AT-02 Q Assurance and Non- Assurance Services Basic Concepts 1. The Auditors Satisfaction as to the reliability of an assertion made by one party for use by another is called: A. Assurance B. Reliance factor C. Precision D. Materiality Show
2. An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria A. Assurance Engagement C. Audit Engagement B. Attestation Engagement D. Management consulting Engagement 3. For Assurance Engagement which are neither audits nor reviews of historical financial information, the following standard applies: A. PSAs B. PSREs C. PSAEs D. PSRSs 4. Pronouncements of the auditing and assurance standards council (AASC) do not cover: A. Review Engagements C. Agreed-upon procedures Engagement B. Compilations D. Consultancy Services 5. The Philippines Standards on Auditing issued by AASC: A. Apply to an independent examination of financial statements of an entity when such an examination is conducted for the purpose of expressing an opinion thereon. B. Must not apply to other related activities of auditors. C. Need to be applied on all audit-related matters. D. Require that in no circumstances would an auditor may judge it necessary to depart from a PSA, even though such a departure may result to more effective achievement of the objective of an audit. Elements of Assurance Engagements 6. This Document defines the elements and objective of an assurance engagement, but does not, by itself, establish standards or provide procedural requirements for the performance of assurance engagements. A. PSRs B. PREPs C. PSAE D. PFAE 7. Which of the following is NOT an element of an assurance engagement? A. Sufficient appropriate Evidence C. A subject matter B. Appropriate Professional Fees D. A written Assurance Report Three-party Relationship 8. The Person, Persons or class of Persons from whom the practitioner prepares the assurance report. A. General Public B. Responsible Party C. Audit Committee D. Intended Users 9. According to the IAASB Glossary of terms, this refers to a professional accountant in public practice. A. Auditor B. Practitioner C. Public Accountant D. Professional 10. A Professional Accountant in public practice may refer to: A professional Accountant, irrespective of functional classification (for example, audit, tax or consulting) in a firm that provides professional services. A firms of CPAs in public practice A B C D Yes No No Yes Yes Yes No No 11. The person or persons who in direct reporting engagement, is responsible for the subject; or in an assertion-based engagement, is responsible for the subject matter information (the assertion), and may be responsible for the subject matter. A. General public B. Responsible party C. Audit Committee D. Intended Users Subject Matter 12. Which of the following forms may the subject matter of an assurance engagement take? I. Financial Performance or condition II. Non-financial performance or condition III. Physical characteristics IV. Systems and processes V. Behavior A. I and II B. I, II, and III C. I, II, III and IV D. I, II, III, IV, V 13. The outcome of the evaluation or measurement of a subject matter. A. Audit Report C. Subject Analysis B. Subject Matter Information D. Criteria 14. In this assurance engagement, the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of an assertion by the responsible party that is made available to the intended users. A. Audit of financial Statements C. Assertion based engagements B. Direct reporting engagement D. None of the Answers. 15. In this assurance engagement, the practitioner either directly performs the evaluation or measurement of the subject matter, or obtains a representation from the responsible party that has performed the evaluation or measurement that is not available to the intended users. The subject matter information is provided to the intended users in the assurance report. A. Audit financial statements C. Assertion-based engagements B. Direct Reporting engagements D. None of the answers Suitable Criteria 16. These are the benchmarks that used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure. A. Assertions B. Engagement Process C. Criteria D. PFRS 17. Which of the following statements is incorrect? A. Criteria can be formal or less formal. B. There can be different criteria for the same subject matter. C. Suitable Criteria are required reasonably consistent evaluation or measurement of a subject matter. D. Professional judgment is always inferior as compared to the requirements of suitable criteria. 18. The following characteristics are considered necessary if the criteria is to be deemed suitable for an assurance engagement. Which of the following phrases best describes reliability? A. Allows suitable criteria to contribute to conclusions that assist decision-making by the intended users. B. Relevant factors that could affect the conclusions in the context of the engagement circumstances are not omitted. C. Allows reasonably consistent evaluation or measurement of the subject matter including, where relevant, presentation and disclosure, when used in similar circumstances by similarly qualified practitioners. D. Contributes to conclusions that are free from bias E. Contributes to conclusions that are clear, comprehensive, and not subject to significantly different interpretations. 19. The financial reporting framework adopted by management and where appropriate, those charged with governance in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements or that is required by law or regulation. A. Generally accepted auditing standards B. Financial Reporting standards C. Applicable financial reporting framework D. Philippines standard in auditing 20. Which of the following is more difficult to evaluate objectively? A. Efficiency and effectiveness of operations. B. Compliance with government regulations C. Presentation of financial statements in accordance with GAAP. D. All three above are equally difficult. Evidence 21. In an assurance engagement, this refers to the information obtained by the practitioner in arriving at the conclusion on which conclusions are based A. Criteria B. Evidence C. Assertions D. PSAs 22. An audit is an assurance engagement. Evidence in an audit engagement comprises: A B C D Accounting records and source document Yes No Yes No Corroborating information from other sources No Yes Yes No 23. The measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based. A. Sufficiency B. Adequacy C. Appropriateness D. Scope 24. The measure of the quantity of audit evidence and its relevance to a particular assertion and its reliability. A. Sufficiency B. Adequacy C. Appropriateness D. Scope 25. This refers to the audit procedures deemed necessary in the circumstances to achieve the objective of the audit. A. Scope of an audit B. Audit program C. Engagement Area D. Sectorization 26. The record of work performed, results obtained, and conclusions the practitioner reached in an assurance engagement. A. Work program C. Data Integrity B. Engagement documentation D. Audit documentation Written Assurance Report 27. In performing an assurance engagement, a professional accountant typically: A. Supplies litigation support services B. Authenticates documentation C. Expresses a conclusion about an assertion D. Provides management consulting advice 28. Generally, the conclusion expressed in an assurance engagement may provide the following levels of assurance: A B C D •Limited Level assurance Yes No Yes Yes •Reasonable level of assurance Yes Yes Yes No •Absolute level of assurance No Yes Yes No 29. According to level of assurance provided, there are two types of such assurance engagements: reasonable assurance engagements and limited assurance engagements. Which of the following best describes reasonable assurance engagements? A. The objective of this assurance engagement is the reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner’s conclusion. B. The objective of this assurance engagement is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner’s conclusion. C. Both A and B apply reasonable assurance engagements. D. None of the answers apply to reasonable assurance engagement. 30. Absolute assurance is generally not attainable as a result of such factors as: A B C • The use of selective testing Yes Yes Yes • The inherent limitations of internal control Yes Yes Yes • Much of the evidence available to the practitioner Is persuasive rather that conclusive Yes Yes No • The use of judgment in gathering and evaluating Evidence and forming conclusions based on that evidence No Yes No D No Yes Yes No Engagement Risk and Levels of Assurance 31. This is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated. A. Audit Risk C. Detection Risk B. Assurance Engagement D. Practitioner’s risk 32. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter conforms, in all material respects, with identified suitable criteria, he/she can provide a(n): A. Limited Level of Assurance C. Reasonable level of Assurance B. Absolute assurance D. No assurance 33. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter is plausible in the circumstances, he/she can provide a(n): C. Limited Level of Assurance C. Reasonable level of Assurance D. Absolute assurance D. No assurance 34. Select the statement that exemplifies negative assurance: A. “In our opinion internal control is effective, in all material respects, based on XYZ criteria” B. “Based on our work described in this report, nothing has come to our attentions that cause us to believe that the internal control is not effective, in all material respects, based on XYZ criteria”. C. “We do not express an opinion in the financial statements.” D. “All the statements illustrate negative assurance.” Types of Assurance Engagements 35. The three commonly sought types of assurance services are: A. Audit, review and compilations B. Audit, compilations, and other assurance services C. Reviews, compilations, and other assurance services D. Audit, review and other assurance services. 