1.

Statement 1: Philippine Standards on Assurance Engagements (PSAE) define and describe the elements
and objectives of an assurance engagement, and identifies engagements to which Philippine Standards on
Auditing (PSAs), Philippine Standards on Review Engagements (PSREs) and Philippine Standards on
Assurance Engagements (PSAEs) apply. False Framework sec. 1

Statement 2: Philippine Framework For Assurance Engagements (The Framework or Framework)

states the basic principles, essential procedures and other related guidance to be applied in the performance
of assurance services of practitioners. False Framework sec. 1

2. Statement 1: In some assurance engagements, the evaluation or measurement of the subject matter is
performed by the responsible party, and the subject matter information is in the form of an assertion by the
responsible party that is made available to the intended users. These engagements are called assurance-
based engagements. False Framework sec. 10

Statement 2: The objective of a reasonable assurance engagement is a reduction in assurance engagement

risk to an acceptably low level in the circumstances of the engagement as the basis for an unmodified form
of expression of the practitioners conclusion. False Framework sec. 10

3. Statement 1: Not all engagements performed by practitioners are assurance engagements. True Framework
sec. 12

Statement 2: The responsible party and the intended users should be from different entities. False
Framework sec. 22

4. Statement 1: The relationship between the responsible party and the intended users needs to be viewed
within the context of a specific engagement and may differ from more traditionally defined lines of
responsibility. True Framework sec. 22

Statement 2: The responsible party is the person (or persons) who (a) In a assertion-based engagement, is
responsible for the subject matter (the assertion); or (b) In a direct reporting engagement, is responsible for
the subject matter information , and may be responsible for the subject matter. False Framework sec. 25

5. Statement 1: In assurance engagements, the practitioner and the intended users are responsible for
determining the nature, timing and extent of procedures. False Framework sec. 29

Statement 2: When engagements are designed for specified intended users or a specific purpose, the
practitioner considers including a restriction in the assurance report that limits its use to those users or that
purpose. True Framework sec. 30

6. Statement 1: Suitable criteria are required for reasonably consistent evaluation or measurement of a subject
matter within the context of professional judgment. Without the frame of reference provided by suitable
criteria, any conclusion is open to individual interpretation and misunderstanding. True Framework 35

Statement 2: Criteria are sufficiently complete when relevant factors that could affect the conclusions in
the context of the engagement circumstances are not omitted. Complete criteria exclude, where relevant,
benchmarks for presentation and disclosure. False Framework sec. 36b

7. Statement 1: Neutral criteria contribute to conclusions that are free from bias. True Framework sec. 36d

Statement 2: Criteria can either be established or specifically developed. Established criteria are those
designed for the purpose of the engagement. Specifically developed criteria are those embodied in laws or
regulations, or issued by authorized or recognized bodies of experts that follow a transparent due process.
False Framework sec. 37

8. Statement 1: Criteria need not to be available to the intended users. False Framework sec. 38

Statement 2: When identified criteria are available only to specific intended users, or are relevant only to a
specific purpose, use of the assurance report is restricted to those users or for that purpose. True Framework
sec 38

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9. Statement 1: The practitioner considers materiality, assurance engagement risk, and the quantity and quality
of available evidence when planning and performing the engagement, in particular when determining the
nature, timing and extent of evidence-gathering procedures. True Framework sec 39

Statement 2: The practitioner plans and performs an assurance engagement with an attitude of professional
skepticism recognizing that circumstances may exist that cause the subject matter information to be
immaterially misstated. False Framework sec 40

10. Statement 1: An assurance engagement involves the authentication of documentation, that is, the
practitioner is expected to be an expert in determining acts of forgery and similar frauds. False Framework
sec 41

Statement 2: Sufficiency is the measure of the quantity of evidence. Appropriateness is the measure of the
quality of evidence; that is, its relevance and its reliability. True Framework sec 42

11. Statement 1: Generally, evidence obtained directly by the practitioner (for example, observation of the
application of a control) is more reliable than evidence obtained indirectly or by inference (for example,
inquiry about the application of a control). True Framework sec. 43

Statement 2: Materiality is considered in the context of quantitative and qualitative factors, such as relative
magnitude, the nature and extent of the effect of these factors on the evaluation or measurement of the
subject matter, and the interests of the intended users. True Framework sec. 47

12. Statement 1: Assurance engagement risk is the risk that the practitioner expresses an inappropriate
conclusion when the subject matter information is not materially misstated. False Framework sec. 48

