an assurance client
D. Pressure to reduce inappropriately the extent of work performed in order to reduce fees
45. Which of the following would most likely create a self-review threat?
A. financial interest in a client
B. litigation involving professional accountant and a client
C. a former partner joins the assurance client
D. a former officer of a client is now a member of the assurance team
46. Examples of circumstances that may create self-review threat do not include
A. Preparation of original data used to generate financial statements or preparation of other
records that are the subject matter of the assurance engagement.
B. A member of the assurance team being, or having recently been, an employee of the assurance
client in a position to exert direct and significant influence over the subject matter of the assurance
engagement.
C. Performing services for an assurance client that directly affect the subject matter of the
assurance engagement.
D. Potential employment with an assurance client.

Page | 5
47. Which of the following is an example of an intimidation threat that may affect the independence of the
professional accountant?
A. Preparation of original data used to generate financial statements or preparation of other
records that are the subject matter for the assurance engagement.
B. Threat of replacement over a disagreement with the application of an accounting principle.
C. Dealing in, or being a promoter of, share or other securities in an audit client.
D. A member of the assurance team having an immediate family member or close family member
who is a director or officer of the assurance client.
48. Acting for an audit client in the resolution of a dispute or litigation would most likely create
A. self-interest threat C. advocacy threat
B. intimidation threat D. familiarity threat
49. The preparation of accounting records or financial statements for an audit client will most likely create
A. self-interest threat C. intimidation threat
B. self-review threat D. familiarity threat
50. Using the same senior personnel on an assurance engagement over a long period of time would most
likely create
A. intimidation threat C. familiarity threat
B. advocacy threat D. self-interest threat
51. Accepting gifts or undue hospitality from an assurance client would most likely create
A. familiarity threat C. advocacy threat
B. self-review threat D. intimidation threat
52. Which of the following circumstances would least likely create familiarity threat?
A. a member of the assurance team having an immediate family member or close family member
who is a director or officer of the assurance team.
B. a member of the assurance team having an immediate family member or close family member
who, as an employee of the assurance client, is in a position to exert direct and significant
influence over the subject matter of the assurance engagement.
C. a former partner of the firm being a director, officer of the assurance client or an employee in a
position to exert direct and significant influence over the subject matter of the assurance
engagement.
D. a former director or officer of the assurance client.
53. When the total fees generated by an assurance client represent a large proportion of a firm’s total fees,
the dependence on that client or client group and concern about the possibility of losing the client will most
likely create:
A. self-interest threat C. intimidation threat
B. self-review threat D. familiarity threat
54. The provision of services by a firm or network firm to an audit client that involve the design and
implementation of financial information technology systems that are used to generate information forming
part of a client’s financial statements may most likely create:
A. self-interest threat C. intimidation threat
B. self-review threat D. familiarity threat
55. When threats to independence that are other than those clearly insignificant are identified, the
professional accountant should
A. continue the assurance engagement but with heightened level of professional skepticism.
B. downgrade the nature of engagement to one that does not require independence.
C. assign more experienced staff to the assurance engagement.
D. apply appropriate safeguards to eliminate threats to independence or to reduce them to an
acceptable level.
56. Safeguards fall into two broad categories. Safeguards created by the profession, legislation or regulation
does not include
A. Educational, training and experience requirements for entry into the profession.
B. Continuing professional development requirements.
C. Corporate governance regulations.
D. Documented policies regarding identification of threats to compliance with the fundamental
principles.
57. Firm-wide safeguards in the work environment may include:
A. Leadership of the firm that stresses the importance of compliance with the fundamental
principles.
B. Having appropriate body independent of management appoint the external auditor.
C. The creation of a corporate governance structure that provides appropriate oversight and
communications regarding the firm’s services.
D. Professional standards.
58. Safeguards within the client’s systems and procedures may include:
A. Involving another firm to perform or re-perform part of the assurance engagement.
B. Discussing independence issues with the audit committee or others charged with governance.
C. Policies and procedures to emphasize the assurance client’s commitment to fair financial
reporting.

Page | 6
 D. Involving an additional professional accountant to review the work done or otherwise advise as
necessary.

