AUDITING THEORY

AT.CDrill13-Philippine Accountancy Act of 2004

(Republic Act No. 9298) and Code of Professional Ethics MAY 2018

CLASSROOM DRILL
1. Who has the power to suspend or remove any member d. may be reinstated as a CPA by the Board of
of the Board of Accountancy? Accountancy after two years if he has acted in an
a. The President of the Philippines exemplary manner.
b. The Chairman of the PRC
c. The Chairman of the FRSC 9. Which of the following is not one of the specified
d. The Chairman of the AASC objectives of the Philippine Accountancy Act of 2004?
a. Examination for registration of CPAs
2. An applicant for the CPA licensure examination should b. Promulgation of auditing and accounting standards
meet the following requisites, except c. Supervision, control and regulation of accounting
a. A Filipino citizen practice
b. Of good moral character d. Standardization and regulation of accounting
c. A holder of the degree of Bachelor of Science in education
Accountancy
d. Has not been convicted of any crime. 10. Which of the following is not one of the functions of the
Board of Accountancy as specifically provided under RA
3. A Professional Identification Card bearing the 9298?
registration number, date of issuance, expiry date, a. To determine and prescribe minimum requirements
duly signed by the chairperson of the Commission, leading to the admission of candidates to the CPA
shall be issued to every registrant examination.
a. Is renewable every three years b. To investigate violations of the Accountancy Law
b. Is renewable every five years and the rules and regulations promulgated
c. Shall bear the signature of the PRC Chairperson thereunder.
and the Chairman and Members of the Board of c. To perform visitorial powers or review professional
Accountancy work of accounting practitioners in a general or
d. Shall remain in full force and effect until random basis.
withdrawn, suspended or revoked. d. After due process, to suspend, revoke, or reissue
certificates of registration for causes provided for
4. The Board of Accountancy may reinstate the validity of by law by the rules and regulations promulgated
a revoked Certificate of Registration after the therefore
expiration of how many years from the date of
revocation? 11. A CPA whose certificate have been revoked may be
a. 1 c. 3 reinstated if he has acted in exemplary manner and
b. 2 d. 5 has not committed any illegal, immoral or dishonorable
conduct for a period not less than
5. A CPA shall not practice under a firm name that a. One year c. Five years
includes or indicates the following except b. Two years d. Depends on the offense
a. Fictitious name
b. Specialization 12. A member of the BOA shall, at the time of his/her
c. Misleading as to the type of the organization appointment, possess the following qualifications,
d. Name(s) of past partner(s) in the firm name of except
successor partnership a. Must be a natural-born citizen and resident of the
Philippines.
6. Are the following CPAs required to comply with the b. Must be a duly registered CPA with more than ten
requirements on continuing professional education? (10) years of work experience in any scope of
a b c d practice of accountancy.
CPAs in Public Accountancy Yes Yes Yes Yes c. Must be of good moral character and must not
CPAs in Commerce and Yes Yes No No have been convicted of crimes involving moral
Industry turpitude.
CPAs in Education/Academe Yes Yes Yes No d. Must not be a director or officer of the APO at the
CPAs in Government Yes No Yes No time of his/her appointment.

7. How many credit units per hour is (are) earned by a
CPA who serves as a facilitator at a CPE seminar?
a. 1 CU per hour c. 3 CU per hour
b. 5 CU per hour d. 2 CU per hour
8. A person whose CPA certificate has been revoked
a. can no longer be reinstated as a CPA.
b. is automatically reinstated as a CPA by the PRC
after two years if he has acted in an exemplary
manner.
c. may be reinstated as a CPA by the PRC after two
years if he has acted in an exemplary manner
13. Which statement is incorrect regarding the term of
office of the chairman and the members of the Board
of Accountancy (BOA)?
a. The Chairman and members of the Board shall
hold office for a term of three years.
b. No person who has served two (2) successive
complete terms shall be eligible for reappointment
until the lapse of one (1) year.
c. A person may serve the BOA for not more than
twelve years.
d. A member of the BOA may continuously serve
office for more than nine years.