Statement 2: The practitioner can influence all the components of assurance engagement risk. False
Framework sec. 49

13. Statement 1: Reasonable assurance is less than absolute assurance. True Framework sec 52

Statement 2: Republic Act No. 9298 (RA 9298) is also known as The Philippine Accountancy Act of
2004. True RA 9298 sec. 1

14. Statement 1: RA 9298 stated objectives are (a) the standardization and regulation of accounting education;
(b) The examination for registration of certified public accountants; and (c) The supervision, control,
and regulation of the practice of accountancy in the Philippines. True RA 9298 sec. 3

Statement 2: The preparation, signing, or certification for employer of reports of audit, balance sheet, and
other financial, accounting and related schedules, exhibits, statements or reports which are to be used by
stockholders or for publication or for credit purposes, or to be filed with a court or government agency, or
to be used for any other purpose are considered practice of public accountancy. False RA 9298 sec. 4

15. Statement 1: Any position in any business or company in the private sector which requires supervising the
recording of financial transactions, preparation of financial statements, coordinating with the external
auditors for the audit of such financial statements and other related functions shall be occupied only by
a duly registered CPA. Provided, That the business or company where the above position exists has a paid
-up capital of at least Ten Million Pesos (P10,000,000.00) and/or an annual revenue of at least Five Million
Pesos (P5,000,000.00). False RA 9298 sec. 4

Statement 2: Members of the Integrated Bar of the Philippines may be allowed to teach business law and
taxation subjects. True RA 9298 sec. 4

16. Statement 1: Practice in the Government shall constitute in a person, who holds, or is appointed to, a
position in an accounting professional group in government or in a government-owned and/or controlled
corporation, including those performing governmental functions, where decision making requires
professional knowledge in the science of accounting, or where a civil service eligibility as a certified
public accountant is a prerequisite. False RA 9298 sec. 4

Statement 2: The Professional Regulatory Board of Accountancy (The Board or BOA) shall be
composed of a chairman and six (6) members to be appointed by the President of the Philippines from a list
of three (3) recommendees for each position and ranked by the Commission, from a list of five (5) nominees

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 for each position submitted by the APO. The President shall also elect a vice-chairman from among its
members for a term of one (1) year. False RA 9298 sec. 5

17. Statement 1: The four (4) sectors in the practice of accountancy shall as much as possible be equitably
represented in the Board. True RA 9298 sec. 5

Statement 2: The Accredited National Professional Organization of CPAs (APO) shall submit its
nominations with complete documentation to the Commission not later than (30) days prior to the expiry
of the term of an incumbent chairman or member. False RA 9298 sec. 5

18. Statement 1: One of the qualifications for a member of the Board is that he/she must be a Filipino citizen
and a resident of the Philippines. False RA 9298 sec. 6

Statement 2: The Chairman and members of the Board shall hold office for a term of three (3) years. Any
vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term only.
No person who has served two successive complete terms as chairman or member shall be eligible
for reappointment as chairman or member until the lapse of one year. Appointment to fill up an unexpired
term is not to be considered as a complete term. Provided, That no person shall serve in the Board for more
than twelve (12) years. True RA 9298 sec. 7

19. Statement 1: The chairman and members of the Board shall receive compensation and allowances
comparable to that being received from their previous employments before they were appointed as members
of the Board. False RA 9298 sec. 8

Statement 2: The Bureau of Internal Revenue is represented in both FRSC and AASC. False RA 9298 sec.
9

20. Statement 1: As far as the Education Technical Council (ETC) is concerned, the APO shall equitably
distribute the representation of the Academe/Education sector among the private and public schools offering
the degree of Bachelors of Science in Accountancy. True RA 9298 sec. 9

Statement 2: The Board shall be under the administrative supervision of the Commission. All records of
the Board, including applications for examination, examination questions , answer sheets, and other records
and documents pertaining to the CPA licensure examinations, and administrative and other investigative
cases conducted by the Board shall be under the custody of the COA. False RA 9298 sec. 10

21. Statement 1: The Chairman of PRC, after giving the concerned member an opportunity to defend himself
in a proper administrative investigation to be conducted by the Commission, may suspend or remove any
member based on valid grounds (e.g. neglect of duty or incompetence). False RA 9298 sec. 11

Statement 2: One of the documents required by the board to be submitted by a CPA licensure examinee is
Marriage Contract in NSO Security Paper for married male applicants. False RA 9298 sec. 14