59. The rotation of senior accounting personnel can be regarded as a safeguard

A. Created by the profession
B. Within the client’s systems and procedures
C. In the work environment
D. Created within the business community
60. Which of the following is not one of the safeguards in the work environment?
A. Using different partners and teams with separate reporting lines for the provision of non-
assurance services to an assurance client.
B. Rotation of senior personnel
C. Documented internal policies and procedures requiring compliance with the fundamental
principles.
D. Continuing professional education requirements
61. Which of the following statements about CPA’s financial interest in a client is incorrect?
A. Immaterial indirect financial interest impairs the CPA’s independence
B. Immaterial direct financial interest impairs the CPA’s independence
C. Material direct financial interest impairs the CPA’s independence
D. Material indirect financial interest impairs the CPA’s independence
62. Which of the following safeguards could address the threat created by a material direct financial interest
in an assurance client?
A B C D
Disposal of financial interest in total Yes Yes No Yes
Disposal of sufficient amount of financial
interest to make it immaterial Yes Yes Yes No
Removing the member of the assurance team
from the assurance client Yes No No Yes
63. If a firm, or a network firm, has an immaterial indirect financial interest in an audit client of the firm,
the self-interest threat created would be so significant no safeguards could reduce the threat to an
acceptable level. The action appropriate to permit the firm to perform the engagement would be to
A. dispose of the financial interest
B. dispose of a sufficient amount of it so that the remaining interest is no longer material
C. Either a or b
D. Neither a or b
64. If a member of the assurance team, or their immediate family member, has a direct financial interest, or
a material indirect financial interest, in the assurance client, the self-interest threat created would be so
significant. Consequently, the professional accountant should apply appropriate safeguards in order to
eliminate the threat or reduce it to an acceptable level. Which of the following safeguards would not be
appropriate?
A. dispose of the direct financial interest prior to the individual becoming a member of the
assurance team
B. dispose of the indirect financial interest in total prior to the individual becoming a member of
the assurance team
C. dispose of a sufficient amount of the indirect financial interest so that the remaining interest is
no longer material prior to the individual becoming a member of the assurance team.
D. limit the participation of the member of the assurance team
65. Close business relationships can be regarded as an indirect financial interest and therefore would impair
the professional accountant’s independence unless
A. the amount is immaterial
B. the relationship is insignificant
C. both a and b
D. neither a nor b
66. Close family members do not include:
A. parents C. non-dependent child
B. siblings D. spouse
67. Immediate family members include
A. parents C. non-dependent child
B. siblings D. spouse
68. Loans from an assurance client that is a financial institution will not impair the independence of
professional accountant if:
A B C D
The loan is immaterial Yes Yes No No
The loan was obtained under normal lending
procedures, terms and requirements Yes No No Yes

Page | 7
69. The following loans and guarantees would not create a threat to independence, except:
A. A loan from, or a guarantee thereof by, an assurance client that is a bank or a similar institution,
to the firm, provided the loan is immaterial to both the firm and the assurance client.
B. A loan from, or a guarantee thereof by, an assurance client that is bank or a similar institution,
to a member of the assurance team, provided the loan is immaterial to both the firm and assurance
client.
C. Deposits made by, or brokerage accounts of, a firm or a member of the assurance team with an
assurance client that is a bank, broker or similar institution, provided the deposit or account is held
under normal commercial terms.
D. If the firm, or a member of the assurance team, makes a loan to an assurance client that is not a
bank or similar institution.
70. A self-interest threat may be created, if fees due from an assurance client for professional services
remain unpaid for a long time. Hence, professional fees for prior year’s engagements must be paid before:
A. the client engages the services of the professional accountant to audit the current year’s
financial statements.
B. the professional accountant formulates an opinion on the current year’s financial statements.
C. the audit report on the current year’s financial statements are issued.
D. the commencement of the current year’s audit engagement.
71. Which of the following activities would least likely impair the professional accountant’s independence?
A. Serving as an officer or director of an audit client.
B. Determining which recommendation of the firm should be implemented
C. Being an honorary member of an audit client.
D. Reporting, in a management role, to those charged with governance
72. The Philippine Code of Ethics requires that lead engagement partners of listed entities be rotated at
least once every
A. 2 years C. 5 years
B. 3 years D. 7 years
73. Which of the following would least likely be considered a violation of the independence rules?
A. Receiving a gift from an assurance client.
B. Providing tax consultancy services to an audit client.
C. Providing legal services to an assurance client in legal dispute.
D. Providing bookkeeping services to an audit client that is listed in the stock exchange.
74. Independence of an auditor in relation to the enterprise may be impaired under the following cases,
except
A. Having a direct or material indirect financial interest in the enterprise.
B. Connection with the enterprise as a promoter, underwriter, voting trustee, director, officer or
employee.
C. Having a loan to or from the enterprise or any officer, director or principal stockholder thereof
with certain exceptions.
D. Engaged to render management advisory services to the enterprise.
75. Which of the following will least likely impair independence?
A. An immediate family member of a member of the assurance team is a director, an officer or an
employee of the assurance client in a position to exert direct and significant influence over the
subject matter of the assurance engagement.
B. A member of the assurance team participates in the assurance engagement while knowing, or
having reason to believe, that he or she is to, or may, join the assurance client some time in the
future.
C. A partner or employee of the firm serves as an officer or as a director on the board of an
assurance client.
D. A partner or an employee of the firm receives a token gift from an assurance client.
76. In determining estimates of fees, an auditor may take into account each of the following, except the
A. Value of the service to the client.
B. Degree of responsibility assumed by undertaking the engagement.
C. Skills required to perform the service.
D. Attainment of specific findings.
77. The CPA should not undertake an engagement if his fee is to be based upon
A. a percentage of audited net income
B. per diem rates plus expenses
C. the findings of a tax authority
D. the complexity of the service rendered.
78. In which of the following situations would a public accounting firm have violated the Code of Ethics in
determining its fee?
A. A fee which is based upon the nature of the engagement rather than upon the actual time spent
on the engagement.