36. This assurance engagement provides reasonable assurance that the financial statements are free from material misstatement: A. Financial Statements audit. C. Compilation of financial information B. Review of historical financial statements D. Agreed-upon procedures engagement. 37. An independent audit aids in the communication of economic data because the audit A. Confirms the accuracy of management’s financial representations. B. Lends credibility to the financial statements. C. Guarantees that the financial data are fairly presented. D. Assures the readers of financial statements that any fraudulent activity has been corrected. 38. This assurance engagement provides a limited level of assurance about the client’s historical financial statements: A. Financial statements audit C. Forecasts and projections. B. Review of historical financial statements D. Agreed-upon procedures engagement 39. The objective of this assurance engagement is to enable the auditor to state, whether, on the basis of procedures which do not provide all the evidence that would be required in an audit, anything has come to the auditor’s attention cause the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with an identified financial reporting framework. A. Compilation engagement C. Review engagement B. Comfort provision engagement D. Valuation Services 40. Which of the following is an objective of a review engagement? A. Expressing a positive opinion that the financial information is presented in conformity with generally accepted accounting principles. B. Expressing a limited assurance to users who have agreed as to procedures that will be performed by the CPA. C. Reporting whether material modifications should be made to such financial statements to make them conform with generally accepted accounting principles. D. Reporting that the financial statements, in all material respects, fairly present the financial position operating results of the client. 41. Which of the following procedures ordinarily performed during an audit are also performed in a review engagement? A. Assessment of accounting and internal control systems B. Test of controls C. Test of records and responses to inquiries. D. Inquiry and analytical procedures 42. Procedures in a review engagement consist primarily of inquiry and analytical procedures. Regarding review procedures, which of the following statements is incorrect? A. The auditor should apply the same materiality considerations as would be applied if an audit opinion on the financial statements were given. B. The judgment as to what is material is made by reference to the information on which the auditor is reporting and the needs of those relying on that information, not to the level of assurance provided. C. There is a greater risk that misstatements will not be detected in an audit than in a review. D. The auditor should apply judgment in determining the specific nature, timing and extent of review procedures. 43. Which of the following best describes health care performance measurement services? A. An engagement which provides assurance about whether financial and non-financial information being reported from the entity’s performance measurement system is reliable. B. An engagement which involves the evaluation of the quality of health care, medical services and looks into the health care delivery system C. An engagement which identifies a set of risks that affect the client organization. It involves the study of the link between risks and the organization’s vision, mission, objectives, and strategies and the development of new relevant measures. D. None of the answers. Association with information 44. A practitioner is associated with the subject matter when: •the practitioner reports on information about that Subject matter. •the practitioner consents to the use of the practitioner’s Name in a professional connection with that subject matter. A B C D Yes Yes No No Yes No Yes No 45. When a practitioner is inappropriately associated with financial information, the following remedies are available except: A. Require the other party (i.e., management) to cease associating the CPA with the subject matter. B. Informing any known third party users of the inappropriate use of the practitioner’s name. C. Seek legal advice. D. All of the above available remedies. Non-assurance engagements 46. A CPA firm’s primary purpose for performing non-assurance services is to: A. Prepare the CPA firm for the changing needs and requirements of the business community. B. Establish the CPA firm as a consultant, which will enable the CPA firm to ensure future viability and growth. C. Provide advice and technical assistance that will enable a client to conduct its business more effectively. D. Enable staff members of the CPA firm to acquire the necessary continuing education in all areas of business. 47. Not all engagements performed by practitioner are assurance engagements. Which of the following are considered as non-assurance engagements? A. Agreed-upon procedures and compilation engagements. B. Preparation of tax returns where no conclusion is expressed C. Consulting or advisory engagements. D. All of the answers are non-assurance engagements. 48. Which of the following statement is incorrect? A. Unlike consulting services, assurance services report on the quality of information B. Audit engagements encompass assurance engagements. C. Not all engagements performed by professional accountants are assurance engagements. D. Non-assurance engagements include agreed-upon procedures, compilation of financial or other information, and preparation of tax returns where no conclusions is expressed, tax consulting and advisory engagements. Consulting and Advisory 49. Assurance services are three-party contracts involving services that improve the quality of information, while consulting services: A. Are three-party contract involving services that recommend uses for information. B. A two-party contracts involving services that recommend uses for information. C. A two-party services that require the use of accounting rather than auditing expertise. D. Are three-party services that require knowledge of analytical approach process. Compilation of financial Information 50. This engagement involves the application of accounting expertise, as opposed to auditing expertise, in collecting, classifying and summarizing financial information: A. Compilation C. Tax Consulting B. Agreed-upon procedures engagement D. Management Consulting 51. According to Philippines standards on related services, the procedures employed in doing compilation are: A. Designed to enable the accountant to express a limited assurance. B. Designed to enable the accountant to express a negative assurance. C. Not designed to enable the accountant to express any form of assurance. D. Less extensive than review procedures but more extensive than agreed-upon procedures. Agreed-upon Procedures Engagement 52. In this non-assurance engagement, the party engaging the CPA determines the procedures to be performed (in some situations, the intended users determines the procedures to be performed). At the end of the engagement, the CPA provides a report of factual findings as a result of undertaking these procedures. What type of engagement has been described? A. Compilation C. Tax Consulting B. Agreed-upon procedures engagement D. Management consulting 53. Which of the following is correct regarding agreed-upon procedures engagement? A. An auditor is engaged to carry out those procedures of an accounting nature to which the auditor and the entity and other appropriate third parties have agreed-upon procedures engagement. B. The recipients of the report must form their own conclusions from the report of the auditor. C. The report is available to the general public D. A high but no absolute level of assurance is provided in agreed-upon procedures engagements. 54. Which of the following is correct of the report based on agreed-upon procedures? A. The report is restricted to those parties who have agreed to the procedures to be performed B. The CPA provides the recipients of the report limited assurance as to reasonableness of the assertion(s) presented in the financial information. C. The report states that the auditor has not recognized any basis that requires a revision of the financial statements. D. The report should state that the procedures performed are limited to analytical procedures and inquiry. Tax services 55. This tax services includes the preparation of tax returns of individuals, corporations, estates and trusts, and other entities. A. Tax evasion C. Tax Shelter B. Tax Planning D. Tax Compliance 56. This tax services includes the determination of the tax consequences of planned or potential transactions, followed by making suggestions on the most desirable course of action (to legally minimize the tax liability while achieving the client’s objectives): A. Tax Evasion C. Tax Shelter B. Tax Planning D. Tax compliance. AT-O2Q Assurance and Non-Assurance Services 1. A 2. A 3. C 4. D 5. A 6. D 7. B 8. D 9. B 10. C 11. B 12. D 13. B 14. C 15. B 16. C 17. D 18. C 19. C 20. A 21. B 22. C 23. C 24. A 25. A 26. B 27. C 28. A 29. A 30. B 31. B 32. C 33. A 34. B 35. D 36. A 37. B 38. B 39. C 40. C 41. D 42. C 43. B 44. B 45. D 46. C 47. D 48. B 49. B 50. A 51. C 52. B 53. B 54. A 55. D 56. B AT-03: THE CPA PROFESSION Basic concept 1. Refers to those persons who hold a valid certificate issued by the Board of Accountancy, whether they be in public practice, industry, commerce, the public sector, or education. A. Professional Accountant C. Senior accounting practitioner B. Professional accountant in public practice D. Audit Associate 2. The standards of the accountancy profession are heavily determined by the public interest. Public interest is defined as: A. A distinguishing mark of a profession is acceptance of its responsibility to the public. B. The accountancy profession’s public consists of clients, credit grantors, governments, employers, employees, investors, the business and financial community, and others who rely on the objectivity and integrity of professional accountants. C. The collective well-being of the community of people and institutions the professional accountant serves. D. The standards of the accountancy profession are heavily determined by the public interest. 