1.

Certified public accountants registered at the time RA9298 took effect shall
A. Take a new set of CPA licensure examinations
B. Automatically be registered as CPAs
C. Renew their certificate of registration
D. Take an oath of profession

2. Statement 1: The dean of the College of Accountancy that exclusively offers the BSA Program must be a CPA.
Statement 2: The dean of the College of Business, Accountancy and Management shall be a CPA.
Statement 3: The program chair of the BSA program must be a CPA.
A. Only one statement is correct
B. Only two statements are correct
C. All statements are correct
D. All statements are incorrect

3. Statement 1: The members are appointed by the President of the Philippines

Statement 2: The Commission submits 3 recommendees to the President based on a list of nominees

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Statement 3: 6 nominees for each position will be submitted by PICPA to the Commission
A. Only one statement is correct
B. Only two statements are correct

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C. All statements are correct
D. All statements are incorrect

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4. Which statement is correct with respect to continuing professional development (CPD) requirements of members of
the accountancy profession?
A. Only members employed in commerce and industry are required to comply with CPD requirements.
B. Only members in public practice are required to comply with CPD requirements.
C. Members, regardless of whether they are in public practice, are required to comply with CPD requirements.
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D. There is no requirement for members to comply with CPD requirements.

5. The organization charged with protecting investors and the public by requiring full disclosure of financial information
by companies offering securities to the public is the:
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A. Auditing and Assurance Standards Council
B. Financial Reporting Standards Council
C. Board of Accountancy
D. Securities and Exchange Commission.

6. Which of the following attributes most clearly differentiates a CPA who audits management's financial statements as
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contrasted to management?
A. Integrity.
B. Competence.
C. Independence.
D. Keeping informed on current professional developments.
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7. Statement 1: A CPA may receive a commission for recommending a particular computer system to an audit client.
Statement 2: CPAs can advertise the fees only for their nonattest services.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
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D. Both statements are incorrect

8. Contingency fee based pricing of accounting services is:

A. Always strictly prohibited in public accounting practice.
B. Never restricted in public accounting practice.
C. Prohibited for clients for whom attestation services are provided.
D. Considered an act discreditable to the profession.

9. Which of the following is least likely to impair a CPA firm's independence with respect to a nonpublic audit client in the
Laguna office of a national CPA firm?
A. A partner in the Laguna office owns an immaterial amount of stock in the client.
B. A partner in the Cavite office owns 7% of the client's stock.
C. A partner in the Laguna office, who does not work on the audit, previously served as controller for the audit client.
D. A partner in the Batangas office is also the vice president of finance for the audit client.
10. When a threat to independence arises, an auditor should consider
A. Alternative threats to a lack of independence.
B. Available safeguards to independence.
C. Global independence rules.
D. Required lack of independence approaches.

11. Statement 1: The risk that information is misstated is referred to as information risk.
Statement 2: The risk associated with a company's survival and profitability is referred to as business risk.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

12. Which of the following risks encompasses the risk that a company will not be able to meet its obligations when they
become due is referred to as:

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A. Information risk.
B. Inherent risk.
C. Relative risk.

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D. Business risk.

13. The attest function:

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A. Is an essential part of every engagement by the CPA, whether performing auditing, tax work, or other services.
B. Includes the preparation of a report of the CPA's findings.
C. Requires a consideration of internal control.
D. Requires a complete review of all transactions during the period under examination.

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14. Statement 1: The auditors are primarily responsible for preparing the financial statements and expressing an opinion
on whether they follow generally accepted auditing standards.
Statement 2: Partners in CPA firms usually have the responsibility for signing the audit report.
A. Only Statement 1 is correct
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B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

15. Statement 1: Independent audits of today place more emphasis on sampling than did the audits of the 19th century.
Statement 2: The Philippine Institute of Certified Public Accountants (PICPA) issues CPA certificates and permits
C

CPAs to practice.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
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16. Which of the following types of services is generally provided only by CPA firms?
A. Tax audits.
B. Financial statement audits.
C. Compliance audits.
D. Operational audits.
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17. An operational audit differs in many ways from an audit of financial statements. Which of the following is the best
example of one of these differences?
A. The usual audit of financial statements covers the four basic statements, whereas the operational audit is usually
limited to either the balance sheet or the income statement.
B. The boundaries of an operational audit are often drawn from an organization chart and are not limited to a single
accounting period.
C. Operational audits do not ordinarily result in the preparation of a report.
D. The operational audit deals with pre-tax income.