22. Statement 1: The Board, subject to the approval of the Commission, may revise or exclude any of the
subjects and their syllabi, and add new ones as the need arises. Provided, That the change shall not be
more often than every five (5) years. False RA 9298 sec. 15

Statement 2: To be qualified as having passed the licensure examination for accountants, a candidate must
obtain a general average of seventy-five percent (75%), with no grades lower than sixty-five percent (65%)
in any given subject. True RA 9298 sec. 16

23. Statement 1: Any candidate who fails in two (2) complete Certified Public Accountant 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-two (22) units of subjects
given in the licensure examination. False RA 9298 sec. 18

Statement 2: No person shall practice accountancy in this country, or use the title Certified Public
Accountant, or use the abbreviated title CPA or display or use any title, sign, card, advertisement, or
other device to indicate such person practices or offers to practice accountancy, or is a certified public
accountant, unless such person shall have received from the Board a Certificate of Registration and be
issued a professional identification card or a valid temporary/special permit duly issued to him/her by the
Board and the Commission. True RA 9298 sec 26

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24. Statement 1: All working papers, schedules and memoranda made by a certified public accountant and his
staff in the course of an examination, including those prepared and submitted by the client, incident to or
in the course of an examination, by such certified public accountant, except reports submitted by a certified
public accountant to a client shall be treated confidential and privileged and remain the property of such
certified public accountant in the absence of a written agreement between the certified public accountant
and the client, to the contrary, unless such documents are required to be produced through subpoena issued
by any court, tribunal, or government regulatory or administrative body in accordance with Philippine
laws. True RA 9298 sec 29

Statement 2: Any person who shall violate any of the provisions of RA No. 9298 or this Implementing
Rules and Regulations as promulgated by the Board subject to the approval of the Commission, shall, upon
conviction, be punished by a fine of not less than fifty thousand pesos (P50,000.00) or by imprisonment for
a period not exceeding two (2) years or both. True RA 9298 Sec 36

25. Statement 1: According to Code of Ethics for Professional Accountants in the Philippines (the Code of
Ethics or The Code), the fundamental principles are Integrity, Objectivity, Confidence, Professional
competence and due care and Professional Behavior. False

Statement 2: The Code illustrates all the specific circumstances or threats to compliance with fundamental
principles that the CPAs are likely to face in practice, and therefore specifies the mitigating actions to
address such threats. False

26. Statement 1: Integrity entails that a professional accountant should be straightforward and honest in all
professional and business relationships. True

Statement 2: According to the Code, the sources of technical and professional standards are Board of
Accountancy (BOA) / Professional Regulation Commission (PRC), Securities and Exchange Commission
(SEC), Financial Reporting Standards Council (FRSC), Commission on Audit (COA) and relevant
legislation. False

27. Statement 1: Professional competence and due care state that a professional accountant should comply with
relevant laws and regulations and should avoid any action that discredits the profession. False

Statement 2: A professional accountant has an obligation to evaluate any threats to compliance with the
fundamental principles when the professional accountant knows, or could reasonably be expected to know,
of circumstances or relationships that may compromise compliance with the fundamental principles. True

28. Statement 1: Compliance with the fundamental principles may potentially be threatened by a broad range
of circumstances. Many threats fall into the following categories: self-interest threats, self-review threats,
advocacy threats, familiarity threats and intimidation threats. True

Statement 2: Advocacy threats may occur when a professional accountant promotes a position or opinion
to the point that subsequent objectivity may be compromised. True

29. Statement 1: The nature of the safeguards to be applied will vary depending on the circumstances. In
exercising professional judgment, a professional accountant should consider what a reasonable and
informed third party, having knowledge of all relevant information, including the significance of the threat
and the safeguards applied, would conclude to be unacceptable. True

Statement 2: The firms leadership and the examples it sets significantly influence the internal culture of
the firm. True

*BONUS*
30. Statement 1: Any person or persons assigned operational responsibility for the firms quality control system
by the firms chief executive officer or managing board of partners should have sufficient and appropriate
experience and ability, and the necessary authority, to assume that responsibility. True

Statement 2: The firm should establish policies and procedures designed to provide it with reasonable
assurance that the firm, its personnel and, where applicable, others subject to independence requirements
(including experts contracted by the firm and network firm personnel), maintain independence where
required by the Philippine Code. True

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31. A CPA has been engaged to perform review services for a client. Identify which of the following is a correct
statement.
A. The CPA must perform the basic audit procedures necessary to determine that the statements are
in conformity with the applicable financial reporting framework.
B. The financial statements are primarily representations of the CPA.
C. The CPA may prepare the statements from the books but may not assist in adjusting and closing
the books.
D. The CPA is performing an assurance engagement other than an audit of the financial statements.