Page | 8
 B. A fee based on the degree of responsibility that the service entails.
C. A fee based on whether or not the audit report leads to the approval of client’s application for
bank loan.
D. A fee that will be established as a result of a bankruptcy proceedings.

79. Fees are not to be regarded as contingent if it is

A. Computed as a percentage of the client’s net income.
B. Computed as a percentage of the amount that the company can save from its tax return.
C. Dependent on the approval of a bank loan.
D. Dependent on the resolution of controversy with government agency.
80. The provision of a legal service by a firm, or network firm, to an entity that is an audit client may create
Advocacy Threat Self-review Threat
A. Yes No
B. No Yes
C. No No
D. Yes Yes
81. A director, an officer or an employee of the assurance client in a position to exert direct and significant
influence over the subject matter of the assurance engagement has been a member of the assurance team or
partner of the firm. This situation would least likely create
A. self-interest threat C. intimidation threat
B. self-review threat D. familiarity threat
82. A former officer, director or employee of the assurance client serves as a member of the assurance
team. This situation will least likely create
A. self-interest threat C. intimidation threat
B. self-review threat D. familiarity threat
83. The approach to a potential client for the purpose of offering professional services is called
A. indecent proposal C. encroachment
B. solicitation D. advertising
84. The communication to the public of facts about a professional accountant which are not designed for
the deliberate promotion of that promotional accountant is called
A. Advertising C. Solicitation
B. Publicity D. Announcements
85. Professional accountants press and other media releases undertaken to commemorate anniversaries in
public practice by informing the public of their achievements or contributions towards nation building are
A. Considered to be a violation of the rules on advertising
B. Forms of solicitation
C. Not permitted in the Philippines
D. Not considered violation of advertising rules provided such undertaking is done only once
every 5 years.
86. A professional accountant in public practice to whom the existing accountant or the client of existing
accountant has referred audit, accounting, taxation, consulting or similar appointments, or who is consulted
in order to meet the needs of the client is called:
A. a management consultant C. an expert
B. a receiving accountant D. a successor auditor
87. A successor auditor is required to communicate with the previous auditor. The primary concern in this
communication is
A. information which will help the successor auditor determines whether the client management
has integrity.
B. to learn about client by examining predecessor’s working papers.
C. to enable successor auditor to perform a more efficient audit.
D. to save successor auditor time and money in gathering data.
88. The primary duty to enforce the provisions of RA 9298 and its IRR rests with
A. The PFRC
B. The FRSC
C. The BOA
D. the AASC
89. The Professional Regulatory Board of Accountancy shall be composed of a chairman and six (6)
members to be appointed by the <LIST A> from a list of three (3) recommendees for each position and
ranked by the <LIST B>, from a list of five (5) nominees for each position submitted by <LIST C>.

