1.

Assurance engagements encompass the applicable financial reporting framework is

following types of services, except an implicit part of the auditor’s
a. Audit of historical financial statements responsibilities.
b. Attestation services c. Making suggestions that are adopted
c. Review engagements about the form and content of an entity’s
d. Management consulting financial statements impairs an auditor’s
independence.
2. The Philippine Framework for Assurance d. The auditor’s report should provide an
Engagements assurance as to the future viability of the
a. Contains basic principles, essential entity.
procedures, and related guidance for
the performance of assurance 6. The purpose of an audit of financial statements
engagements. is to
b. Defines and describes the elements a. Relieve management or those charged with
and objectives of an assurance governance of the responsibility for the
engagement, and identifies preparation and presentation of the financial
engagements to which PSAs, PSREs, statements in accordance with the applicable
and PSAEs apply. financial reporting framework.
c. Provides a frame of reference for CPAs b. Obtain an absolute level of assurance that
in public practice when performing the financial statements as a whole are free
audits, reviews, and compilations of from material misstatement.
historical financial information. c. Enhance the degree of confidence of
d. Establishes standards and provides intended users in the financial statements.
procedural requirements for the d. Assure the future viability of the entity by
performance of assurance expressing an opinion on the entity’s
engagements. financial statements.

3. The auditor’s satisfaction as to the reliability of 7. In performing an operational audit, the auditor
an assertion being made by one party for use by primarily relies on which of the following
another party is called procedures?
a. Opinion a. Physical inspection
b. Assurance b. Analytical procedures
c. Examination c. Inquiry and observation
d. Verification d. Tracing and vouching