3. Regulation of the accounting profession include: A. Public regulation as provided for in the Philippines Accountancy Act 2004. B. Regulation within the profession, through the implementation of the Codes of Ethics. C. Regulation within the firm, through the implementation of a system of quality control D. All of the answers 4. This is the document contains the norms and principles governing the practice of the accountancy profession in the highest standards of ethical conduct: A. Code of ethics for CPAs in the Philippines C. IRR to RA9298 B. Republic Act 9298 D. PSA 220 on quality control The Philippines Act of 2004 5. The Philippines accountancy act of 2004- shall provide for and govern: A. The standardization and regulation of accounting education B. The examination for registration of Certified Public Accountant C. The supervision, Control, and regulation of the practice of accountancy in the Philippines. D. All of the answers. 6. Which of organization(s) has the primary duty of effectively enforcing the provisions of RA 9298/ I. Professional Regulatory Board of Accountancy II. Department of Justice III. Professional Regulation Commission IV. Philippines Institute of Certified Public Accountant A. I and II B. II and III C. I, III, and IV D. I and III BOA and PRC 7. Fill in the table below to summarize pointers on the Board Of Accountancy: Composition Nominations 1 complete Term Maximum Term Vice-Chairman Term 2 Consecutive Complete terms 8. The Following are qualifications of the members of the Board of Accountancy, except: A. Natural born citizens and resident of the Philippines B. Duly registered CPA with at least 5 years of work experience in any scope of practice of accountancy. C. Good moral character not convicted of crimes involving moral turpitude. D. No direct or indirect pecuniary interest in any schools, college, university or institution or conferring the B.S. Accountancy degree or providing CPA review classes. E. Must not have been an officer of APO at the time of appointment 9. The accredited National Professional Organization (APO) shall submit its nomination for the Board of Accountancy (with complete documentation) to the Commission A. Not later than 60 days prior to the expiry of the term of an incumbent chairman or member. B. On the date of expiry of the term of an incumbent chairman or member. C. After 60th day from the expiry of the term of an incumbent chairman or member. D. Upon request by the commission for the submission of the nominations. 10. The following are among the power of the Board of Accountancy, except: A. To prescribe and adopt the rules and regulations necessary for implementing RA9298. B. To prescribe and/or adopt a code of Ethics for the practice of accountancy. C. To ensure, in coordination with the DECS that all higher educational instruction and offering of accountancy comply with the prescribed policies, standards and requirements of the course. D. To conduct an oversight into the quality of audits of financial statements. 11. Which of the following statements is correct? A. The chairman and members of the board shall receive compensation and allowances comparable to that being received by the chairman and members of the existing regulatory boards under the PRC as provided for in the General Appropriate Act. B. No person shall serve in the Board for more than nine years. C. The BOA chairman has the sole power to administer oaths in connection with the administration of the Accountancy Law. D. The board shall be under the administrative supervision of the PICPA 12. The following are ground of suspension or removal of members of the Board of Accountancy, except: A. Neglect of duty or incompetence. B. Violation of tolerance of any violation of RA9298 and its IRR, or the Code of Ethics and technical and professional standards of practice for CPAs. C. Pending case on a crime involving moral turpitude. D. Manipulation or rigging of the CPA licensure examination results. 13. Who is the person that has the authority to suspend or remove a member of the BOA, on valid grounds and after due process? A. The president of the Republic of the Philippines B. The chairman of the Professional Regulatory Board of Accountancy, unless he is the one who is under investigation. C. The commissioner of the Professional Regulation Commission. D. None of them. 14. This organization administers implements and enforces the regulatory policies of the Philippines Government with respect to the regulation and licensing of various professions under its jurisdiction, one of which is accountancy. A. BOA B. PICPA C. COA D. PRC Other organizations Affecting Practice of Accountancy 15. Identify the organization being described by each of the following statements: __________________This is the Government agency that regulates the registration and operations of corporations, partnerships and other forms of associations in the Philippines __________________This Organization aims to raise revenues for the government through the effective and efficient collection of taxes, provide quality service to taxpayers, and enforce tax in an impartial and uniform manner __________________Its mandate is to regulate and supervise the insurance industry for the promotion of the national interest. __________________The primary objective of this agency is to maintain price stability conductive to a balanced and sustainable economic growth. Sectors of accounting practice 16. As used in republic Act No. 9298, this term refers to the area of practice of accountancy: A. Line B. Section C. Segment D. Sector 17. A person is deemed to be in practice of the accounting profession in commerce and industry when he/she: A. Holds, or is appointed to a position in an accounting professional group in government or in government-owned and/or controlled corporation, where decisionmaking requires professional knowledge in the science of accounting. B. It is involve in the decision-making requiring professional knowledge in the science of accounting, as well as the accounting aspects of finance and taxation, or is employed in a position that requires a CPA. C. It is an educational institution which involves teaching of accounting, auditing, and management advisory services, accounting aspect of finance, business law, taxation, and other technically-related subjects. D. Holds out himself/herself as one skilled in the knowledge, science and practice of accounting and as someone qualified to rendered professional services as a CPA. 18. The practice of accountancy includes the following except: A. Practice in public accountancy B. Practice in education or academe C. Practice in the government D. Practice in commerce and industry, when the CPA is appointed as marketing manager of the enterprise. 19. The practice of accountancy includes the following except: A. Being appointed as the marketing manager of a business enterprise. B. Serving as audit examiner for the Commissioner on Audit. C. Working as the Dean of College that grants a degree of BS Accountancy D. Provision of Assurance services to more than one client and on a fee basis. Admission to the profession: BS Accountancy Course 20. All graduates with Bachelors Degree major in Accounting shall be allowed to take the CPA Licensure Examination within two (2) years from the effectivity of RA 9298 under the rules and regulations to be promulgated by the BOA subject to the approval by the PRC. A. 1 year B. 2 years C. 3 years D. 4 years 21. According to the IRR, this council is tasked to assist the BOA in continuously upgrading accountancy education in the Philippines to make Filipinos globally competitive. A. Quality review Committee C. CPE Council B. Education technical Council D. Commission on Higher Education 22. The Education Technical Council shall composed of: A. Six members B. Seven members with a Chairman C. Seven members with a Chairman and a vice-chairman D. Eight members with a chairman and a vice-chairman Admission to the Profession: CPA Board Examinations, the CPA Certificate and the PRC ID 23. S1 To be qualified as having passed the licensure examinations for accountants, a candidate must obtain a general average of seventy-five percent, with no grades lower than sixty-five percent in any given subject. S2 A candidate with a conditional credits must take a removal examination within three years from the date of the preceding examination. A. True, true B. True, False C. False, True D. False, False 24. The following grounds for the refusal to issue a certificate of registration and professional identification card (select exception): A. Conviction of moral offense involving moral turpitude B. Guilty of immoral and dishonorable conduct C. Unsound mind D. Conviction of political offense 25. Any candidate who fails in ____ complete CPA Board Examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the BOA that he/she enrolled in and completed at least ___ of subject given in the licensure examination. A. 3, 15 units per year for a total of 60 units C. 2, 15 unit per year for a total of 60 units B. 2, 24 units D. 3, 24 units 26. The Board, subject to the approval of the PRC, may revise or exclude any subjects and their syllabi, and add new ones as the need arises, provided that the change shall not be more often than: A. Every two years C. Every four years B. Every three years D. Every five years 27. A certificate under seal, bearing a registration number, issued to an individual, by the PRC, upon recommendation by the board of accountancy, signifying that the individual has complied with all the legal and procedural requirements for such issuance, including, in appropriate cases, having successfully passed the CPA licensure examination. A. Certificate of Registration C. Certificate of Identification