LIST A LIST B LIST C

A. Commission APO President
B. President APO Commission
C. Commission Commission APO
D. President Commission APO

Page | 9
90. Which of the following statements about the composition of the Board of Accountancy is incorrect?
A. The four sectors in the practice of accountancy shall as much as possible be equitably
reperesented in the Board.
B. The Board shall be composed of a chairman and six members.
C. The members of the Board shall be appointed by the President of the Philippines from a list of
three recommendees for each position and ranked by the Commission, from a list of five nominees
for each position submitted by Accredited Professional Organization (APO)
D. The Board shall elect a chairman from among its members to serve for a term of one year.
91. The following statements relate to the term of office of the chairman and the members of the Board of
Accountancy (BOA).
I. No person who has served two (2) successive complete terms shall be eligible for reappointment until the
lapse of one (1) year.
II. Appointment to fill up an unexpired term is not to be considered a complete term.
III. A person may serve in the Board of Accountancy for eight consecutive years.
IV. No person shall serve in the Board for more than 12 years.
A. All statements are true.
B. Only I and II and IV are true.
C. Only I and IV are true.
D. Only II, III and IV are true.
92. Which of the following is not among the qualifications of a member of the Board of Accountancy?
A. He/She must have at least 10 years of experience in the practice of public accountancy.
B. He/She must be natural-born Filipino citizen and a resident of the Philippines.
C. He/She must not be a director or officer of the accredited national professional organization at
the time of appointment.
D. He/She must be of good moral character.
93. Which of the following is not a valid ground of suspension or removal of members of the Board of
Accountancy?
A. Neglect of duty or incompetence.
B. Rigging the CPA licensure examination results.
C. Violating 9298.
D. Being charged of crimes involving moral turpitude.
94. The standard setting body created by the PRC to promulgate accounting standards that will be generally
accepted in the Philippines is known as
A. Financial Reporting Standards Council (FRSC)
B. Auditing Standards and Practices Council (ASPC)
C. Accounting Standards Council (ASC)
D. Auditing and Assurance Standards Council (AASC)
95. The Financial Reporting Standards Council shall be composed of a chairman and
A. 14 members
B. 17 members
C. 8 members
D. 15 members
96. Which of the following is not represented in the AASC?
A. Board of Accountancy
B. Bureau of Internal Revenue
C. Commission on Audit
D. Securities and Exchange Commission
97. The term of office of each members of AASC is
A. 2 years, renewable C. 3 years, nonrenewable
B. 4 years, nonrenewable D. 3 years, renewable
98. The sector that is most represented in the Auditing and Assurance Standards Council is the
A. Commerce and Industry
B. Academe
C. Public practice
D. Government
99. Which of the following statements about Accounting Standards Setting Council is incorrect?
A. The accounting standard setting body is to be known as Financial Reporting Standards Council
(FRSC).
B. The accounting standard setting body shall be composed of a chairman and fourteen members.

Page | 10
 C. The chairman and members of the standard setting council shall be appointed by the
Commission upon the recommendation of the Board in coordination with the accredited national
professional organization.
D. The public accounting practice is the sector that is most represented in the accounting standard
setting council.

100. Which of the following best describes the function of Auditing and Assurance Standards Council?
A. To monitor full compliance by auditors to PSAs
B. To promulgate auditing standards, practices and procedures that shall be generally accepted by
the accounting profession in the Philippines.
C. To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs
in public practice.
D. To undertake continuing research on both auditing and financial accounting in order to make
them responsive to the needs of the public.

101. The following are represented both to the Financial Reporting Standards Council (FRSC) and
Auditing and Assurance Standards Council (AASC), except
A. Bangko Sentral ng Pilipinas
B. Bureau of Internal Revenue
C. Securities and Exchange Commission
D. Board of Accountancy
102. The following statements relate to the RA9298. Which statement is true?
A. The Professional Regulation Commission has the authority to remove any member of the Board
of Accountancy for negligence, incompetence, or any other just cause.
B. Insanity is not a ground for proceeding against a CPA.
C. No person shall be appointed as a member of the Board of Accountancy unless he has been in
the practice of accountancy for atleast 10 years, among others.
D. After three years, subject to certain conditions, the Board of Accountancy may order the
reinstatement of a CPA whose certificate of registration has been revoked.
103. According to Philippine Accountancy Act of 2004 (RA9298), the following are the qualifications of
applicants for CPA Examinations, except
A. A natural born Filipino citizen
B. BS Accountancy degree holder
C. Of good moral character
D. Has not been convicted of any criminal offense involving moral turpitude.
104. Which of the following is correct?
A. Any candidate who fails in two (2) complete CPA board examinations will no longer be
allowed to take another set of examinations
B. Any candidate who fails in two (2) complete CPA board examinations shall be disqualified
from taking another set of examinations unless he / she submits evidence to the satisfaction of the
Board that he / she enrolled in and completed at least twenty-four (24) units of subjects given in
the Licensure examination.
C. The examination in which the candidate was conditioned and the removal examination on the
subject in which he / she failed shall be counted as two (2) complete examinations.
D. The refresher course should be completed within two 920 years from the preceding
examination.
105. The Board of Accountancy shall submit to the PRC the ratings obtained by each candidate within
____ days after the examination, unless extended for just cause.