4. Independence is not a requirement for which 8. The primary orientation of operational auditing
of the following engagements? is towards
Compilation Review Agreed- a. Future improvements to accomplish the
upon goals of management
Procedures b. The accuracy of the data reflected in
a. No Yes No management’s financial records
b. No No No c. The verification that a company’s financial
c. Yes No Yes report is fairly presented
d. Yes Yes Yes d. Past protection provided by existing
internal control
5. Which of the following statements is correct
concerning an auditor’s responsibilities 9. An objective of a performance audit is to
regarding financial statements? determine whether an entity’s
a. An auditor’s responsibilities for audited a. Operational information is in accordance
financial statements are confined to the with government auditing standards
expression of the auditor’s opinion. b. Specific operating units are functioning
b. The fair presentation of audited financial economically and efficiently
statements in accordance with an
 c. Financial statements present fairly the
results of operation 16. Which of the following types of audit uses laws
d. Internal control is adequately operating as and regulations as its criteria?
designed a. Operational audit
b. Financial statement audit
10. Which of the following professionals has c. Compliance audit
primary responsibility for the performance of an d. Financial audit
audit?
a. The managing partner of the firm. 17. Which of the following types of auditing is
b. The senior assign to the engagement. performed most commonly by CPAs on a
c. The manager assign to the engagement. contractual basis?
d. The partner in charge of the engagement. a. Internal auditing
b. Government auditing
11. A pervasive characteristic of a CPA’s role in a c. BSP bank audit
consulting services engagement is that of being d. External auditing
a(an)
a. Independent practitioner 18. The assumption underlying an audit of financial
b. Computer expert statements is that they will used by
c. Confidential reviewer a. The regulatory agencies to verify information
d. Objective advisor that is relevant to their supervisory
functions.
12. The risk associated with the company’s survival b. The board of directors as basis of declaring
and profitability is referred to as: cash dividends.
a. Business risk c. The general public in making investment
b. Information risk decisions.
c. Detection risk d. Different groups for different purposes.
d. Control risk
19. The most common type of audit report
13. The difference between what public expects to contains a(n):
get from the audited financial statements and a. Adverse opinion
what the public is actually getting is known as: b. Disclaimer of opinion
a. Credibility gap c. Qualified opinion
b. Audit gap d. Unqualified opinion
c. Expectation gap
d. Level of assurance gap 20. Audits of financial statements include an
expression of a conclusion about which of the
14. Which of the following statements does not following financial statement characteristics?
properly describe an element of the theoretical a. Governance
framework of auditing? b. Reliability
a. The data to be audited can be verified. c. Relevance
b. Short-term conflicts may exist between the d. Timeliness
managers who prepare the data and auditors
who examine them.
c. Auditors act on behalf of the management.
d. An audit benefits the public. 21. Which of the following is not one of the
specified objectives of the Accountancy Act of
15. Which of the following criteria is unique to the 2004?
independent auditor’s attest function? A. Examination for registration of CPAs.
a. General competence. B. Supervision, control, and regulation of
b. Familiarity with the particular industry in accounting practice.
which each client operates. C. Standardization and regulation of
c. Due professional care. accounting practice.
d. Independence.
 D. Promulgation of accounting and C. Establish the firm as a consultant, thus
auditing standards. ensuring its future expansion and
22. In all of the following situations except one, a growth.
person is deemed to be engaged in professional D. Permit the firm’s staff members to
accounting practice. Which of them is the acquire expertise in other areas of
exception? practice.
A. Performing audits or verification of 27. These statements are issued to provide practical
financial transactions and records for assistance to auditors in implementing the PSAs
more than one client. A. Interpretations
B. Employed as the department chairman B. SASP
that supervises the BSA program of an C. PAPS
educational institution. D. SPA
C. Employment as controller of a private 28. Which of the following government agencies is
business enterprise and such represented both to the Auditing Standards and
employment requires that the holder Practice Council and the Auditing and Assurance
thereof should be a CPA. Standards Council?
D. Appointment in the government where A. Bangko Sentral ng Pilipinas
first grade civil service eligibility is a B. Bureau of Internal Revenue
prerequisite. C. Securities and Exchange Commission
23. A person is not deemed to be engaged in D. Commission on Higher Education
professional accounting practice if 29. A professional Identification Card bearing the
A. He merely holds himself out as skilled registration number, date of issuance, expiry
in the science and practice of date, duly signed by the chairperson of the
accounting and qualified to render Commission, shall be issued to every registrant
services as a CPA. renewable every
B. He merely offers to render services as a A. 2 years
CPA to the public, but does not actually B. 3 years
render such services. C. 4 years
C. He offers or no renders bookkeeping D. 5 years
services to more than one client. 30. The BOA shall not refuse the registration of any
D. He Install and revises accounting person who successfully passed the CPA
systems for more than one client. examinations if
24. Which of the following is not one of the A. Convicted by a court of competent
penalties that can be imposed by the Board of jurisdiction of a criminal offense
Accountancy? involving moral turpitude.
A. Fine or imprisonment B. Convicted for a political offense.
B. Revocation of CPA certificate C. Guilty of immoral and dishonorable
C. Reprimand conduct.
D. Suspension of CPA certificate D. None of the above.
25. Which of the following normally a service 31. Which of the following is not one of the grounds
rendered by public accountants? for proceedings against a CPA?
A. Management consultation service A. Gross negligence or incompetence in
B. Attest function the practice of his profession.
C. Internal Auditing B. Engaging in public practice while being