B. Certificate of Accreditation D. Certificate of Quality Review 28. A professional identification card has a validity of: A. 1 year B. 2 years C. 3 years D. 4 years PICPA and Sectoral Organizations 29. S1 The Philippine institute of certified public accountants is registered with the Securities and exchange commission as a non-profit corporation and registered by the board of accountancy, subject to the approval by the professional regulation commission. S2 Membership in the PICPA shall be a bar to membership in any other of certified public accountants. A. True, true B. True, false C. False, true D. False, false 30. Unless there is a valid reason to have additional representation, the PICPA shall have how many national directors? A.12 B.14 C. 15 D. 20 31. The PICPA national Directors shall be apportioned according to four geographic sectors based on the ratio of latest available number of members in good standing from those areas. Which of the following is not a geographic sector? A. Luzon B. NCR C. Mindanao D. CAR 32. A PICPA director can only represent a sector in a region if he/she has been a member in a good standing in such sector in the region for at least ___years at the time of his/her nomination: A. Two years B. Three years C Four years D. five years 33. PICPA shall renew its certificate of accreditation once: A. Annually B. Every 3 years C. Every 4 years D. Every 5 years 34. The PICPA certification shall be cancelled or suspended by the PRC upon the recommendation by the BOA after due hearing under any of the following grounds or causes, except: A. It has ceased to possess any of the qualification for accreditation. B. It no longer serves the best interest of CPAs. C. Two years have passed and it has not yet enlisted into active membership the majority of CPAs in the practice of accountancy. D. It has commitment acts inimical to its member and to the profession. 35. Sectoral Organizations have been established t promote the interest of groups of professional accountants. Which of the following is the sectoral organization for CPAs in the public practice? A. GACPA. B. ACPAPP C. ACPAPI D. ACPAE Renewal of PRC ID-CPE requirements 36. The CPE programs shall have this objectives: A •To raise and maintain the professional’s capability for delivering Yes Yes •To attain and maintain the highest standards and quality in the Practice of his profession Yes No •To make the profession globally competitive. Yes No B D Yes C Yes Yes No Yes No 37. The total CPE credit units for registered CPA shall be: A. Sixty (60) units for three years, provided that a minimum of fifteen (15) credit units shall be earned in each year. B. Forty-five (45) credit units for three years, provided that a minimum of fifteen (15) credit units shall be earned in each year. C. Sixty (60) credit units for three years, provided that a minimum of twenty (20) credit units shall be earned each year. D. Minimum of fifteen (15) credit units earned in each year. 38. Monitoring the compliance with the CPE requirements is done by the PRC CPE Council. The PRC CPE Council be composed of: A. B. C. D. A chairperson and three members A chairperson, vice-chairman and two persons A chairperson and two members. A chairperson, vice-chairman and three members. 39. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of: A. 50 years old B. 60 years old C. 65 years old D. 70 years old 40. S1 A registered professional who is working abroad shall be temporarily exempted from compliance with CPE requirement during his/her stay abroad, provided that he/she has been out of the country for at least one year immediately prior to the that of renewal. S2 Those who failed to renew professional licenses for a period of three (3) continuous years, from initial recognition, or from last renewal, shall be declared delinquent. A. True, true B. True, false C. False, true D. False, false Practice of Public Accountancy and Accreditation 41. S1 A BSA graduate is allowed to practice public accountancy under his or her own name upon immediately passing CPA board exams. S2 The certificate of accreditation to practice pubic accountancy is granted only once and remains in effect until withdrawn, suspended or revoke in accordance with R.A. 9298. A. True, true B. True, false C. False, true D. False, false 42. Regarding practice of accountancy, which of the following certificates is issued to successful passer of CPA Board exams first, a certificate of registration or a certificate of accreditation? A. Certificate of registration C. Both are issued at the same time B. Certificate of accreditation D. Neither are issued to CPAs. C. 43. Which of the following statement is incorrect? A. Single practitioners and partnerships for the practice of public accountancy shall be registered certified public accountants in the Philippines. B. A certificate of accreditation shall be issued to certified public accountants in public practice only upon showing, that such registrant has acquired a maximum of three (3) years meaningful experience in any areas of the public practice including taxation. C. Meaningful experiences, as mentioned by R.A 9298 are explained in detail under Section 28A of the Implementing rules and regulations. D. The SEC shall not register any corporation organized for the practice of public accountancy. 44. Individual CPA, Firms or Partnerships of CPAs, including partners and staff members thereof shall register with the Board of Accountancy and the Professional Regulation Commission. If the application for registration of James and Sison, CPAs, was approves on July 19, 2010, it shall file for renewal on or before: A. July 19, 2013 C. September 30,2013 B. September 30, 2012 D. December 31, 2012 45. The following are regarded by Ra 9298 as CPA services in public practice if offered or rendered on a fee basis and to more than one client: A B C D • Preparation and signing of audit reports Yes •Professional assistance on accounting procedures Yes •Representation of clients before governmental agencies on tax And other matter regardless of its relation to accounting No Yes Yes Yes Yes No No Yes yes No 46. CPAs may practice public accountancy under the following forms of organization, except: A. Sole proprietorship C. Limited liability partnerships B. General partnerships D. Corporations 47. The names under which a CPAs practices profession must: A. Not be misleading as to the form or organization C. Indicate any specialization B. Contain more than three names D. Include one fictitious name 48. A(n) _________________ shall business shall do business under their respective duly registered and authorized firm name appearing in the registration documents issued by the Department of Trade and Industry or any other proper government office. A. Individual CPA C. Partnership of CPAs B. Firm D. Corporation of CPAs 49. Below are the names of three CPA firms and pertinent facts relative to each form. Unless otherwise indicated, the individuals named are CPAs and partners, and there are no other partners. Which of these indicates a violation of the IRR of RA 9298? A. A, B and C, CPAs (died seven years ago; B and C are continuing the firm). B. G and H, CPAs (G died 3 years ago, and H is continuing the firm as a sole proprietor) C. D and E, CPAs (the name of F, a third active partner is omitted from the firm name) D. K and L, CPAs ( K died 3 years ago, L was admitted to the partnership two months after K’s death. There seven other active partners, all whom have their names omitted from the firm name) 50. Indicate whether the following functions would be performed by: P- Partner, MManager, S-Senior Associate; or A- Associate I. Signs the audit report II. Assumes overall responsibility for the audit III. Performs detailed audit procedures IV. Prepares the audit program and performs more complex audit procedures V. Tasked with liaison work between partners and other team members. Operating a CPA firm – Services Fees and Standards 51. This is the traditional service provided by CPA firms. A. Compilation B. Audits C. Reviews D. Tax Services 52. A CPA firm usually offers non-audit services, such as management advisory services. Its primary purpose is to: A. Furnish professional advice and assistance which will enable the client to improve operations. B. Keep the CPA firm competitive with other firms. C. Establish the firm as a consultant, thus ensuring its future expansion and growth. D. Permit the firm’s staff and members to acquire expertise in other areas of practice. 53. All licensed CPAs shall obtain and use a seal of a design prescribe by the; A. Accounting Standards Council C. Board of Accountancy B. Philippines institute of Accountancy commission D. Professional regulation 54. The CPA shall required to indicate which of the following numbers on the documents he/she signs, uses or issues in connection with the practice of the profession: A. CPA certificate of registration number B. Professional Identification Card C. Professional tax receipt D. All of these are required to be indicated. 55. The amount of audit fees depend largely on the: A. Size and capitalization of the company under audit B. Amount of profit for the year C. Availability of cash D. Volume of audit work and degree of competence and responsibilities involved. 56. Under this method of billing a client, the external auditors’ charges on the basis of actual time spent by principals/partners, supervisors, seniors and juniors at predetermined rates agreed upon with the client. A. Per diem basis C. Flat fee or flat sum basis B. Retainer basis D. Maximum fee basis C. 57. Standard-setting bodies also affect the provision of services in the public accounting. Local International Accounting standards Auditing standards Give the full meaning of the initials of each organization: FRSC AASC IASB IAASB 58. The chairpersons of the FRSC and the AASC shall be appointed by: A. The President of the Republic of the Philippines B. The professional Regulatory Board of Accountancy C. The Professional Regulation Commission D. The Philippines Institute of Certified Public Accountants.