18. A typical objective of an operational audit is for the auditor to:

A. Determine whether the financial statements fairly present the entity's operations.
B. Evaluate the feasibility of attaining the entity's operational objectives.
C. Make recommendations for improving performance.
 D. Report on the entity's relative success in attaining profit maximization.

19. Which of the following is not one of the assertions made by management about an account balance?
A. Relevance.
B. Existence.
C. Valuation.
D. Rights and obligations.

20. Which of the following factors would most likely cause a CPA to decide not to accept a new audit engagement?
A. Lack of understanding of the potential client's internal auditors' computer-assisted audit techniques.
B. Management's disregard for internal control.
C. The existence of related party transactions.
D. Management's attempt to meet earnings per share growth rate goals.

21. A predecessor auditor is required to attempt to initiate communication with the successor auditor:
I. Prior to the incoming auditor’s acceptance of the engagement

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II. Subsequent to the incoming auditor’s acceptance of the engagement
A. I only
B. II only

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C. Both I and II
D. Neither I nor II

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22. Preliminary arrangements agreed to by the auditors and the client should be reduced to writing by the auditors. The
best place to set forth these arrangements is in:
A. A memorandum to be placed in the permanent section of the auditing working papers.
B. An engagement letter.
C. A client representation letter.
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D. A confirmation letter attached to the constructive services letter.

23. Statement 1: Audit committees should be made up of the most qualified directors regardless of whether they are part
of management of the company.
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Statement 2: In planning an audit, the auditor may decide that it is appropriate to perform substantive approach to an
audit for many small businesses.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
C

24. The auditors will not ordinarily initiate discussion with the audit committee concerning the:
A. Extent to which the work of internal auditors will influence the scope of the examination.
B. Extent to which change in the company's organization will influence the scope of the examination.
C. Details of potential problems which the auditors believe might cause a qualified opinion.
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D. Details of the procedures which the auditors intend to apply.

25. Which measure of materiality (or both) considers quantitative considerations?

I. Planning
II. Evaluation
A. I only
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B. II only
C. Both I and II
D. Neither I nor II

26. The auditors are planning an audit engagement for a new client in a business that is unfamiliar to the auditors. Which
of the following would be the most useful source of information for the auditors during the preliminary planning stage
when they are trying to obtain a general understanding of audit problems that might be encountered?
A. Client manuals of accounts and charts of accounts.
B. Industry Audit Guides.
C. Prior-year working papers of the predecessor auditors.
D. Latest annual and interim financial statements issued by the client.

27. Statement 1: The auditors' tests of controls are designed to substantiate the fairness of specific financial statement
accounts.
 Statement 2: At least a portion of the auditors' consideration of internal control usually is performed at an interim date
rather than at the balance sheet date.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

28. Statement 1: The relatively low number of types of transactions incurred by small firms makes the segregation of
duties impossible.
Statement 2: In a financial statement audit, CPAs are required to assess the operating effectiveness of most
significant accounting-oriented controls.
A. Only Statement 1 is correct
B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect

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29. Which of the following is true about the auditors' consideration of internal control in a financial statement audit?
A. The auditors must assess control risk at a level lower than the maximum.
B. The auditors must prepare a flowchart description of internal control for their working papers.

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C. The auditors must obtain an understanding of the steps in processing major types of transactions.
D. The auditors must perform tests of controls.

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30. Which of the following is most likely to be considered a risk assessment procedure relating to internal control?
A. Confirm accounts receivable.
B. Perform a test of a control relating to payroll.
C. Take test counts of the year-end inventory.
D. Trace a transaction through the information system relevant to financial reporting.

department?
A. Reconciling accounting records with existing assets.
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31. For effective internal control, which of the following functions should not be assigned to the company's accounting
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B. Recording financial transactions.
C. Signing payroll checks.
D. Preparing financial reports.

32. Statement 1: The operating system is an example of system software.

Statement 2: Data encryption is an example of data transmission control.
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A. Only Statement 1 is correct

B. Only Statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
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33. Internal control is ineffective when computer department personnel:

A. Participate in computer software acquisition decisions.
B. Design documentation for computerized systems.
C. Originate changes in master files.
D. Provide physical security for program files.
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34. Which of the following is least likely to be a general control over computer activities?
A. Procedures for developing new programs and systems.
B. Requirements for system documentation.
C. A change request log.
D. A control total.

35. Which of the following is least likely to be tested with generalized audit software?
A. An aging of accounts receivable.
B. A schedule of inventory.
C. A depreciation schedule
D. A computer-operations manual.