A. 10 B. 5 C. 2 D. 3
106. Which of the following shall be issued to a candidate who passes the CPA licensure examination?
A. Certificate of accreditation to practice public accountancy and PRCID.
B. Personal identification card and a certificate of accreditation to practice public accountancy.
C. Certificate of registration and professional identification card
D. Certificate of full compliance and PRCID.
107. The Board of Accountancy may issue certificate of registration and professional identification card to
any successful examinee:
A. Of unsound mind
B. Convicted by a court of political offense.
C. Guilty of immoral or dishonorable conduct.
D. Who has falsely represented himself / herself in his / her application for examination.
108. A CPA whose certificate has been revoked may be reinstated if he has acted in exemplary manner and
has not committed any illegal, immoral or dishonorable conduct for a period not less than
A. One year
B. Two years

Page | 11
 C. Five years
D. The period depends on the seriousness of his offense.

109. The following statements relate to roster of CPAs. Identify the incorrect statement.
A. A roster showing the names and place of business of all registered CPAs shall be prepared and
updated by the Board.
B. Copies of the roster shall be made available to any party as may be deemed necessary.
C. The Board, upon approval of the Commission, may delegate the preparation of this roster to the
APO.
D. The publication of the roster in the official gazette or in any major newspaper of public
circulation shall be deemed compliance with the requirement of RA9298.
110. Any person who shall violate any of the provisions of the Accountancy Act or any of its implementing
rules and regulations promulgated by the Board of Accountancy subject to the approval of the PRC, shall
upon conviction, be punished by
A. Lethal injection
B. A fine of not more than P50, 000
C. Imprisonment for a period not exceeding two years.
D. A fine not less than P50, 000 or by imprisonment for a period not exceeding two years or both.
111. Which of the following statements is correct about the PRC-CPE Council?
A. The Council shall be composed of six members and a chairperson.
B. The Council shall be composed of two members and a chairperson.
C. The members of the council shall be appointed by the Commission upon the recommendation
of the Board in coordination with APO.
D. The chairperson and members of the Council shall have a term of three years renewable for
another term.
112. Which requirement is correct regarding CPE requirements for renewal of professional license?
A. The total CPE credit units required for CPAs shall be sixty (60) units for three (3) years,
provided that a minimum of twenty (20) credit units shall be earned in each year.
B. A registered professional shall be permanently exempted from CPE requirements upon
reaching the age of 60 years old.
C. A registered professional who is working abroad shall be temporarily exempted from
compliance with CPE requirement during his / her stay abroad, provided that he / she is has been
out of the country for at least one year immediately prior to the date of renewal.
D. Those who failed to renew professional licenses for a period of five (5) continuous years from
initial registration, or from last renewal shall be declared delinquent.
113. PRC-CPE Council differs from AASC, FRSC and ETC because
A. PRC-CPE Council members are appointed by the Commission.
B. PRC-CPE Council is created by the Board of Accountancy.
C. The chairperson of PRC-CPE Council is elected by the members of the Board from among
themselves.
D. PRC-CPE Council members have a three year term renewable for another term.
114. All CPAs who are considered in the practice of Accountancy shall abide by the requirements, rules
and regulations on continuing professional education. For this purpose, it is required that all registered
CPAs must complete a minimum of
A. 60 credit units in three years.
B. 30 credit units in three years.
C. 45 credit units in three years.
D. 15 credit units in three years.
115. Mel, CPA is applying for renewal of his professional license. He is exempted from the CPE
requirements
A. If he is at least 65 years old.
B. If he is working abroad and he has been out of the country for at least two years immediately
prior to the date of renewal.
C. Either a or b.
D. Neither a nor b.
116. Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed
the CPE requirements shall
A. Be dropped from the roster of CPAs
B. Not be allowed to renew their professional licenses.
C. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills
and experience to discharge their professional responsibility.