D. Taxation employed in a private enterprise.
26. A CPA firm offers management advisory services C. Insanity.
to clients. Its primary purpose is to D. Immoral or dishonorable conduct.
A. Furnish professional advice and 32. Who is not permitted by law to practice
assistance which will enable the client accountancy?
to improve operations. A. A corporation whose stockholders are
B. Keep the CPA firm competitive with all CPAs
other firms. B. A partnership of CPAs
C. An individual CPA practitioner
 D. A partnership of CPAs with some non- D. P AS S M
CPA staff
33. The PICPA shall renew its Certificate of 38. The amount of audit fees depends largely on the
Accreditation once every how many years after A. Size and capitalization of the company
the date of the Resolution granting the petition under audit
for re-accreditation and the issuance of the said B. Amount of profit for the year
certificate upon submission of the C. Availability of cash
requirements? D. Volume of audit work and degree of
A. 2 years competence and responsibilities
B. 3 years involved
C. 4 years 39. In determining audit fees, an auditor may take
D. 6 years into account each of the following except
34. The primary duty to enforce the provisions of RA A. Volume and intricacy of work involved
9298 and its IRR rests with B. Number and cost of man hours needed
A. The PRC C. Degree of responsibility assumed
B. The BOA D. Size and amount of capital of client
C. The PRC and BOA 40. Under this method of billing a client, the
D. The AASC external auditors charge on the basis of time
35. The Board, subject to the approval of the spent by principal/partners, supervisors, seniors
Commission, may revise or exclude any of the and juniors at predetermined rates agreed upon
subjects and their syllabi, and add new ones as with the client
the need arises. Provided that the change shall A. Maximum fee basis
not be more often than every B. Flat sum basis
A. 2 years C. Retainer basis
B. 3 years D. Per diem basis
C. 4 years
D. 5 years
36. Statements on financial accounting standards
constituting GAAP are issued by the
A. Philippine institute of CPA’s 41. Generally Accepted Auditing Standards (GAAS)
B. Audit Standards and Practices Council and Philippine Standards on Auditing (PSA)
C. Securities and exchange commission should be looked upon by practitioners as
D. Accounting Standards Council
37. Indicate whether the following functions would a. ideals to work for, but which are not
be performed by: achievable.
b. maximum standards which denote
P- Partner S- Senior
excellent work.
M- Manager AS- Audit Assistant c. minimum standards of performance
which must be achieved on each audit
(1) Supervises two or more concurrent engagement.
audit engagements d. benchmarks to be used on all audits,
(2) Performs detailed audit procedures reviews, and compilations.
(3) Overall responsibility for audit
(4) Signs audit report 42. Reasonable assurance means:
a. Gathering of all available corroborating
1 2 3 4 evidence for the auditor to conclude
that there are no material
A. P AS S M misstatements in the financial
statements, taken as a whole.
B. M S M P
b. Gathering of the audit evidence
C. M AS P P necessary for the auditor to conclude
that the financial statements, taken as
 a whole, are free from any
misstatements. 47. Auditing standards are
c. Gathering of the audit evidence a. Statutory in nature.
necessary for the auditor to conclude b. Rules imposed by the Securities and
that the financial statements are free Exchange Commission.
of material unintentional c. Rules imposed by the PICPA.
misstatements. d. General guidelines to help the auditors.
d. Gathering of the audit evidence
necessary for the auditor to conclude 48. Though PSAs do not provide “hard and fast
that there are no material rules”, they provide subjective guidance which
misstatements in the financial allow the auditors to:
statements, taken as a whole. a. Tailor their audit to procedures
requested by management.
b. Only apply those standards that are
important to the audit.
43. Required audit communication to the Audit c. Accurately interpret the profession’s
Committee concerning noncompliance with Code of Professional Conduct.
laws and regulations that were detected d. Use adequate professional judgment
includes: when applying the standards.
a. All material items.
b. All those which are not adequately 49. The Philippine Standards on Auditing issued by
addressed by management. the Auditing and Assurance Standards Council
c. All those that constitute management (AASC)
fraud. a. are interpretations of generally
d. Any of such acts. accepted auditing standards
b. are the equivalent of laws for audit
44. Auditors focus on practitioners.
a. areas where the risks of material errors c. must be followed in all situations
and irregularities is least. d. are optional guidelines which an
b. areas where the risk of material errors auditor may choose not to follow which
and irregularities is greatest. conducting an audit.
c. all areas equally.
d. a random selection of all areas. 50. Competence as a certified public accountant
includes all of the following except
45. The decision as to how much evidence to be a. Having the technical qualifications to
accumulated for a given set of circumstance is perform an engagement.
a. provided by following the generally b. Possessing the ability to supervise and
accepted accounting principles. evaluate the quality of staff work.
b. one requiring professional judgement. c. Warranting the infallibility of the work
c. determined by statistical analysis performed.
d. provided in the Philippine Standards on d. Consulting others if additional technical
Auditing. information is needed.
46. As auditor need not abide by a Philippine 51. In any case in which the incoming accountant is
Standards on auditing if the auditor believes not qualified to perform the work, a
that professional obligation exists to
a. The amount is insignificant. a. acquire the required level of knowledge
b. The requirement of the PSA is and skills.
impractical to perform. b. recommend someone else who is
c. The requirement of the PSA is qualified to perform the work.
impossible to perform. c. decline the engagement.
d. Any of the given three choices is d. any of the given choices.
correct.
52. Ultimately, the decision about whether or not c. Reduce control risk below the
an auditor is independent must be made by the maximum.
a. auditor d. Attain the proper balance of
b. audit committee professional experience and formal
c. client education.
d. public
58. Which of the following is the best statement
53. To be independent, the auditor: concerning the concept of materiality?