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14. The following statements relate to CPA examination
ratings. Which of the following is incorrect?
a. To pass the examination, candidates should obtain
a general weighted average of 75% and above,
with no rating in any subject less than 65%.
b. Candidates who obtain a rating of 75% and above
in at least four subjects shall receive a conditional
credit for the subjects passed.
c. Candidates who failed in four complete
examinations shall no longer be allowed to take
the examinations the fifth time.
d. Conditioned candidates shall take an examination
in the remaining subjects within two years from
the preceding examination.
15. Which of the following is not one of the grounds for
proceedings against a CPA?
a. Gross negligence or incompetence in the practice
of his profession.
b. Engaging in public practice while being employed
in a private enterprise.
c. Insanity.
d. Immoral or dishonorable conduct.
16. In all of the following situations except one, a person is
deemed to be engaged in professional accounting
practice. Which of them is the exception?
a. Performing audits or verification of financial
transactions and records for more than one client.
b. Employed as the department chairman that
supervises the BSA program of an educational
institution.
c. Employment as controller of a private business
enterprise and such employment requires that the
holder thereof should be a CPA.
d. Appointment in the government where first grade
civil service eligibility is a prerequisite.
17. The Accountancy Law provides that all working papers
made during an audit shall be the property of the
auditor. These working papers shall include the
following, except:
a. Schedules and memoranda made by the CPA and
his staff.
b. Working papers prepared and submitted by the
client.
c. Excerpts or copies of documents furnished the
auditor.
d. Reports submitted by the CPA to the client.
18. Which of the following are the grounds for suspension
or removal of members of BOA?
I. Neglect of duty or incompetence.
II. Violation or tolerance of any violation of the
CPA’s Code of Ethics.
III. Final judgment of crimes involving moral
turpitude.
IV. Rigging of the certified public accountant’s
licensure examination results.
a. I, II, III and IV c. III and IV
b. I, II and III d. I, III and IV
19. 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
a. 2 years c. 4 years
b. 3 years d. 5 years
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20. A meaningful experience shall be considered as
satisfactory compliance with the requirements of
Section 28 of RA 9298 if it is earned in (Choose the
incorrect one)
a. Commerce and industry and shall include
significant involvement in general accounting,
budgeting, tax administration, internal auditing,
liaison with external auditors, representing his/her
employer before government agencies on tax and
matters related to accounting or any other related
functions.
b. Academe/education and shall include teaching for
at least three (3) trimesters or two (2) semesters
subjects in either financial accounting, business
law and tax, auditing problems, auditing theory,
financial management and management services.
c. Government and shall include significant
involvement in general accounting, budgeting, tax
administration, internal auditing, liaison with the
Commission on Audit or any other related
functions.
d. Public practice and shall include at least two years
as audit assistant and at least one year as auditor
in charge of audit engagement covering full audit
functions of significant clients.
21. In order to achieve the objectives of the accountancy
profession, professional accountants have to observe a
number of prerequisites or fundamental principles.
The fundamental principles include the following,
except
a. Professional behavior c. Independence
b. Confidentiality d. Objectivity
22. The principle of integrity imposes an obligation on
professional accountants to
a. Comply with relevant laws and regulations
b. Avoid any action that may bring discredit to the
profession
c. Both a and b
d. Neither a nor b
23. The principle of objectivity imposes which of the
following obligations on professional accountants?
a. To maintain professional knowledge and skill at the
level required to ensure that clients or employers
receive competent professional advice
b. To refrain from disclosing confidential information
obtained as a result of professional and business
relationships
c. To comply with relevant laws and regulations and
avoid any situation that may bring discredit to the
profession
d. Not to compromise professional or business
judgment because of bias, conflict of interest or
undue influence of others
24. Confidential client information may be disclosed in the
following circumstances, except
a. When disclosure is authorized.
b. When disclosure is required by law.
c. When the relationship between the client and the
auditor ceases.
d. When there is a professional duty or right to
disclose.
25. Occurs when a professional accountant promotes a
position or opinion to the point that subsequent
objectivity may be compromised
a. Self-interest threat c. Advocacy threat
b. Self-review threat d. Familiarity threat
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26. Immediate family includes c. Disclosing confidential information to another
a. Parent c. Non-dependent child accountant interested in purchasing the CPAs
b. Sibling d. Spouse practice
d. Disclosing confidential information in an
27. Close family include the following, except investigation conducted by the PRC thru the Board
a. Parent c. Non-dependent child of Accountancy
b. Sibling d. Spouse
34. During the course of an audit engagement, the CPA
28. Using the same lead engagement partner on an audit needed additional studies and consultation with
over a prolonged period may most likely create experts. This additional study and consultation is
a. Self-interest threat c. Intimidation threat deemed to be
b. Self-review threat d. Familiarity threat a. An unusual practice which should have voided the
audit engagement.
29. Examples of circumstances that may create familiarity b. Lack of competence on the part of the CPA.
threat include c. An appropriate part of the professional conduct of
I. A member of the assurance team having an the audit engagement.
immediate family member or close family member d. Undertaken as a responsibility of management.
who is a director or officer of the assurance client.
II. Dealing in, or being a promoter of, share or other 35. A CPA shall not disclose confidential information
securities in an assurance client. obtained during an audit engagement in which one of
III. Threat of replacement over a disagreement with the following situations?
the application of an accounting principle. a. When the security of the State so requires
IV. Potential employment with an assurance client. b. With the consent of the client
V. Long association of a senior member of the c. In defense of himself when sued by the client
assurance team with the assurance client. d. Under the rule against disclosing information
a. I, IV and V only
b. II and V only 36. In which of the following may confidential information
c. II, III and IV only not be disclosed?
d. I and V only a. To comply with the quality review of a member
body or professional body
30. Safeguards created by the profession, legislation or b. To submit evidence in the course of legal
regulation, include the following proceedings
I. Educational, training and experience requirements c. Acquiring information in the course performing
for entry into the profession professional services and use that information for
II. Continuing education requirements personal advantages
III. Legislation governing the independence d. When consent to disclose information is given by
requirements of the firm. the client
IV. Policies and procedures that emphasize the
assurance client’s commitment to fair financial 37. Occurs when a professional judgment needs to be re-
reporting evaluated by the professional accountant responsible
V. Policies and procedures to implement and monitor for that judgment
quality control of assurance engagements. a. Self-interest threat c. Advocacy threat
a. I, II, III and IV only c. I, II and III only b. Self-review threat d. Familiarity threat
b. I, II and V only d. I and III only
38. The network firms are required to be independent of
31. Occurs when a professional accountant promotes a the client
position or opinion to the point that subsequent a. For assurance engagements provided to an audit
objectivity may be compromised client.
a. Self-interest threat c. Advocacy threat b. For assurance engagements provided to clients
b. Self-review threat d. Familiarity threat that are not audit clients, when the report is not
expressly restricted for use by identified users.
32. There are fundamental principles that the professional c. For assurance engagements provided to clients
accountant has to observe when performing assurance that are not audit clients, when the assurance
engagements. The requirement of which principle is of report is expressly restricted for use by identified
particular importance in an assurance engagement in users.
ensuring that the conclusion of the professional d. All of the above.
accountant has value to the intended user?
a. Integrity c. Confidentiality 39. The following are not allowed form of advertising and
b. Professional competence d. Objectivity publicity
I. Self laudatory statements
33. The rules of professional conduct states that a CPA II. Discrediting or attacking other firms or CPA
shall not disclose any confidential information obtained practitioners
in the course of a professional engagement with III. Giving too much emphasis on competitive
certain exceptions. In which of the situations given differences
below would disclosure by the CPA be in violation of IV. Publishing services in billboard advertisements
the rules of professional conduct? a. I, II and III only
a. Disclosing confidential information in order to b. I, III and IV only
properly discharge the CPAs responsibilities in c. II, III and IV only
accordance with his professional standards d. I, II, III and IV
b. Disclosing confidential information in compliance
with a subpoena by a court