\ 59. Fill the composition of the FRSC and the AASC: FRSC Chairman Plus 14 representatives □_____________ □_____________ □_____________ □_____________ □_____________ □_____________ □PICPA •PP _____ •CI _____ •E/A _____ •Gov _____ AASC _______ _______ _______ _______ _______ _______ Chairman Plus 14 representatives □_____________ □_____________ □_____________ □_____________ □_____________ □_____________ □PICPA •PP _____ •CI _____ •E/A _____ •Gov _____ _______ _______ _______ _______ _______ _______ 60. Subjects or citizens or foreign countries: A. May be allowed practice accountancy in the Philippines, regardless of the provisions of existing laws and international treaty obligations, including mutual recognition agreements entered into by the Philippines Government with other countries B. Are not allowed to practice accountancy in the Philippines, unless they take the certified public accountant licensure examination given by the Board of Accountancy C. May be allowed to practice accountancy in the Philippines, subject to the provision of existing laws and international treaty obligations including mutual recognition agreements entered into by the Philippines government with other countries. D. Are never allowed to practice accountancy in the Philippines because they will jeopardize the interest of Filipino certified public accountants. 61. RA 9298 provides that temporary or special permits may be issued to foreign CPAs in the following situations, except: A. A foreign CPA was called for consultation which, in the judgment of the Board of Accountancy, is essential for the development of the Philippines. The permit restricts the foreign CPA’s practice to particular consultation work being performed. No Filipino CPA was qualified for such consultation. B. A foreign CPA was engaged to a lecture on fields essential to accountancy education in the Philippines. The permit restricts the CPA to teaching only, and limited public practice provided such practice is conducted outside class hours. C. A foreign CPA, an IFRS expert, is engaged for services deemed essential for the advancement of accountancy in the Philippines. D. All of the above situations do not justify the issuance of a temporary or special permit. Advertising 62. Any advertising by the professional accountants beyond their name, address, telephone number and membership in professional organizations has been traditionally considered unethical in the Accountancy Profession, due to the following reasons except: A. Advertising could lead to undue competition between and among practitioners, causing a decline in quality of service B. Advertising would encourage a more personal approach to clients C. The cost of advertising would outweigh any savings that might result from competition D. Small or new practitioners would be unlikely to have the financial resources to match the advertising of larger or more established practices. 63. Which of the following is allowed under the revised rules on advertising? A. Self Laudatory statements B. Discrediting, disparaging, or attacking other firms or CPA practitioners. C. Referring to, using or citing actual or purported testimonials by third parties D. None of these are allowed forms of advertising. 64. Before advertisements are disseminated, they must be subjected to the review of: A. Those charged with governance of the clients of the CPA B. Managing partner and quality control partner of the firm C. Board of Accountancy and Professional Regulation Commission D. Risk management partner and Managing partner of the firm 65. Which of the following cannot e mentioned by an author in publicizing a book in accounting? A. Name C. Membership in professional organization B. Qualifications D. Services that the author’s firm provides 66. A professional may invite the following to attend training course and seminars conducted for the assistance of staff (select the exception): A. Clients C. Other Professional accountants B. Staff of the firm D. Potential clients 67. May a CPA give a brochure to a non-client? A. No, because this is a violation of the revised rules on advertising B. Yeas, since this is acceptable under the revised rules on advertising C. No, unless the non-client becomes a client within 10 days from receipt of the brochure D. Yes, if the non-client has made an unsolicited request 68. Regarding anniversaries, a firm may undertake press release or other media releases to commemorate their anniversaries in public practice only every: A. Year B. 3 years C. 4 years D. 5 years 69. Which of the following partner profile information may be posted in a firm’s wtebsite? A. Name B. Educational attainment ad brief listing of services C. Postal address, telephone, fax and e-mail address D. All of these may be posted in a firm’s website Quality Review 70. A study, appraisal, or review by the Board or its duly authorized representatives, of the quality of audit of financial statement through a review of the quality control measures institute by an CPAs, engaged in the practice of public accountancy to ascertain his/her/its compliance with prescribed professional, ethical, technical standards of public practice. A. CPA review B. Quality review C. CPE review D. Peer Review 71. This committee is created to conduct an oversight into the quality of audits of financial statements through a review of the quality control measures instituted by individual CPAs, firms or partnerships. A. Quality Review Council C. Quality Review Committee B. Quality Control Committee D. Engagement Quality Control Review 72. The Quality Review Committee (QRC) shall be composed of: A. Seven members with a chairman C. Five members with a chairman B. Six members with a chairman D. Four members with a chairman 73. The QRC shall have the following functions: A. Conduct quality control review on applicants for registration to practice public accountancy and render a report on such quality review. B. Revoke the certificate of registration and professional ID of an individual CPA, firm, or partnerships of CPAs who have not observe quality control measures. C. All of the answers D. None of the answers Practice in Commerce and Industry (For number 74 and 75) ABC Company is a business in the private sector. The company has several administrative positions that require, among others: The supervision of the recoding of financial transactions Preparation of financial statements; Coordination with the external auditors for the audit of the financial statements and; Other related functions. 74. These position should be occupied by duly registered CPAs, if Burr Company has: Paid-up capital of at least Annual Revenue of A. ₱ 5,000,000 ₱10,000,000 B. ₱10,000,000 ₱10,000,000 C. ₱ 5,000,000 ₱ 5,000,000 D. ₱10,000,000 ₱ 5,000,000 75. Supposed that these positions are concurrently occupied by non-CPAs; will the effectivity of IRR displace incumbents to these positions? A. Yes, the non-CPAs will be terminated, provided equitable benefits for them, and the resulting vacancies will be filled in by CPAs B. No, the IRR specifically provides that the provision shall not result to the deprivation of the employment of incumbents to the position. C. Yes, unless the no-CPAs are able to take and pass CPA board examination within two years from the effectivity of the implementing rules and regulations of RA9298 D. Cannot be determined without additional information Practice in education and accreditation of accounting teachers 76. Jude Isaac, CPA, is the dean of the college of Accountancy in the University of St. James. Related to this, which of the following statements is incorrect? A. Jude is considered to be in the practice of his profession B. The position of the dean or the department chair or its equivalent that supervises the BS accountancy program of an educational institution must be duly registered CPA. C. Jude is not considered in the practice of his profession because he occupies an administrative position. D. Jude is practicing accountancy in profession in the education sector (academe). 77. According to the IRR, the following can teach business law: CPAs Members of IBP A. Yes Yes B. Yes No C. No Yes D. No No 78. This act provides that only licensed professionals may teach licensure subjects, and provides for triennial renewal of the Professional identification card: A. RA 9298 B. PRC modernization Act C. IRR of RA 9298 D. PD 1081 79. The policy for accreditation covers CPAs involved in teaching of accounting and related subjects in the: A. Primary level C. Secondary and tertiary levels only B. Primary and secondary levels only D. Primary, secondary, tertiary and graduate level 80. The following are the requirement accreditation for accounting teachers (select the exception) A. Possession of relevant Master’s Degree B. Completion of 12 units of relevant education subjects from CHED recognized schools C. A total of three year’s meaningful experience in actual accounting work D. Proof that the CPA has undergone continuing professional education, totaling 75 units 81. The accreditation granted for accounting teachers is valid for: A. One year C. Three years B. Two years D. Four Years Practice in government and commission on Audit 82. The constitution of the Philippines requires this office to “keep the general accounts of the Government and for such period as may be provided by law, preserve the vouchers pertaining thereto.” A. National Accounting office C. Commission on Audit B. Ministry of Finance D. Accounting Units 83. The following are duties of COA except; A. Define the scope of its audit and examination B. Promulgate accounting rules and regulations C. Keep the general accounts of the government D. Assume fiscal responsibility for the government and its instrumentalities 84. Who appoints the members of COA? A. The commissioner of the Professional regulation commission B. The chairman of the Professional Regulatory Board of Accountancy C. The President, the concurrence of the commission on appointments D. The chairman of the