1. S1 Audit evidence comprises all the information available to the auditor during an audit engagement.

S2 Accounting records, on their own, constitute sufficient appropriate evidential matter.

A. True, true
B. B. False, false
C. C. True, false
D. D. False, true

2. I – no need to consider if the client might be involving in money laundering or other criminal activities
II – Consider identity and business reputation of the client’s principal owners, key management, related
parties and those charge with its governance
a. True, True
b. True, False
c. False, True
d. False, False

3. I The SEC shall register any corporation organized for the practice of accountancy
II – The network firm of RG Manabat and Co. is KPMG,LLP
a. True, True
b. True, False
c. False, True
d. False, False

4. I - Dependable information is essential to the very existence and survival of society

II – Through the audit report, CPAs can tell decision makers that the information they are relying on
constitutes a fair picture of “what is really happening”.
a. True, True
b. True, False
c. False, True
d. False, False

5. Which of the following statements is false?

a. Perform works that complies with professional standards and regulatory and equal requirement
b. by not exercising due professional care in the planning and performance of the audit, quality is at stake
c. Philippine Standard on Auditing 220 (Redrafted), Quality Controls for an assurance services
d. some auditor was accused of not exercising due care and skepticism in their 2001 audits of the
company.

6. I – Appropriate consultations have taken place and the resulting conclusions have been recommended and
implemented
II – The work performed supports the conclusions reached and is appropriately documented
a. True, True
b. True, False
c. False, True
d. False, False

7. I – The firm should establish policies and procedures in setting out the nature, timing and extent of a
management quality control review.
II – The firm should establish policies and procedures in setting out documentation requirements for an
engagement quality control review.
a. True, True
b. True, False
c. False, True
d. False, False

8. Assurance engagement include the following, except

a. An engagement conducted to provide a high level of assurance that the subject matter conforms in all
material respects with identified suitable criteria.
b. An engagement conducted to provide a moderate level of assurance that the subject matter is plausible in
the circumstances.
c. An engagement in accordance with the Philippine Standard on Assurance Engagement(s) issued by the
Philippine Auditing Standards and Practices Council as approved by the Board of Accountancy/Professional
Regulation Commission.
d. An engagement to perform agreed-upon procedures.
9. Financial interest means
a. Any bank account which is used solely for the banking of clients’ monies.
b. Any monies received by a professional accountant in public practice to be held or paid out on the instruction
of the person from whom or on whose behalf they are received.
c. A financial interest beneficially owned through a collective investment vehicle, estate, trust or other
intermediary over which the individual or entity has no control.
d. An interest in an equity or other security, debenture, loan or other debt instrument of an entity,
including rights and obligations to acquire such an interest and derivatives directly related to such
interest.

10. Firm includes the following, except

a. A sole practitioner professional accountant.
b. An entity that controls a partnership of professional accountants.
c. An entity controlled by a partnership of professional accountants.
d. A sole practitioner, partnership or corporation of professional accountants.

11. Which of the following is incorrect regarding independence?

a. Independence consists of independence of mind and independence in appearance.
b. Independence of mind is the state of mind that permits the provision of an opinion without being affected by
influences that compromise professional judgment, allowing an individual to act with integrity, and exercise
objectivity and professional skepticism.
c. Independence in appearance is the avoidance of facts and circumstances that are so significant a
reasonable and informed third party, having knowledge of all relevant information, including any safeguards
applied, would reasonably conclude a firm's or a member of the assurance team’s integrity, objectivity or
professional skepticism had been compromised.
d. Independence is a combination of impartiality, intellectual honesty and a freedom from
conflicts of interest.

12. The Code of Ethics for Professional Accountants in the Philippines defined “practice” as
a. A distinct sub-group, whether organized on geographical or practice lines.
b. An entity under common control, ownership or management with the firm or any entity that a reasonable and
informed third party having knowledge of all relevant information would reasonably conclude as being part of
the firm nationally or internationally.
c. Any service requiring accountancy or related skills performed by a professional accountant including
accounting, auditing, taxation, management consulting and financial management services.
d. A sole proprietor or a partnership of professional accountants which offers professional services to
the public.