32. Safeguards created by the profession, legislation or regulation include the following, except
A. Continuing professional development requirements.
B. Professional standards.
C. Firm-wide and engagement specific safeguards.
D. Educational, training and experience requirements for entry into the profession.

33. An audit is conducted on the premise that management and, where appropriate, those charged, with
governance, have acknowledged and understand that they have responsibilities that are fundamental to the
conduct of an audit in accordance with PSAs.

Which of the following is not one of those responsibilities?

A. The preparation of financial statements in accordance with relevant pronouncements issued by the
AASC.
B. The establishment and maintenance of an adequate internal control system that is necessary to
enable the preparation of financial statements that are free from material misstatement whether due
to fraud or error.
C. To provide the auditor with access to all information that is relevant to the preparation of the
financial statements such as records, documentation, and other matters. .
D. To provide the auditor with unrestricted access to persons within the entity from which the auditor
determines it necessary to obtain audit evidence.

34. Which part of the Code of Ethics applies to professional accountants in public practice?
A. Part A
B. Part B
C. Part C
D. Part D

35. How are management's responsibility and the auditor's responsibility represented in the standard auditor's
report?
A. B. C. D.
Managements responsibility Explicitly Implicitly Implicitly Explicitly
Auditors responsibility Explicitly Implicitly Explicitly Implicitly

36. On which of the following safeguards a professional accountant in public practice cannot rely solely to
reduce threats to an acceptable level?
A. Safeguards created by the profession, legislation or regulation.
B. Firm-wide safeguards.
C. Engagement specific safeguards.
D. Safeguards within the clients systems and procedures.

37. If the fee quoted for a professional service is so low, it may be difficult for the CPA to perform the
engagement in accordance with applicable technical and professional standards for that price. This situation
may create a self-interest threat to
A. Professional competence and due care
B. Integrity
C. Objectivity
D. Professional behavior

38. Which of the following is not a contingent fee?

A. A fee that is dependent upon the approval of the assurance clients loan application
B. An audit fee that is based on 5% of the clients adjusted net income for the current year
C. A fee that is fixed by a court or other public authority

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 D. An arrangement whereby no fee will be charged unless a specified finding or result is attained

39. A self-interest threat would be created 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, or guarantees such an assurance clients borrowing.
The self-interest threat created would be so significant that no safeguard could reduce the threat to an
acceptable level unless the loan or guarantee is
A. Made under normal lending terms, procedures and requirements
B. Immaterial to the firm or the member of the assurance team
C. Immaterial to both or the member of the assurance team and the assurance client
D. Made under normal lending terms, procedures and requirements and the loan or guarantee is
immaterial to both the firm or the member of the assurance team and the assurance client

40. What type of assurance engagement is involved when the practitioner expresses a negative form of
conclusion?
A. Reasonable assurance engagement
B. Negative assurance engagement
C. Assertion-based assurance engagement
D. Limited assurance engagement

41. The following statements relate to the performance of an assurance engagement other than an audit or
review of historical financial information covered by PSAs and PSREs. Which is incorrect?
A. Those persons who are performing the engagement should collectivity possess the necessary
professional competence
B. The practitioner is not allowed to use the work of persons from other professional disciplines
C. The practitioner should consider materiality and assurance engagement risk when planning and
performing an assurance engagement
D. The assurance report should be in writing and should contain a clear expression of the practitioners
conclusion about the subject matter information

42. Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of the
following factors, except
A. The use of selective testing
B. The fact that much of the evidence available assurance knowledge is persuasive rather than
conclusive
C. The practitioner may not have the required assurance knowledge and skills to gather and evaluate
evidence
D. The use of judgment in gathering and evaluating evidence and forming conclusions based on that
evidence

43. Professional judgment

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

44. The internal auditing profession has advanced primarily as a result of

A. Increased interest by Bachelor of Science in Accountancy (BSA) graduates and experienced
auditors
B. Job qualification specifications that included added emphasis on background knowledge and skills
C. The limitation of financial statement audit scope
D. Increased complexity and sophisticated of business operations

45. The single feature that most clearly distinguishes auditing, attestation, and assurance is
A. Type of service.
B. Training required performing the service.
C. Scope of services.
D. CPAs approach to the service.