a. Cannot place any reliance on the a. Materiality is determined by reference
client’s verbal and written assertions. to PSA matrix.
b. Is responsible only to third-party users b. Materiality depends only on the peso
of the financial statements. amounts involved.
c. Cannot perform any other professional c. Materiality depends on the nature of
services for an audit client. an item rather than on the peso
d. Must be impartial when dealing with amount.
the client. d. Materiality is a matter of professional
judgement.
54. A CPA, while performing an audit, strives to
achieve independence in appearance in order to 59. Which of the following underlies the application
a. Reduce risk and liability. of generally accepted auditing standards,
b. Comply with the generally accepted particularly the standards of fieldwork and
standards of fieldwork. reporting?
c. Become independent in fact. a. Elements of materiality and risk
d. Maintain public confidence in the b. Element of corroborating evidence
profession. c. Element of internal control
d. Element of reasonable assurance
55. Practitioner’s independence:
a. Minimizes risk. 60. The auditor communicates the results of his or
b. Helps achieve public confidence. her work through the issuance of:
c. Defends against professional liability. a. Engagement Letter
d. Achieves compliance with the b. Management Letter
standards of fieldwork. c. Audit Report
d. Financial Statements
56. The standard of due to audit care requires the 61. Immediate family includes:
auditor to a. Parent
a. Apply judgement in a conscientious b. Sibling
manner, carefully weighing the c. Non-dependent children
relevant factors before reaching a d. Spouse
decision.
b. Ensure that the financial statements 62. The communication to the public of facts about
are free from error. a professional accountant which are not
c. Make perfect judgement decisions in all designed for the deliberate promotion of that
cases. professional accountant.
d. Possess skills clearly above the average a. Publicity
for the profession. b. Indirect promotion
c. Advertising
57. The exercise of due professional care requires d. Solicitation
that an auditor
a. Examine all available corroborating
evidence. 63. A professional accountant should comply with
b. Critically review the judgment relevant laws and regulations and should avoid
exercised at every level of supervision. any action that discredits the profession. This is
a fundamental principle of:
 a. Objectivity a) Professional competence and due care
b. Professional competence and due care b) Objectivity
c. Professional behavior c) Integrity
d. Integrity d) Professional behavior
69. The holding of media-covered events
undertaken only to commemorate a
64. A form of threat which may occur when a professional accountant’s anniversaries in public
previous judgment needs to be reevaluated by practice does not violate the rules on
the professional accountant who is responsible advertising and solicitation provided that such
for that judment. undertaking should be done only every _____
a. Sself-interest threat years of celebration
b. Self-review threat a) 5 c) 20
c. Familiarity threar b) 10 d) 25
d. Advocacy threat 70. The firm’s system of quality control should
include policies and procedures that address
each of the following elements, except
65. The underlying reason for a code of professional a. Relevant ethical requirements
conduct for any profession is b. Control environment
a. the need for public confidence in the c. Monitoring
quality of service of the profession d. Engagement performance
b. that it provides a safeguard to keep
unscrupulous people out.
c. that it is reqquired by congress
d. that it allows Professional Regulation 71. The provision of corporate finance services,
Commission to have a yardstick to advice or assistance to an assurance client may
measure deficient performance. create
66. Litigation support services include the following a. Self-interest threat
activities, except c. Advocacy and self-review threats
a) Acting as an expert witness. b. Self-interest and intimidation threats
b) Providing assistance to an audit client’s d. Advocacy and intimidation threats
internal legal department.
c) Calculating estimated damages or amounts
that might become receivable or payable as
72. When the total fees generated by an assurance
the result of litigation or other legal dispute
client represent a large proportion of a firm’s
d) Assistance with document management
total fees, the dependence on that client or
and retrieval in relation to a dispute or
client group and concern about the possibility of
litigation
losing the client may create a/an
67. The Code of Ethics provides that where the
a. Self-interest threat
larger structure is aimed at cooperation and the
c. Intimidation threat
entities within the structure share a significant
b. Self-review threat
part of professional resources, it is considered
d. Advocacy threat
to be a network. Professional resources include
the following, except
a) Audit methodology or audit manuals
b) Training courses and facilities 73. What threat to independence may be created if
c) Brand name fees due from an assurance client for
d) Partners and staff professional services remain unpaid for a long
68. If the fee quoted fir the professional service is so time, especially if a significant part is not paid
low, it may be difficult for the CPA to perform before the issue of assurance report for the
the engagement in accordance with applicable following year?
technical and professional standards for that a. Advocacy threat
price. This situation may create a self-interest c. Intimidation threat
threat to
 b. Self-interest threat a) Professional competence and due care
d. Self-review threat b) Objectivity
c) Integrity
d) Professional behavior
79. The communication to the public of facts about
74. When a firm obtains an assurance engagement
a professional accountant which are not
at a significantly lower fee level that charged by
designed for the deliberate promotion of that
the predecessor firm, or quoted by other firms,
professional accountant.
the self-interest threat created will not be
a. Publicity
reduced to an acceptable level unless
b. Indirect promotion
I. The firm is able to demonstrate
c. Advertising
that appropriate time and qualified
d. Solicitation
staff are assigned to the task.
80. Immediate family includes:
II. All applicable assurance standards,
a. Parent
guidelines, and quality control
b. Sibling
procedures are being complied
c. Non-dependent children
with.
d. Spouse
a. I only
c. Both I and II
81. The auditior’s report may be addressed to any
b. II only
of the following, except the client’s
d. Neither I nor II
a. Stockholders