13. The term professional accountant in public practice includes the following, except
a. A sole proprietor providing professional services to a client.
b. Each partner or person occupying a position similar to that of a partner staff in a practice
providing professional services to a client.
c. Professional accountants employed in the public sector having managerial
responsibilities.
d. A firm of professional accountants in public practice.

14. Which of the following would not be a consideration of a CPA firm in deciding whether to accept a new
client?
A. The client’s probability of achieving an unqualified opinion.
B. The client’s financial ability.
C. The client’s relations with its previous CPA firm.
D. The client’s standing in the business community.

15. After accepting an audit engagement, a successor auditor should make specific inquiries of the
predecessor auditor regarding:
A. The predecessor’s evaluation of matters of continuing accounting significance.
B. Disagreements which the predecessor had with the client concerning auditing procedures and
accounting principles.
C. The client’s ability to pay the fee for this engagement.
D. The predecessor’s assessments of inherent risk and judgments about materiality.

16. Which of the following is not a valid reason why an auditor sends to his client an engagement letter?
A. Avoid misunderstanding with respect to the engagement
B. Confirms the auditor’s appointment
C. Discloses the objective and scope of the audit
D. Assures CPA’s compliance to PSAs
17. S1 Materiality judgments are made in light of surrounding circumstances and necessarily involve both
quantitative and qualitative judgments.
S2 An auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of a
reasonable person who will rely on the financial statements.

A. True, true
B. False, false
C. True, false
D. D. False, true

18. S1 In a financial statement audit, audit risk represents the probability that internal controls fail and the
failure is not detected by the auditor’s procedures.
S2 Audit risk may be eliminated by 100% testing of the items in the population.

A. True, true
B. B. False, false
C. C. True, false
D. D. False, true

19. Which of the following is an example of the auditor’s direct knowledge?

I. Inspection
II. Observation
III. Computation
A. I only B. I and III C. II and III D. I, II and III

20. Which of the following is an example of fraud?

A. Client personnel make mistakes in gathering or processing accounting data from which financial
statements are prepared.
B. Client personnel alter accounting records from which financial statements are prepared.
C. Client personnel overlook or misinterpret facts, causing accounting estimates to be incorrect.
D. Client personnel make mistakes in the application of accounting principles.

21. Which of the following situations are applicable to fraud as well as error?
A. Mistakes in gathering or processing accounting data
B. Suppression of the recording of accounting transactions
C. Misinterpretation of facts, causing the classification of leases to be incorrect
D. Misapplication of accounting policies

22. Which of the following best describes a portion of the auditor’s responsibility regarding illegal acts by
clients?
A. The auditors have a responsibility to discover all material illegal acts.
B. If audit procedures reveal illegal acts, the auditors should take appropriate actions.
C. If the auditors suspect that illegal acts have been performed, they should conduct a legal audit of the
company
D. The auditor’s responsibility for the detection of all illegal acts is the same as their responsibility
regarding material errors and irregularities.

23. Which of the following statements is incorrect?

a. Attendance consists of being present during all or part of a process being performed by others.
b. Audit evidence will comprise source documents and accounting records underlying financial
statements and corroborating information from other sources.
c. The characteristics for determining whether criteria are suitable are relevance, reliability,
neutrality and consistency.
d. Governance describes the role of persons entrusted with the supervision, control and direction of
an entity.

24. Because external auditors are paid fees by their clients, external auditors
a. are absolutely independent and may conduct audits
b. may be sufficiently independent to conduct audits
c. are never considered to be independent
d. must receive approval of the SEC before conducting audits
25. Objectivity refers to a practitioner’s ability:
a. To remain impartial.
b. To identify assertions that are appropriate.
c. To be unyielding in all disputes.
d. To choose independently between accounting principles and auditing standards.
26. Before accepting an engagement to audit a new client, a CPA is required to obtain
a. An understanding of prospective client’s industry and business.
b. The prospective client’s signature to the engagement letter.
c. A preliminary understanding of the prospective client’s control environment.
d. The prospective client’s consent to make inquiries of the predecessor auditor, if any.