Page | 12
 D. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE
requirements.
117. How many credit units per hour will be earned by a participant in a CPE seminar?
A. 1 CU per hour
B. 3 CU per hour
C. 5 CU per hour
D. 2 CU per hour

118. Who is not permitted by RA9298 to practice public accountancy?

A. A general partnership
B. A limited liability partnership
C. A sole proprietorship
D. A corporation, whose stockholders are all CPAs.
119. According to RA9298, if a partner in a two-member partnership dies, the surviving partner may
continue to practice as an individual under the existing firm title which includes the deceased partner’s
name.
A. For a period of time not to exceed five years.
B. For a period of time not to exceed two years.
C. Indefinitely
D. Until the partnership pay-out to the deceased partner’s estate is terminated.
120. A CPA shall not practice under a firm name that includes or indicates the following, except
A. Fictitious name
B. Specialization
C. Misleading as to the type of organization
D. Name(s) of past partner(s) in the firm name of the successor partnership.
121. Below are the names of four CPA firms and pertinent facts relating to them. Unless otherwise
indicated, the individuals named are CPAs and partners and there are no other partners. Which firm name
and related facts indicate a violation of the Philippine Accountancy Act of 2004?
A. Binhi, Binti and Bigti, CPAs (Bigti died about five years ago; Binhi and Binti are continuing
the firm)
B. Ti and Ramos, CPAs (The name of R. Hermosilla, CPA, athird partner is omitted from the firm
name.)
C. Bitay and Bigo, CPAs (Bitay died about three years ago; Bigo is continuing the firm as a sole
practitioner.)
D. R. Hermosilla and Co., CPAs (R. Hermosilla has ten other partners who are all CPAs.)
122. CPAs, firms and partnerships of CPAs engaged in the practice of public accountancy including
partners and staff members thereof, shall register with the Commission and the Board, such registration to
be renewed every three years on or before
A. April 15
B. September 30
C. December 31
D. May 31
123. A certificate of accreditation shall be issued to CPA’s in public practice only upon showing , in
accordance with rules and regulations promulgated by the Board and approved by the PRC, that such
registration has acquired a minimum of ___ years meaningful experience in any of the areas of public
practice including taxation.
A. 2 B. 3 C. 4 D. 5
124. Affixing the CPA’s seal and signature on the auditor’s report is an indication of:
A. CPA’s acceptance of responsibility for the financial statements audited.
B. Compliance by the CPA of the requisite accounting and auditing standards and rules.
C. CPA’s accreditation to practice public accountancy.
D. Fair presentation of financial statements audited.
125. Special / temporary permit may be issued by the Board to the following persons except:
A. A foreign CPA called for consultation or for specific purpose which is essential for the
development of the country and that there are no Filipino CPAs qualified for such consultation or
specific purpose and that his / her practice shall be limited only to the particular work that he / she
is being engaged.
B. A foreign CPA engaged as a professor or lecturer in the fields essential to accountancy
education in the Philippines and his / her engagement is confined to teaching only.
C. A foreign CPA with specialization in any branch of accountancy and his / her service is
essential for the advancement of accountancy in the Philippines.
D. A foreign CPA who can prove that the contrary of which he / she is a citizen admits citizens of
the Philippines to the practice of the same profession without restriction.
126. Which of the following is not one of the functions of the Board of Accountancy?

Page | 13
 A. To supervise the registration, licensure and practice of accountancy in the Philippines.
B. To issue, suspend, revoke, or reinstate the certificate of registration for the practice of the
accountancy profession.
C. To prescribe and/or adopt a Code of Ethics for the practice of accountancy.
D. To adopt an official seal of the Commission.
127. The letters “CPA” shall be engraved in what part of the COA’s seal?
A. Upper portion of the space between the bigger and smaller circle.
B. Lower portion of the space between the bigger and smaller circle.
C. Left and right portion of the space between the bigger and smaller circle and in the middle of
the smaller circle.
D. Middle of the smaller circle.

128. Any position in private sector which requires supervision of recording transactions, financial statement
preparation and other related functions must be occupied by a duly registered CPA if the company where
the above position exists has a paid-up capital and annual revenue of at least:
A. P10, 000, 000 and P5, 000, 000 respectively
B. P5, 000, 000 and P10, 000, 000 respectively
C. P1, 000, 000 and P5, 000, 000 respectively
D. P5, 000, 000 and P1, 000, 000 respectively
129. Which of the following is not one of the functions of the Board of Accountancy as specified in the
RA9298?
A. To look form time to time into the conditions affecting the practice of the accountancy
profession.
B. To appoint members of the AASC.
C. To investigate violations of RA 9298 and its IRRS.
D. To determine and prescribe minimum requirements leading to the admission of candidates to
the CPA examination.
130. A CPA certificate is evidence of
A. Independence as a professional
B. Basic competence at the time of certification
C. Membership in the accredited association
D. Completion of continuing professional education program.

Page | 14