75. These are fees calculated on a predetermined b. Chief executive officer

basis relating to the outcome or result of a
c. Board of directors
transaction or the result of the work performed.
a. Contingent fees d. Partners
b. Fixed fees
c. Predetermined fees
d. Commisions
76. The firm’s system of quality control should 82. Management’s responsibility for the financial
include policies and procedures that address statements is
each of the following elements, except
a. Relevant ethical requirements a. Implicitly represented in the
b. Control environment auditor’s standard report.
c. Monitoring
d. Engagement performance b. Explicitly represented in the
77. The Code of Ethics provides that where the opening paragraph of the auditor’s
larger structure is aimed at cooperation and the standard report.
entities within the structure share a significant
c. Explicitly represented in the scope
part of professional resources, it is considered
- responsibility of the management
to be a network. Professional resources include
paragraph of the auditor’s
the following, except
standard report.
a) Audit methodology or audit manuals
b) Training courses and facilities d. Explicitly represented in the
c) Brand name opinion paragraph of the auditor’s
d) Partners and staff standard report.
78. If the fee quoted fir the 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 83. The auditor’s responsibility in an audit
price. This situation may create a self-interest engagement is limited to:
threat to
 a. Expression of an opinion on the 86. In which of the following situations would
financial statements. qualified opinion be inappropriate?

b. Expression of an opinion on the a. Financial statements are materially

financial statements and adequacy misstated.
of summary of accounting policies
and other notes. b. A doubt that is more substantial
about the ability of the company to
c. Opinion issued and the fairness of continue as a going concern.
presentation of the financial
statements. c. A significant scope limitation.

d. Expression of opinion and an d. The management insisted of not

inclusion of supplementary attaching the statement of cash
information, if necessary. flows.