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46. The auditor's judgment concerning the overall fairness of the presentation of financial position, results of
operations, and changes in financial position is applied within the framework of
A. Generally accepted accounting principles.
B. Generally accepted auditing standards.
C. Internal control.
D. Information systems control.

47. The auditor communicates the results of his or her work through the medium of the
A. Engagement letter.
B. Management letter.
C. Audit report.
D. Financial statements.

48. Which of the following statements best describes why the CPA profession has deemed it essential to
promulgate ethical standards and to establish means for ensuring their observance?
A. A requirement for a profession is the establishment of ethical standards that stress primarily a
responsibility to clients and colleagues.
B. A requirement of most state laws calls for the profession to establish a code of ethics.
C. An essential means of self-protection for the profession is the establishment of flexible ethical
standards by the profession.
D. A distinguishing mark of a profession is its acceptance of responsibility to the public.

49. 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.

50. The objectives of the Philippine Accountancy Act of 2004 are the following, except:
A. Standardization and regulation of accounting education.
B. Integration of accountancy profession.
C. Examination for registration of certified public accountants.
D. Supervision, control and regulation of the practice of accountancy.

51. Practice of Public Accountancy shall constitute in a person:

A. When involved in decision making requiring professional knowledge in the science of accounting,
as well as the accounting aspects of finance and taxation.
B. When he/she is appointed in an accounting professional group in government or in a government-
owned and/or controlled corporation, including those performing proprietary functions, where
decision-making requires professional knowledge in the science of accounting.
C. When he or she is involved in teaching of accounting, auditing, management advisory services,
accounting aspect of finance, business law, taxation and other technically related subjects.
D. When a person is skilled in the knowledge, science and practice of accounting and as a qualified
person to render professional services as a CPA.

52. The following statements relate to the Board of Accountancy. Which statement is incorrect?
A. The Board consists of a Chairman and six members
B. The Chairman and members are appointed by the President of the Philippines upon
recommendation of PRC
C. No person shall be appointed a member of the Board unless he is natural-born citizen of the
Philippines, a duly registered CPA and has been in the practice of accountancy for at least ten years
D. The Professional Regulation Commission may remove from the Board any member whose
certificate to practice has been removed or suspended

53. The APO shall submit its nominations with complete documentation to the Commission not later than ____
prior to the expiry of the term of an incumbent chairman or member.
A. 30 days
B. 60 days
C. 90 days
D. 120 days

54. Which of the following is incorrect regarding the qualifications of members of the Board of Accountancy?

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 A. Must be a natural-born citizen and resident of the Philippines
B. Must be a duly registered Certified Public Accountant with at least fifteen (15) years of work
experience in any scope of practice of accountancy
C. Must be a good moral character and must not have been convicted of crimes involving moral
turpitude
D. Must not have any pecuniary interest, directly or indirectly, in any school, college, university where
review classes in preparation for the licensure examination are being offered or conducted

55. Which statement is (are) correct regarding CPE requirements for renewal of professional license?
I. The total CPE credit units required for CPAs shall be sixty (60) units for three (3) years, provided
that a minimum of fifteen (15) credit units shall be earned in each year.
II. Any excess credit units in one year may be carried over to the succeeding years within the three-year
period.
III. Excess credit units earned shall not be carried over to the next three-year period without exception.
IV. 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.
A. I, II and III only
B. I , II and IV only
C. I and II only
D. I , II, III and IV

56. How many credit units per hour is (are) earned by a CPA who serves as a resource speaker at a CPE
seminar?
A. 1 CU per hour
B. 3 CU per hour
C. 5 CU per hour
D. 2 Cu per hour

57. Ramil Corporation has engaged Bryan, CPA, to issue a report on the accuracy of product quality
specifications included in trade sales agreements. This is an example of a(n):
A. Attestation service.
B. Compliance audit.
C. Financial statement audit.
D. Operational audit.

58. One of the general principles of an audit is compliance with Philippine Standards on Auditing (PSAs). As
a consequence of his failure to adhere to PSAs in the course of his examination of the Far East Bank, Trinie,
CPA, did not detect the embezzlement of a material amount of funds by Dadz, the companys controller.
As a matter of common law, to what extent would Trinie be liable to Far East Bank, for losses attributable
to the theft?
A. Trinie would be liable for losses attributable to his negligence.
B. Trinie would be liable only if it could be proven that he committed gross negligence.
C. Trinie would have no liability because privity of contract is lacking.
D. Trinie would have no liability, since the ordinary examination cannot be relied upon to detect
embezzlement.