27. Which of the following services provides the highest level of assurance to third parties about a company’s
financial statements?
a. Audit
b. Review
c. Compilation
d. Write-up work

28. Which of the following most accurately summarizes what is meant by the term “material misstatement?”
a. Fraud and direct-effect illegal acts.
b. Fraud involving senior management and material fraud.
c. Material error, material fraud, and certain illegal acts.
d. Material error and material illegal acts.

29. S1 The audit report is the means through which the auditor provides reasonable assurance that the
financial statements are fairly stated.
S2 An audit cannot provide absolute assurance that the subject matter is free of any fraud, or error.

A. True, true B. False, false C. True, false D. False, true

30. S1 The objective of an audit of financial statement is to enable the auditor to express an opinion whether
the
financial statement are prepared, in all material respects, in accordance with an identified financial reporting
framework or acceptable financial reporting standard.
S2 The management is responsible for preparing and presenting the financial statement in
accordance with the financial reporting framework.
A. True, true B. False, false C. True, false D. False, true

31. The firms should obtain acceptance and continuance information as it considers necessary in the following
circumstances:
A. When accepting and engagement with a new client.
B. When deciding whether to continue an existing engagement.
C. When accepting a new engagement with existing client.
D. All of these.

32. A firm has obtained information that would have caused it to decline an engagement had the information
been
available earlier. Actions available to the auditor includes the following, except:
A. Reporting the information and its implications to the person(s) who appointed the CPA.
B. Withdraw the engagement.
C. Withdraw from both the engagement and the client relationship.
D. Continue the engagement, since the Code of Ethics requires started engagements to be finished regardless
of
subsequent developments and information