auditing and assurance standards council 85. Which of the following is a correct qualification of the Chairman and two Commissioners of the COA? A. A naturalized citizen of the Philippines B. At least 40 years of age upon appointment C. CPAs with no less than 5 years of auditing experience or members of the Philippines bar who have engaged in law practice for at least 5 years. D. Must not have been candidates for any elective position preceding appointment. Sanctions and Violations 86. The following are grounds for the suspension or revocation of certificate of registration and professional identification card, EXCEPT: A. B. C. D. Possession of unsound mind Practice in more than one field of accountancy Conviction of a criminal offense involving moral turpitude Unprofessional or unethical conduct, malpractice, or violation of RA9298 87. The punishment, upon conviction, for any person who has violated any of the provisions of the Accountancy Act of 2004, or any of its Implementing Rules And Regulations as promulgated by the Board of Accountancy: A. A fine of not less than fifty thousand pesos (P50,000.00) but not an imprisonment B. A fine of not less than fifty thousand not exceeding two years C. No fine but an imprisonment for a period not exceeding two years D. A fine of not less than fifty thousand pesos (P50,000.00) or imprisonment for a period exceeding two years, or both. 88. A CPA whose certificate has been revoked: A. Is required to take to CPA Board licensure Examinations before reinstatement B. May be reinstated by the BOA after the expiration of 2 years from the date of revocation C. Can no longer reinstate as Certified Public Accountant. D. Has no committed a crime involving moral turpitude. 89. S1. The board may, after the expiration of two (2) years from the date of revocation of a certificate of registration and upon application for reasons deemed proper and sufficient, reinstate the validity of a revoked certificate of registration and in so doing, may, in its discretion, exempt the applicant form taking another examination. S2 a new certificate of registration cannot be issued if the old certificate was lost, destroyed, or multilated, under the principles of negligence. A. True, true B. True, false C. False, true D. False, false 90. When was RA9298 approved by the president of the Philippines? A. May 13, 2004 C. July 6, 2004 B. May 25, 2004 C. July 19, 2004 AT-03Q: THE CPA PROFESSION 1. 2. 3. 4. 5. 6. 7. A C D A D D – 8. B 9. A 10. C 11. A 12. C 13. A 14. D 15. – 16. D 17. B 18. D 19. A 20. B 21. B 22. B 23. B 24. D 25. B 26. B 27. A 28. C 29. B 30. C 31. D 32. A 33. B 34. C 35. B 36. A 37. A 38. C 39. C 40. D 41. D 42. A 43. – 44. B 45. D 46. D 47. A 48. B 49. – 50. – 51. B 52. A 53. C 54. D 55. D 56. A 57. – 58. C 59. – 60. C 61. B 62. – 63. D 64. D 65. D 66. D 67. D 68. D 69. D 70. B 71. C 72. A 73. A 74. A 75. B 76. C 77. A 78. B 79. D 80. D 81. C 82. C 83. D 84. C 85. D 86. B 87. D 88. B 89. B 90. A 7. Composition Nominations 1 complete term Maximum Term Vice chairman Term 2 consecutive complete terms 7 (1 chairman and 6 members) APO(PICPA 5) (PRC 3) (president of the Philippines 1) 3 years 2terms consecutive – rest 1 year (12 years) Elected among themselves 1 year 1 year lapse 15. • SEC, • BIR, • Insurance Commission, • BSP 91. I. II. III. IV VI. P P A S M 57. Accounting standards Auditing standards FRSC AASC IASB IAASB Local FRSC AASC International IASB IAASB Financial Reporting Standards Council Auditing and Assurance Standard Council International Accounting Standards Board International Auditing and Assurance Standards Board QUALITY CONTROLS Basic Concepts 1. The policies and procedures adopted by a firm designed to provide it with reasonable assurance regarding compliance with professional standards and regulatory and legal requirements, and appropriateness of reports issued by the firm: A. Internal controls B. Monitoring C. Code of Ethics D. Quality Controls 2. AASC Engagement Standards, as defined in the “Preface to the Philippine Standards on Quality Control, Auditing, Assurance and Related Services,” and relevant ethical requirements, which ordinarily comprise Parts A and B of the IFAC Code and relevant national ethical requirements. A. Philippine Standards on Auditing C. Professional Standards B. Philippine Standards on Assurance D. Standards on Quality Control 3. Which of the following best describes the word “personnel” in the context of PSQC No. 1? A. This refers to any individual with authority to bind the firm with respect to the performance of a professional services engagement. B. This refers to professionals, other than partners, including any experts the firm employs. C. This refers to partners and staff. D. All of these statements describe “personnel”. 4. The partner or other in the firm who is responsible for the engagement and its performance, and for the report that is issued on behalf of the firm, and with, where required, has the appropriate authority from a professional, legal or regulatory body. A. Engagement partner C. Personnel B. Engagement quality control reviewer D. Suitably qualified external person 5. All personnel performing an engagement, including any experts contacted by the firm in connection with that engagement. A. Staff B. Personnel C. Engagement team D. Professional 6. 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. A. Firm B. Engagement team C. Network firm D. Listed entity Applicable Standards 7. PSQC No. 1 applies to _______________, while PSA 220 applies to _________________. A. Assurance engagements, audits C. Audits, reviews B. Audits, assurance engagements D. Assurance engagements, related services Leadership Responsibilities for Quality Within The Firm 8. The firm’s leadership include the following: A B C Yes Yes No No Yes Yes D Chief executive officer No Managing board of partners No 9. Quality control policies and procedures are designed to promote an internal culture recognizing that: A. Quality is essential in performing engagements. B. Reasonable, and not absolute, assurance can be provided by all CPA engagements. C. The firm should always move towards the elimination of audit risk. D. The promotion of a quality-oriented internal culture depends on clear, consistent and frequent actions and messages from all levels of the firm’s management. 10. Actions and messages that encourage a culture of quality are communicated through: A. Training seminars, meetings, formal or informal dialogue, mission statements. B. Newsletters and briefing memoranda, internal documentation and training materials. C. Partner and staff appraisal procedures. D. All of these. 11. The firm’s business strategy is subject ti the overriding requirement for the firm to achieve quality in all engagements that the firm performs. Accordingly, the firm: A. Assigns its management responsibilities so that commercial considerations may override the quality of work performed. B. Designs policies and procedures addressing performance evaluation, compensation, and promoting to demonstrate the firm’s overriding commitment to quality. C. Devotes sufficient resources for the development, documentation and support of its quality control policies and procedures. D. All of these statements. Relevant Ethical Requirements 12. Ethical requirements to which the engagement team and engagement quality control reviewer are subject, which ordinarily comprise Parts A and B of the Code of Ethics together with national requirements that are more restrictive. A. Fundamental principles C. Client screening criteria B. Relevant ethical requirements D. Pre-conditions to an audit 13. The following are the fundamental principles of professional ethics except: A. Independence C. Objectivity B. Professional competence and due care D. Integrity 14. The firm’s policies and procedures emphasize the fundamental principles, which are reinforced in particular by: A. Leadership of the firm. B. Education and training. C. Monitoring and process for dealing with non-compliance. D. All of these. 15. The firm should establish policies and procedures designed to provide it with reasonable assurance that individual and firms maintain independence (where required by the Code of Ethics). Such policies and procedures should enable the firm to (select the exception): A. Communicate independence requirements. B. Identify and evaluate circumstances and relationships that create threats to independence. C. Override independence requirements of PSQC1. D. Take appropriate action to eliminate or reduce threats. 16. Regarding identified threats to independence, appropriate action by the firm and the relevant engagement partner includes the following, except: A. Application of safeguards to eliminate threats to independence. B. Application of safeguards to reduce threats to independence to an acceptable level. C. Expression of a qualified or adverse opinion on the subject matter under audit. D. Withdrawal from the engagement. 17. The firm should obtain written confirmation of compliance with its policies and procedures on independence from all firm personnel required to be independent by the Code of Ethics at least: A. Monthly B. Quarterly C. Annually D. Every 3 years 18. By obtaining confirmation and taking appropriate action on information indicating noncompliance, the firm demonstrates the importance that it attaches to independence and makes the issue current for, and visible to, its personnel. Written confirmation: A. May be in paper format only. B. May be in electronic format only. C. May be in paper form or electronic form. D. Is not required since oral confirmation will suffice per PSQC1. 19. The familiarity threat that may be created by using the same senior personnel on an assurance engagement over a long period of time and the safeguards that might be appropriate to address such a threat. Accordingly, safeguards may include: A. Rotation of senior personnel. C. Both a and b B. Engagement quality control review. D. Neither a nor b Acceptance and Continuance of Client Relationships and Specific Engagements 20. The firm should obtain such acceptance and continuance information as it considers necessary in the circumstances such as when: A. Accepting an engagement with a new client. B. Deciding whether to continue an existing engagement. C. Accepting a new engagement with an existing client. D. All of the answers. 