59. A study, appraisal, or review by the BOA or its duly authorized representatives, of the quality of audit of
financial statements through a review of the quality control measures instituted by an Individual CPA, Firm
or Partnership of CPAs engaged in the practice of public accountancy.
A. Peer review
B. Quality assurance review
C. Analytical review
D. Administrative review

60. This refers to a professional who acts as discussion leader or lecturer in a convention or seminar or similar
gathering:
A. Resource speaker
B. CPE provider
C. Peer reviewer
D. Panelist/reactor

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61. The following are the more significant powers and functions of the Board of Accountancy select the
exception)
A. To prescribe and adopt the rules and regulations necessary for carrying out the provisions of RA
9298.
B. To supervise the registration, licensure and practice of professions in the Philippines
C. To administer oaths in connection with the administration of RA 9298
D. To revoke of licenses of violators of RA 9298

62. This refers to the ownership of intellectual property which includes technical or professional books,
instructional materials and the like
A. Authorship
B. Patent
C. Copyright
D. Professional journalism

63. Ten credit hours as participant of a Continuing Professional Education (CPE) program, activity or source
shall be equivalent /to:
A. 10 credit units
B. 3 credit units
C. 5 credit units
D. 1 credit units

64. Which one of the following is not a logical function of a CPA in public accounting practice?
A. Attest function.
B. Supervision of internal audit staff.
C. Tax practice.
D. Management consulting services.

65. The principal purpose in conducting a study and evaluation of existing internal control system is
A. For independent auditor to maintain a statement of independence in mental attitude in all matters
relating the audit
B. To assure compliance with GAAP
C. To enable independent auditor to assess and be assured of managements efficiency and effectivity
D. To develop an audit plan and determine the nature, timing and extent of audit work required

66. The following statements relate to RA 9298 and its IRR. Which statement is incorrect?
A. A person shall be considered to be in the professional practice of accounting if, as an officer of a
private enterprise, he makes decisions requiring professional accounting knowledge
B. When a CPA represents his/her client before government agencies on tax and other matters related
to accounting, the CPA is engaged in public accountancy
C. A registered professional shall be permanently exempted from CPE requirements upon reaching
the age of 65 years old
D. The total CPE credit units required for CPAs shall be sixty (60) units for three years, provided that
a maximum of fifteen (15) credit units shall be earned in each year

67. A certificate under seal, issued by the Commission upon the recommendation by the Board of Accountancy
pursuant to the revised IRR, attesting that individual CPAs (including the staff members thereof), firms
(including the sole proprietors and the staff members thereof) and partnerships of CPAs (including the
partners and the staff members thereof) are duly accredited to practice public accountancy in the Philippines
A. Certificate of registration
B. Certificate of Identification
C. Certificate of accreditation
D. Certificate of Quality Review

68. Which of the following best describes high level of assurance?

A. It refers to the professional accountant having obtained evidence based on procedures agreed upon
between the practitioner and the intended users to be satisfied that findings be reported to the
intended users.
B. It refers to the professional accountant having obtained sufficient external and internal appropriate
evidence to be satisfied that the subject matter is plausible in the circumstances.
C. It refers to the professional accountant having obtained sufficient appropriate evidence to conclude
that the subject matter conforms in all material respects with identified suitable criteria.

- Page 9 of 14 -
 D. It refers to the professional accountant having obtained sufficient evidence to conclude that he has
no knowledge of any required modifications to be made in the financial statements in order for
them to conform of prescribed criteria.

69. Which of the following statements is (are) incorrect regarding assurance services?
A. Assurance services can be provided either on information or processes.
B. The third party who receives the assurance generally does not pay for the assurance received.
C. Assurance services always involve a report by one person to a third party on which an independent
organization provides assurance.
D. All of the above.

70. Which of the following statements does not describe a condition that creates a demand for auditing?
A. Conflict between the information preparer and the user can result in biased information.
B. Information can have substantial economic consequences for a decision maker.
C. Expertise is often required for information preparation and verification.
D. Users can directly assess the quality of information.

71. Governmental effectiveness (program) auditing seeks to determine whether the desired results are being
achieved and objectives are being met. The first step in the performance of such an audit would be:
A. Identify the legislative intent of the program being audited
B. Evaluate the system used to measure results.
C. Determine the sampling frame to use in studying the system.
D. Collect and analyze quantifiable data.

72. Under this mode of billing for audit services, the client actually does not know in advance how much will
be cost of audit engagement
A. Retainer basis.
B. Maximum fee basis.
C. Flat sum basis.
D. Per diem basis.