33. The following methods are most likely develop capabilities and competence, except:
A. Professional education
B. Continuing professional development, including training.
C. Work experience and coaching by less experienced staff
D. Self-study modules on professional accounting and auditing literature.
Accept the challenge............... Page 5
34. Supervision includes:
A. Tracking the progress of the engagement.
B. Considering the capabilities and competence of individual members of client’s personnel.
C. Addressing all issues arising during the engagement and modifying the planned approach appropriately.
D. Identifying matters for consultation or consideration by less experience engagement team members during
the
engagement.
35. Review responsibilities determined on the basis that ____ experienced team members review the work of
____
experiences team members.
A. More, more C. Less, more
B. More, less D. Less, less
36. Consultation is usually undertaken for:
A. Difficult or contentious matters.
B. Matters for which there is readily available support.
C. Matters for which the judgement of the engagement leader is deemed sufficient.
D. straightforward matters involving accounting and auditing.
37. An engagement quality control reviews is required to be performed:
A. Immediately after the re-assessment of control risk.
B. For all audits of financial statement of listed entities.
C. For all types of audits, regardless of the subject matter on the engagement.
D. at engagement completion after the report is issued.
38. What aspects are most important in determining the eligibility of the engagement quality control reviewers?
A. Technical qualifications and objectivity.
B. Integrity and objectivity.
C. Conference and independence.
D. All of these.
39. In case of differences of opinion among members of a team:
A. The engagement partner shall issue a disclaimer of opinion due to a scope limitation
B. As increase in the audit fee will be requested due to the extension the time required to complete the
engagement.
C. Documentation will be made regarding the unsolved matter, and the auditor will withdraw from the
engagement altogether.
D. The report shall not be issued until the matter is resolved.
40. In the case of an audit, final engagement final engagement files should be completely assembled not more
than.
A. 60 days after the date of the audit report.
B. 30 days after the date of the audit report
C. 10 days after the date of the audit report.
D. 5 days after the date of the audit report.
41. What is the normal retention period for audit engagement documentation?
A. No shorter than one year from the date of the audit report.
B. No shorter than three years from the date of the audit report.
C. No shorter than five years from the date of the audit report.
D. No shorter than seven years from the date of audit report.
42. An inspection cycle ordinarily spans no more than:
A. One year C. Three years
B. Two years D. Four years
43. Monitoring of the film’s system of the quality control is performed by competent individuals and covers.
A. Appropriateness of the design of quality control.
B. Effectiveness of the operation of quality control.
C. Both A and B.
D. Neither A or B.
44. The film should communicate the results of the monitoring of its quality control system to engagement
partners and other appropriate individuals within the film at least:
A. Every six months.
B. Every twelve months.
C. Every twelve years.
D. Everyday.
Accept the challenge............... Page 6
45. The firm should establish policies and procedures requiring appropriate documentation to provide evidence
of
the operation of each element of its system of quality control, based on.
A. PSQC No.1.
B. PSA 220.
C. Philippine audit practice statement.
D. The films decision/methodology of document.
46. The Code of Ethics for Professional Accountants in the Philippines is
A. Mandatory for all CPAs
B. Mandatory for CPAs in public practice
C. Mandatory for CPAs in Government
D. Not mandatory
47. Which of the following statements best describes why the profession of CPAs has deemed it essential to
promulgate a code of professional ethics and to establish a mechanism for enforcing observation of the Code?
A. A distinguishing mark of a profession is its acceptance of responsibility to the public
B. A pre-requisite to success is the establishment of an ethical code that primarily defines the
professional’s responsibility to clients and colleagues
C. A requirement of most state laws calls for the profession to establish a Code of Ethics.
D. An essential means of self-protection for the profession is the establishment of flexible ethical
standards by the profession
48. IFAC stands for:
A. International Foundation of Accountants
B. Integrated Federation for Assurance
C. International Federation of Accountants
D. International Federation of Auditors
49. Suppose that a national statutory requirement in the Philippines setting is in conflict with a provision of the
IFAC
Code. In this case:
A. Both are applied simultaneously
B. The IFAC Code requirement prevails
C. The national statutory requirement prevails
D. There will be no ruling for that particular requirement
50. The following steps are part of the conceptual framework approach. Set the steps in the proper order.
I. Address threats which are other than clearly insignificant through the application of
safeguards
II. Evaluate the significance of threats to compliance with fundamental principles.
III. Identify threats to compliance with the fundamental principles
A. I, II, III C. III, I, II
B. II, III, I D. III, II, I
51. If a CPA cannot implement appropriate safeguards, the professional accountant should the following,
except:
A. Decline the specific professional service involved