84. The auditor’s standard report states that the 87. If the scope of the auditor’s procedures in
financial statements are presented fairly conducting an audit is significantly restricted by
the client management, the audit opinion would
a. With reasonable assurance. most likely be a(n):

b. In all material aspects. a. Adverse opinion.

c. Without significant errors. b. Qualified opinion.

d. On a consistent basis. c. Unqualified with explanatory

paragraph.

d. Disclaimer of opinion.
85. An auditor concludes that there is substantial
doubt about an entity’s ability to continue as a
going concern for a reasonable period of time. If
the entity’s disclosures concerning this matter 88. When there is a limitation in the scope of the
are adequate, the audit report should include audit that results to a disclaimer of opinion, the
a(n) following paragraphs are modified, except:

Adverse Opinion “Except for” Qualified a. Introductory paragraph.

Opinion
b. Management’s responsibility for
a. Yes the financial statements.
Yes
c. Auditor’s responsibility.
b. No
No d. Auditor’s opinion.

c. No
Yes
89. An auditor who is reporting on financial
d. Yes statements that contain a material departure
No from PFRS should include in his audit report a
separate explanatory paragraph and
 a. Not modify the opinion paragraph d. Only the current year, but the prior
as long as the departure is year’s report should be referred to.
adequately disclosed in a footnote.

b. Disclaim an opinion on the

financial statements. 93. If a misstatement is immaterial relative to the
financial statements of the entity for the current
c. Express a qualified or adverse period and is not expected to have a material
opinion. effect in the future periods, it is appropriate to
issue a(n)
d. Express a qualified opinion or
disclaim an opinion. a. Unqualified opinion.

b. Qualified opinion.

90. A qualified opinion report can be used only c. Adverse opinion.

when the auditor believes that the overall
financial statements are d. Disclaimer of opinion.

a. Fairly stated.

b. Not fairly stated. 94. If a company’s financial statements violate PFRS

for an immaterial item which is expected to
c. Materially misstated. become material in the future, the auditor is
likely to issue:
d. Materially misleading.
a. Unqualified standard report.

b. Unqualified with explanatory

91. Materiality is: language.

a. Addressed within a practitioner’s c. Qualified.

attestation and audit reports.
d. Adverse.
b. Expressed in terms of pesos.

c. Measured using the guidelines

established by the FRSC. 95. When a material uncertainty exists, the auditor
must
d. Not applicable to attestation
engagements. a. Disclose it in the audit report.

b. First determine whether adequate

disclosure is included by the client
92. When the audited financial statements of the in the financial statements.
prior year are presented together with those of
the current year, the continuing auditor’s report c. Issue a disclaimer.
should cover
d. Issue a qualified opinion.
a. Both years.

b. Only the current year.

96. The distinction between an adverse opinion and
c. Only the current year, but the prior a disclaimer is
year’s report should be presented.
 a. The lack of PFRS versus lack of 99. When a disclaimer of opinion is issued because
GAAS. the auditor lacks independence,

b. Knowledge versus lack of a. No report title is included in the

knowledge. report.

c. The audit report versus the review b. A one-paragraph audit report is

report. issued.

d. AASC statements versus the FRSC c. The only reason cited for issuing
Standards. the disclaimer of opinion is the lack
of independence.

d. All of the choices are required.

97. The opinion paragraph of a CPA’s report states:
“In our opinion, with the exception of the
effects of not observing inventory in one of the
client’s Mactan warehouses, as discussed in the 100. A client company has changed its method of
preceding paragraph, the financial statements inventory valuation from an unacceptable one
present fairly, in all material respects,…” This to one in conformity with Philippine financial
paragraph expresses a(n) reporting standards. The auditor’s report on the
financial statements in the year of the change
a. Unqualified opinion. should include

b. Adverse opinion due to scope a. No reference to consistency.

limitation.
b. A reference to a prior period
c. Qualified opinion due to scope adjustment in the opinion
limitation. paragraph.

d. Opinion modified because of an c. An explanatory paragraph

uncertainty. explaining the change.

d. A justification for making the

change and the impact of the
98. A disclaimer of opinion is issued whenever the change on reported net income.
auditor

a. Is unable to satisfy himself that the

overall financial statements are
presented fairly.

b. Believes that the overall financial

statements are not presented
fairly.

c. Believes that some material parts

of the financial statements are not
presented fairly.

d. Has determined that the financial

statements are presented fairly.