73. Which of the following is the least function of the Board of Accountancy
A. Determination of the minimum requirements leading to the admission of candidates to the CPA
examinations.
B. Regulation of the practice of accountancy
C. Supervision over the accredited professional organization of CPAs
D. Preparation of the contents of the CPA licensure examinations and rating of the examination
papers.

74. Individual CPAs, Firms or Partnerships of CPAs, including partners and staff members thereof shall register
with the BOA and the PRC. If the application for registration of Burgonia, Baldres, Gudani and Co., CPAs
was approved on August 30, 2011, the registration will expire on
A. Sept. 30, 2013
B. Dec. 31, 2014
C. Dec. 31, 2013
D. Aug. 30, 2013

75. Which of the following will least likely create a threat to independence?
A. A member of the assurance team, partner or former partner of the firm has joined the assurance
client.
B. 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.
C. Arrangements to combine one or more services or products of the firm with one or more services
or products of the assurance client and to market the package with reference to both parties.
D. Family and personal relationships between a member of the assurance team and a director, an
officer or certain employees.

76. Which of the following is prohibited by the Code of 16. Professional Ethics for CPAs?
A. Use of a firm name which includes the name of a retired partner.
B. Announcement in a newspaper of the opening of a public accounting office.
C. Engaging in civic activities during business hours.

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 D. Accepting an engagement or employment which one cannot reasonably expect to complete or
discharge with professional competence

77. Jun & Co., a large international CPA firm, is to have an external peer review. The peer review will most
likely be performed by
A. Audit review staff of the Securities and Exchange Commission.
B. Audit review staff of the American Institute of Certified Public Accountants.
C. Employees and partners of another CPA firm.
D. Employees and partners of Jun & Co. who are not associated with the particular audits being
reviewed.

78. Internal auditing often extends beyond examinations leading to the expression of an opinion on the
fairness of financial presentation and includes audits of efficiency, effectiveness, and
A. Internal control.
B. Evaluation.
C. Accuracy.
D. Compliance.

79. Which of the following best describes the operational audit?

A. It requires the constant review by internal auditors of the administrative controls as they relate to
operations of the company.
B. It concentrates on implementing financial and accounting control in a newly organized company.
C. It attempts and is designed to verify the fair presentation of a company's results of operations.
D. It concentrates on seeking out aspects of operations in which waste would be reduced by the
introduction of controls.

80. Individual CPAs, Firms or Partnerships of CPAs, including partners and staff members thereof shall register
with the BOA and the PRC. If the application for registration of Soliman, Trinidad, De Jesus and Co., CPAs
was renewed on August 30, 2011, such renewal will expire on
A. Sept. 30, 2013
B. Dec. 31, 2014
C. Dec. 31, 2013
D. Aug. 30, 2013

81. To maximize independence, the director of internal auditing should report to the
A. Audit committee.
B. Controller.
C. Chief financial officer.
D. Director of information systems.

82. For assurance engagements provided to clients that are not audit clients, when the report is not 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

83. A typical objective of an operational audit is to determine whether an entity's

A. Financial statements fairly present financial position and cash flows.
B. Financial statements present fairly the results of operations.
C. Financial statements fairly present financial position, results of operations, and cash flows.
D. Specific operating units are functioning efficiently and effectively.

84. Assurance services least likely involve

A. Implementing a system that improves the processing of information.
B. Improving the quality of information for decision purposes.
C. Improving the quality of the decision model used.
D. Improving the relevance of information.

85. Which of the following is incorrect regarding engagement period?

A. The period of the engagement starts when the assurance team begins to perform assurance services
and ends when the assurance report is issued, except when the assurance engagement is of a

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 recurring nature.
B. If the assurance engagement is expected to recur, the period of the assurance engagement ends with
the notification by either party that the professional relationship has terminated or the issuance of
the final assurance report, whichever is earlier.
C. In the case of an audit engagement, the engagement period includes the period covered by the
financial statements reported on by the firm.
D. When an entity becomes an audit client during or after the period covered by the financial
statements that the firm will report on, the firm should consider whether any threats to
independence may be created by previous services provided to the audit client.

86. In performing an attestation engagement, a CPA typically

A. Supplies litigation support services.
B. Assesses control risk at a low level.
C. Expresses a conclusion about an assertion.
D. Provides management consulting advice.

87. If a firm, or a network firm, has a direct financial interest in an audit client of the firm, the self-interest
threat created would be so significant no safeguard 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 nor b.