B. Discontinue the specific professional service involved
C. Resign from the client or the employing organization as necessary
D. Issue an adverse opinion on the subject matter of the engagement
52. An inadvertent violation of the Code of Ethics, depending on the nature and significance of matter, may not
compromise compliance with the fundamental principles provided, once the violation is discovered
A. The CPA withdraws from the specific professional service involved
B. A disclaimer of opinion is issued to the client as a result of the violation
C. The violation is corrected promptly and any necessary safeguards are applied
D. The engagement is promptly transferred to another professional accountant who has not
committed the violation
53. The state of mind that permits the provision of an opinion without being affected by influences that
compromise
professional judgment
A. Professional Skepticism
B. Integrity
C. Objectivity
D. Independence of mind
54. The avoidance of facts and circumstances that are so significant a reasonable and informed third party,
having
knowledge of all relevant information, would reasonably conclude a CPA’s integrity, objectivity or professional
skepticism had been compromised.
A. Principle of segregation
Accept the challenge............... Page 7
B. Independence in Appearance
C. Functional Integrity
D. Preemptive Estoppel
55. A CPA should maintain objectivity and free of conflicts of interest when performing:
A. Audits but not any other professional services
B. All attestation services, but not other professional services
C. All attestation and tax services, but not other professional services
D. All professional services
56. Hilorie, CPA, has an overbearing superior, and the superior is suppressing the recording of certain
transactions
of the company. Hilorie is being asked to act contrary to technical and professional standards. The first remedy
in case of ethical conflict is
A. Follow the established policies of the employing organization to seek a resolution of such conflict
B. Review the conflict problem with the superior
C. Review the conflict problem with the next higher managerial level, after giving notice to the
immediate superior of the intention to do so.
D. Seek counseling and advice on a confidential basis with an independent advisor or the applicable
professional accountancy body or regulatory body
57. Prior to beginning the field work on a new audit engagement which a CPA does not possess expertise in
the
industry in which the client operates, the CPA should:
A. Reduce audit risk by lowering the preliminary levels of materiality
B. Design special substantive tests to compensate the lack of industry expertise
C. Engage financial experts familiar with the nature of the industry
D. Obtain a knowledge of matters that relate to the nature of the entity’s business
58. A CPA shall not disclose confidential information obtained during an audit engagement in which one of the
following situations?
A. When the security of the state so requires
B. With the consent of the client
C. In defense of himself when sued by the client
D. Under the rule against disclosing confidential information
59. In which of the situations given below would disclosure by a CPA be in violation if the Code?
A. Disclosing confidential information in order to properly discharge the CPA’s responsibilities in
accordance with his profession’s 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
practice.
D. Disclosing confidential information in a review of the CPA’s professional practice by the Quality
Review Committee
60. May occur 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
61. May occur when previous judgment needs to be re-evaluated by the professional accountant responsible
for
that judgment
A. Self-interest threat C. Advocacy threat
B. Self-review threat D. Familiarity threat
62. May occur when a professional accountant promotes a position or opinion to the point that subsequent
objectivity may be compromise
A. Self-interest threat C. Advocacy threat
B. Self-review threat D. Familiarity threat
63. May occur 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
64. May occur when a professional accountant may be deterred from acting objectively by threats actual or
perceived.
A. Self-interest threat C. Advocacy threat
B. Intimidation threat D. Familiarity threat
65. For assurance engagements provided to an audit client, the following should be independent of the client:
A. The members of the assurance team
B. The firm
C. Network firms
Accept the challenge............... Page 8
D. All of these
66. In which of the following situation would be a CPA be in violation of the rules of professional ethics I
determining
the professional fees?
A. A fee based on appropriate rates per hour or per day for the time of each person engaged in
performing professional services
B. A fee which is lower compared to the fee charged in the prior year of similar services
C. A fee based on appropriate rates per hour where the appropriate rate is based on the fundamental
premise that the organization and conduct of the CPA and the services provided to clients are well
planed, controlled and managed
D. A fee is based on the 10% of the client’s adjusted net income for the current year
67. The rendering of two or more types of professional services concurrently
A. Is a violation of the code of ethics
B. Would impair, objectivity or independence or the good reputation of the profession
C. Does not by itself impair integrity, objectivity or independence
D. Is inconsistent with the practice of public Accountancy
68. Les, CP-lawyer, has a law practice. Les has recommended one of her clients to Lee, CPA. Lee has agreed
to pay