21. With regard to the integrity of a client, matters that the firm considers include the following: A. The identity and business reputation of the client’s principal owners, key management, related parties and those charged with its governance. B. The nature of the client’s operations, including its business practices. C. Information concerning the attitude of the client’s principal owners, key management and those charged with its governance towards such matters as aggressive interpretation of accounting standards and the internal control environment. D. All of the answers. 22. Information on matters mentioned in number 21 may come from: A. Communications with existing or previous of CPA services to the client. B. Inquiry of other firm personnel or third parties such as (bankers, legal counsel and industry peers). C. Background searches of relevant databases. D. All of these. 23. In considering whether the firm has the capabilities, competence, time and resources to undertake a new engagement from a new or an existing client, the firm reviews the specific requirements of the engagement and existing partner and staff profiles at all relevant levels. Matters the firm considers include the following, except: A. Whether firm personnel have knowledge of relevant industries or subject matter. B. Whether the client is aggressively concerned with maintaining the firm’s fees as low as possible. C. Whether firm personnel have experience with relevant regulatory or reporting requirements, or the ability to gain the necessary skills and knowledge effectively. D. Whether the firm is able to complete the engagement within the reporting deadline. 24. 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 include the following, except: A. Reporting the information and its implications to the person(s) who appointed the CPA. B. Withdraw from the engagement. C. Withdraw from both the engagement and the client relationship. D. Continue the engagement, since the Code of Ethics requires starter engagements to be finished regardless of subsequent developments and information. 25. When a firm withdraws from an engagement, the firm may have reportorial responsibilities to the following: A B C D Appropriate level of management Yes Yes Yes Yes Those charged with governance Yes Yes No No Regulatory authorities Yes No No Yes Human Resources 26. Personnel issues that must be addressed by the system of quality control include the following, A. Recruitment and performance evaluation B. Capabilities and competence C. Career development and promotion D. Compensation and estimation of personnel needs E. All of the answers. 27. Which of the following methods are least likely to develop capabilities and competence? A. Professional skepticism. 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. 28. Where internal technical and training resources are unavailable, the firm A. Violates a basic tenet of quality control regarding capabilities and competence. B. Cannot adequately provide for the professional development needs of its members. C. Must obtain, within two years, the necessary internal technical and training resources. D. May use a suitably qualified external person for that purpose. 29. Smaller firms, in particular, may: A. Employ more formal methods of evaluating the performance of their personnel. B. Employ less formal methods of evaluating the performance of their personnel. C. Be exempted under PSQC1 from employing methods of evaluating the performance of their personnel. D. Be exempted for the first three years of its operation from employing methods of evaluating the performance of their personnel. Human Resources – Assignment of Engagement Teams 30. Regarding the assignment of engagement teams, which of the following statements is incorrect? A. The firm should assign responsibility for each engagement to the senior management. B. The identity and role of the engagement partner should be communicated to key members of client management and those charged with governance. C. Policies and procedures include systems to monitor the workload and availability of engagement partners so as to enable these individuals to have sufficient time to adequately discharge their responsibilities. D. The firm should also assign appropriate staff with the necessary capabilities, competence and time to perform engagements in accordance with professional standards and regulatory and legal requirements, and to enable the firm or engagement partners to issue reports that are appropriate in the circumstances. 31. The capabilities and competence considered when assigning engagement teams, and in determining the level of supervision required, include the following, except: A. An understanding of, and practical experience with, engagements of a similar nature and complexity through appropriate training and participation. B. An understanding of professional standards and regulatory and legal requirements. C. Ability to apply professional skepticism. D. An understanding of the firm’s quality control policies and procedures. Engagement Performance 32. Through its policies and procedures, the firm seeks to establish consistency in the quality of engagement performance. This is often accomplished through (select the incorrect item): A. Written or electronic manuals. B. Written confirmation of compliance with independence requirements. C. Software tools or other forms of standardized documentation. D. Industry or subject matter-specific guidance materials. 33. Regarding engagement performance, matters addressed include the following: A B D How engagement teams are briefed on the engagement to obtain an understanding of the objectives of their work. Yes Yes Yes Processes for compliance with applicable engagement standards. Yes Yes No Processes of engagement supervision, staff training and coaching. Yes No Yes Methods of reviewing the work performed, the significant judgments made and the form of report being issued. Yes Yes Yes Appropriate documentation of the work performed and of the timing and extent of the review. Yes No No Processes to keep all policies and procedures current. Yes No Yes C Yes No No Yes Yes Yes Engagement Performance – Direction, Supervision and Review 34. Supervision includes: A. Tracking the progress of the engagement. B. Considering the capabilities and competence of individual members of client personnel. C. Addressing all issues arising during the engagement and modifying the planned approach appropriately. D. Identifying matters for consultation or consideration by less experienced engagement team members during the engagement. 35. Review responsibilities are determined on the basis that ____ experienced team members review the work of ____ experienced team members. A. More, more B. More, less C. Less, more D. Less, less 36. Reviewers consider: A. The work has been performed in accordance with GAAP. B. Consultation with experts has been made for all phases of the engagement. C. The work performed supports the conclusions reached and is appropriately documented. D. Whether the system of quality control is operating effectively and adequately. Engagement Performance – Consultation 37. Consultation is usually undertaken for: A. Difficult or contentious matters. B. Matters for which there is readily available support. C. Matters for which the judgment of the engagement leader is deemed sufficient. D. Straightforward matters involved accounting and auditing. 38. Consultation may be obtained in the form of advisory services provided by: A. B. C. D. Other firms. Professional and regulatory bodies. Commercial organizations that provide relevant quality control services. Any if these. 39. In a certain audit engagement, several key members of the engagement team had differences of opinion regarding a certain matter. In this case: A. The engagement partner shall issue a disclaimer of opinion due to a scope of limitation. B. An increase in the audit fee will be requested due to extension of the time required to complete the engagement. C. Documentation will be made regarding the unresolved matter, and the auditor will withdraw from the engagement altogether. D. The report shall not be issues until the matter is resolved. Engagement Performance – Engagement Quality Control Review 40. This is a review that provides an objective evaluation of the significant judgments made by the engagement team and the conclusions reached in formulating the report. A. Engagement quality control review. C. Peer review. B. Engagement judgment review procedures. D. System of quality control. 41. Criteria for determining whether an engagement quality control review should be performed include the following: A. The nature of the engagement, including extent of involvement of the public interest. B. Unusual circumstances or risks in an engagement or class of engagements. C. Laws and regulations that may require an engagement quality control review. D. All of these. 42. An engagement quality control review is required to be performed: A. Immediately after the re-assessment of control risk. B. For all audits of financial statements of listed entities. C. For all types of audits, regardless of the subject matter of the engagement. D. At engagement completion after the report is issued. 