88. Cielito, CPA is applying for renewal of his professional license. He is temporarily 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. Under no circumstances.

89. According to the profession's ethical standards, an auditor would be considered independent in which of
the following instances?
A. The client owes the auditor fees for two consecutive annual audits.
B. The auditor's checking account, which is fully insured by a PDIC, is held at a client financial
institution.
C. The auditor is also an attorney who advises the client as its general counsel.
D. An employee of the auditor donates service as treasurer of a charitable organization that is a client.

90. A CPA purchased a stock in a client corporation and placed it in a trust as an educational fund for the CPA's
minor child. The trust securities were not material to the CPA but were material to the child's personal net
worth. Would the independence of the CPA be considered to be impaired with respect to the client?
A. No, because the CPA would not be considered to have a direct financial interest in the client.
B. No, because the CPA would not be considered to have a material indirect financial interest in the
client.
C. Yes, because the stock would be considered a direct financial interest and consequently, materiality
is not a factor.
D. Yes, because the stock would be considered an indirect financial interest that is material to the
CPA's child

91. Which of the following is required if the professional accountant uses experts who are not professional
accountants?
A. Experts who are not professional accountants need not be informed of ethical requirements because
they are not members of the Accountancy profession.
B. The ultimate responsibility for the professional service is assumed by the expert who is not a
professional accountant.
C. The professional accountant is discouraged to engage the services of experts who are not a
professional accountant.
D. The professional accountant must take steps to see that such experts are aware of ethical
requirements.

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*BONUS*
92. The policies and procedures adopted by a firm to provide reasonable assurance that all audits done by the
firm are being carried out in accordance with the Objective and General Principles Governing an Audit of
Financial Statements.
A. Internal controls
B. Peer review
C. Quality controls
D. General controls

*BONUS*
93. The quality of performance of an auditor is measured by the statements emanating from the:
A. Accounting Standards Council
B. Quality Control Standards
C. Auditing and Assurance Standards Board
D. Interpretations of Accountants in Practice

*BONUS*
94. The least important evidence of a CPA firm's evaluation of it system of quality controls would concern the
CPA firm's policies and procedures with respect to
A. Employment (hiring).
B. Confidentiality of audit engagements.
C. Assigning personnel to audit engagements.
D. Determination of audit fees.

*BONUS*
95. The primary purpose of establishing quality control policies and procedures for deciding whether to accept
a new client is to
A. Enable the CPA firm to attest to the reliability of the client.
B. Satisfy the CPA firms duty to the public concerning the acceptance of clients.
C. Minimize the likelihood of association with clients whose management lacks integrity.
D. Anticipate before performing any fieldwork whether an unqualified opinion can be expressed.

*BONUS*
96. In pursuing a CPA firms quality control objectives, a CPA firm may maintain records indicating which
partners or employees of the CPA firm were previously employed by the CPA firms clients. Which quality
control objective would this be most likely to satisfy?
A. Professional relationship.
B. Supervision.
C. Independence.
D. Advancement.

*BONUS*
97. The audit work performed by each assistant should be reviewed to determine whether it was adequately
performed and to evaluate whether the
A. Auditors system of quality control has been maintained at a high level.
B. Results are consistent with the conclusions to be presented in the auditors report.
C. Audit procedures performed are approved in the professional standards.
D. Audit has been performed by persons having adequate technical training and proficiency as
auditors.

*BONUS*
98. Which of the following is the best criterion for evaluating a staff auditors work performance?
A. Quantity of deficiency findings.
B. Ability to get along with clients.
C. Working papers appearance.
D. Fulfillment of requirements set forth in the audit programs.

*BONUS*
99. The auditor with final responsibility for an engagement and one of the assistants have a difference of
opinion about the results of an auditing procedure. If the assistant believes it is necessary to be disassociated
from the matters resolution, the CPA firms procedures should enable the assistant to
A. Refer the disagreement to the PICPAs Quality Review Committee.

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 B. Document the details of the disagreement with the conclusion reached.
C. Discuss the disagreement with the entitys management or its audit committee.
D. Report on the disagreement to an impartial peer monitoring team.

100. Before accepting an audit engagement, you as the successor auditor would least likely make specific
inquiries of the previous auditor regarding
A. Facts that might bear on the integrity of management.
B. The degree of cooperation the previous auditor received from the clients lawyer.
C. An inquiry regarding disagreements with management as to auditing procedures.
D. The predecessor auditors understanding as to the reasons for the change of auditors.

***END OF EXAMINATION***

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