Les 12% of the fees for services rendered by Lee to Les’ client Who, if anyone, is in violation of the Code of
Ethics?
A. Les and Lee C. Lee only
B. Les only D. Neither of them
69. Which statement is incorrect regarding custody of clients’ assets?
A. Client’s assets should not be held by the CPA if there is reason to believe that the assets were
obtained from, or are reason to believe that the assets were obtained from, or are to be used for,
illegal activities.
B. A CPA in public practice should maintain one or more bank accounts for clients monies
C. Monies may only be drawn from the client account on the instruction of the client
D. Fees due from a client may be drawn from client’s monies without the need of notifying the client.
70. Which statement id incorrect regarding CPAs in business?
A. CPAs in business owe a duty of loyalty to their employer as well as to the profession therefore
there may be no time that the two will be in conflict.
B. A CPA, particularly one having authority over others, should five due weight for the need for them
to develop and hold their own judgment in accounting matters and should deal with difference of
opinion in a professional way.
C. When undertaking significant tasks for which a CPA has not had sufficient specific, he or she should
not mislead the employer as to the degree of expertise or experience he or she possesses and
where appropriate, expert advice and assistance should be sought.
D. A CPA is expected to present financial information fully, honestly and professionally and so that it
will be understood in its context
71. Which of the following is not a potential benefit of having the auditor provide both auditing and consulting
services to the client?
A. As a consequence of the knowledge gained during the audit, the auditor can provide the consulting
services more efficiently than an outside consultant.
B. Information acquired during the course of the consulting engagement may help in the planning
and performing of the audit.
C. Systems designed by the auditor as part of a consulting engagements do not need to be audited
as carefully as systems designed by an outside consultant since the auditor has prior knowledge of
their reliability
D. Consulting practice increases the auditors understanding of the client and the client’s industry.
This understanding reduces the potential for an audit failure
72. One difference between auditors and other professional is that most professionals:
A. Need not be concerned about remaining independence
B. Don’t have requirements for continuing education beyond college
C. Don’t have to pass a rigorous examination
D. Aren’t expected to act in the public interest
73. S1: A CPA can relax the confidentiality rule when in a social environment
S2: A CPA should also maintain confidentiality of information disclosed by a prospective client or
employer
A. True, false C. True, true
B. False, True D. False, false
Accept the challenge............... Page 9
74. The nature and significance of threats may differ depending on whether they arise in relation to the
provision
of services to client. In which of the following types of clients would the Revised Code provide the strictest set
of requirements regarding independence?
A. A financial statement audit client
B. A non-financial statement audit assurance
C. A non-assurance client
D. A non-client
75. Appropriate safeguards during client acceptance may include:
A. Obtaining knowledge and understanding of the client
B. Obtaining knowledge and understanding about the client’s owners, managers and those
responsible for its governance and business activities
C. Securing the client’s commitment to improve corporate governance practices or internal controls
D. All of these
76. Regarding conflict of interest, the following safeguards are applicable (select the exception)
A. Notifying the client of the firm’s business interest or activities that may represent a conflict of
interest, and obtaining their consent to act in such circumstances
B. Notifying all known relevant parties that the CPA in public practice is acting for two or more parties
in respect of a matter where their respective interests are in conflict and obtaining their consent
to so act.
C. Notifying the client that the CPA in public practice does not act exclusively for any one client in the
provision of proposed services and obtaining their consent to so act
D. Clear guidelines for members of the client personnel on issues of security and confidentiality.
77. A client seeking a second opinion does not permit the CPA to communicate with the existing accountant. In
such
cases, the CPA should:
A. Issue a disclaimer of opinion due to a significant client imposed scope limitation
B. Consider whether, taking all the circumstances into account, it is appropriate to provide the
opinion sought.
C. Consider whether to issue a qualified opinion or disclaimer of opinion due to a significant client-
imposed scope limitation
D. Communication the client’s refusal directly to the existing accountant.
78. The payment of receipt of referral fees or commissions may create threats to which fundamental
principles?
A. Integrity
B. Objectivity
C. Professional competence and due care
D. Professional Behavior.
A. I and III C. II, III AND IV
B. I and IV D. II and IV
79. A CPA business may be:
A. A salaried employee
B. A partner, director (whether executive or non executive) or an owner manager
C. A volunteer or another working for one or more employing organization
D. Any of these
80. A CPA in business or an immediate or close family member may be offered an inducement or pressured to
offer
inducement. Inducements may take various forms, including
A. Gifts and hospitality
B. Preferential treatment
C. Inappropriate appeals to friendship or loyalty
D. Any of these