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40. When performing a review engagement, the following 45. Safeguards created by the profession, legislation or
should be independent of the client regulation include the following, except:
a. Professional standards.
a. b. c. d. b. Professional or regulatory monitoring and
The members of the Yes Yes Yes Yes disciplinary procedures.
assurance team c. External review by a legally empowered third party
The firm Yes Yes No No of the reports, returns, communications or
Network firms Yes No No Yes information produced by a professional accountant.
d. An explicitly stated duty to report breaches of
41. Which of the following is a “self review” threat to ethical requirements by the employing
engagement team member’s compliance with organization.
fundamental principles?
a. An engagement team member has a spouse that 46. Indicate the normal pattern of development for a
serves as CFO of the attest client. professional accountant.
b. A second partner review is required on all attest I. A period of work experience.
engagements. II. High standard of general education.
c. An engagement team member prepares invoices III. Specific education, training and examination in
for the attest client. professionally relevant subjects
d. An engagement team member has a direct a. I, II, III c. III, II, I
financial interest in the attest client. b. II, III, I d. II, I, III

42. The underlying reason for a code of professional
conduct for any profession is:
a. the need for public confidence in the quality of
service of the profession.
b. that it provides a safeguard to keep unscrupulous
people out.
c. that it is required by federal legislation.
d. that it allows licensing agencies to have a yardstick
to measure deficient behavior.
43. Society has attached a special meaning to the term
“professional.” A professional is:
a. someone who has passed a qualifying exam to
enter the job market.
b. a person who is expected to conduct himself or
herself at a higher level than the requirements of
society’s laws or regulations.
c. any person who receives pay for the services
performed.
d. someone who has both an education in the trade
and on-the-job experience received under an
experienced supervisor.
44. Safeguards created by the profession, legislation or
regulation include the following, except:
a. Educational, training and experience requirements
for entry into the profession.
b. Continuing professional development
requirements.
c. Corporate governance regulations.
d. Effective, well-publicized complaint systems
operated by the employing organization, which
enable colleagues, employers and members of the
public to draw attention to unprofessional or
unethical behavior.
47. Which of the following is not explicitly referred to in
the Code of Ethics as source of technical standards?
a. Commission of Audit (COA)
b. Financial Reporting Standards Council (FRSC) and
Auditing standards and Assurance Council (AASC)
c. Securities and exchange Commission (SEC)
d. Relevant legislation
48. Which of the following is a misunderstanding created
by the use of the word “independence?”
a. A person exercising professional judgment should
be free from all economic, financial and other
relationships.
b. Possessing the ability to act with integrity and
objectivity.
c. Independence precludes relationships that may
appear to impair objectivity in rendering assurance
services.
d. Possessing the ability to express a conclusion
without being affected by influences that
compromise professional judgment.
49. When CPAs are able to maintain their actual
independence, it is referred to as independence in:
a. conduct. c. fact.
b. appearance. d. total.
50. “Independence” in auditing means:
a. maintaining an indirect financial interest.
b. not being financially dependent on a client.
c. taking an unbiased and objective viewpoint.
d. being an advocate for a client.
☺ - done - ☺

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