43. An entity whose shares, stock or debt are quoted or listed on a recognized stock exchange, or are marketed under the regulations of a recognized stock exchange or other equivalent body. A. Quoted entity B. Listed entity C. Public sector entity D. Recognized entity 44. Regarding engagement quality control review of PSQC1, the firm should establish policies and procedures setting out: A B C D The nature, timing and extent of procedures. Yes No Yes Yes Criteria for eligibility of reviewers. Yes Yes Yes No Documentation requirements. Yes Yes Yes Yes Appropriate fees for the engagement quality control review. Yes Yes No No 45. A partner, other person in the firm, suitably qualified external person, or a team made up of such individuals, with sufficient and appropriate experience and authority to objectively evaluate, before the report is issued, the significant judgments the engagement team made and the conclusions they reached in formulating the report. A. Engagement partner C. Personnel B. Engagement quality control reviewer D. Suitably qualified external person 46. An individual outside the firm with the capabilities and competence to act as an engagement partner, for example a partner of another firm, or an employee (with appropriate experience) of either a professional accountancy body whose members may perform audits and reviews of historical financial information, or other assurance or related services engagements, or of an organization that provides relevant quality control services. A. Suitably qualified external person C. Engagement partner B. Partner D. Engagement quality control reviewer 47. What aspects are most important in determining the eligibility of engagement quality control reviewers? A. Technical qualifications and objectivity. C. Competence and independence. B. Integrity and objectivity. D. All of these. 48. The engagement quality control reviewer (choose the incorrect one): A. May be selected by the engagement partner. B. Does not otherwise participate in the engagement during the period of review. C. Does not make decisions for the engagement team. D. Is not subject to other considerations that would threaten the reviewer’s objectivity. 49. The following statements pertain to quality control reviewers. Which statement is correct? A. Where the nature and extent of the consultations becomes significant, care is taken by both the engagement team and the reviewer to maintain the reviewer’s integrity. B. The extent of the review depends on the complexity of the engagement and the risk that the report might not be appropriate in the circumstances. C. The review does not reduce the responsibilities of the engagement partner. D. An engagement quality control review is always conducted at the end of the engagement. 50. Which of the following statements is incorrect? A. An engagement quality control review ordinarily involves discussion with the engagement partner, a review of the financial statements or other subject matter information and the report, and, in particular consideration of whether the report is appropriate. B. The extent of the review depends on the complexity of the engagement and the risk that the report might not be appropriate in the circumstances. C. The review does not reduce the responsibilities of the engagement partner. D. An engagement quality control review is always conducted at the end of the engagement. 51. An engagement quality control review of audits of financial statements of listed entities includes considering the following, except: A. The engagement team’s evaluation of the firm’s independence in relation to the specific engagement. B. Significant risks identified during the engagement and the responses to those risks. C. Judgments made, particularly with respect to materiality and significant risks. D. Whether working papers selected for review reflect the work performed in relation to the significant judgments and support significant management assertions. 52. Where the engagement quality control reviewer makes recommendations that the engagement partner does not accept and the matter is not resolved to the reviewer’s satisfaction, the report: A. Is not issued until the matter is resolved by client management. B. Is issued with an emphasis of a matter paragraph highlighting the difference in opinion. C. Is not issued until the matter is resolved by the following the firm’s procedures for dealing with differences of opinion. D. Will not be issued. 53. Policies and procedures on documentation of the engagement quality control review should require documentation that: The procedures required by the firm’s policies on engagement quality control review have been performed. Yes Yes The engagement quality control review has been completed before the report is issued. Yes No The reviewer is not aware of any unresolved matters that would cause the reviewer to believe that the significant judgments the engagement team made and the conclusions they reached were not appropriate. Yes Yes Yes No Yes Yes Yes Yes Engagement Performance – Engagement Documentation 54. Controls that the firm may design and implement to maintain the confidentiality, safe custody, integrity, accessibility and retrievability of engagement documentation include the following, except: A. The use of a password among engagement team members to restrict access to electronic engagement documentation to authorized users. B. Appropriate back-up routines for electronic engagement documentation (always done at the end of the engagement). C. Procedures for properly distributing engagement documentation to the team members at the start of engagement, processing it during engagement, and collating it at the end of the engagement. D. Procedures for restricting access to, and enabling proper distribution and confidential storage of, hardcopy engagement documentation. 55. Original paper documentation may be scanned and stored electronically for practical reasons. After scanning, the original paper document: A. Shall be discarded following established principles on waste disposal. B. Shall be kept on file for future reference. C. Shall be considered for retention or disposal depending on legal or regulatory requirements and other factors. D. None of these. 56. Unless otherwise specified by law, engagement documentation is owned by: A. The client. C. The client and the firm. B. The firm. D. The Board of Accountancy. 57. In the case of an audit, final engagement files should be completely assembled not more than ____ days after the date of the audit report: A. 60 B. 30 C. 10 D. 5 58. The normal retention period for audit engagement documentation is no shorter than _____ from the date of the audit report: A. Two years B. Four years C. Five years D. Seven years Monitoring 59. A process comprising an ongoing consideration and evaluation of the firm’s system of quality control, including a periodic inspection of a selection of completed engagements, designed to enable the firm to obtain reasonable assurance that its system of quality control is operating effectively. A. Inspection C. Quality review B. Engagement quality control review D. Monitoring 60. Responsibility for the monitoring process is entrusted to: A. Audit associates. C. Managers. B. Senior associates. D. Partners. 61. Monitoring of the firm’s system of quality control is performed by competent individuals and covers A Appropriateness of the design of quality controls Yes Effectiveness of the operation of quality controls Yes C Yes B D No No Yes No No 62. The purpose of monitoring compliance with quality control policies and procedures is to provide an evaluation of: A B C D Adherence to professional standards and regulatory and legal requirements. Yes No Yes Yes Whether the quality control system has been appropriately designed and effectively implemented. Yes Yes Yes No Whether the firm’s quality control policies and procedures have been appropriately applied, so that reports that are issued by the firm or engagement partners are appropriate in the circumstances. Yes Yes Yes Yes 63. In relation to completed engagements, these are procedures designed to provide evidence of compliance by engagement teams with the firm’s quality control policies and procedures. A. Inspection C. Monitoring B. Quality control D. Engagement quality control review 64. The inspection of a selection of completed engagements is ordinarily performed on a cyclical basis. Engagements selected for inspection in clued at least: A. One engagement for each engagement partner over an inspection cycle. B. Two engagements for each engagement partner over an inspection cycle. C. One engagement for each firm over an inspection cycle. D. Two engagements for each firm over an inspection cycle. 65. An inspection cycle ordinarily spans no more than: A. One year. B. Two years. C. Three years. D. Four years. 66. Deficiencies noted as a result of the monitoring process may indicate: A. Instances that do not necessarily indicate an insufficiency in the quality control system. B. Systemic, repetitive or other significant deficiencies that require prompt corrective action. C. Both a and b D. Neither a nor b 67. PSQC1 requires complaints and allegations against the firm to be dealt with appropriately. Complaints and allegations may come from: A B C D Firm personnel Yes No Yes Yes Clients Yes Yes No Yes Other third parties No Yes No Yes 68. The firm should communicate the results of the monitoring of its quality control system to engagement partners and other appropriate individuals within the firm at least every: A. Six months. Three years. B. Twelve months. C. Two years. D. 69. 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. How such matters are documented is based on: A. PSQC No. 1 C. Philippine Audit Practice Statement B. PSA 220 D. The firm’s decision 70. Compared to larger firms, smaller firms may use: A. More formal methods in documenting the system of quality controls. B. More informal methods in documenting the system of quality controls. C. Electronic databases to document the system of quality controls. D. More elaborate means of documenting the system of quality controls. The Lord has made a solemn promise, and by His power He will carry it out: “Your grain will no longer be food for your enemies, and foreigners will no longer drink your wine. But you that planted and harvested the grain will eat the bread and praise the Lord. You that tended and gathered the grapes will drink the wine in the courts of my Temple.” Isaiah 62: 8-9 Jesus answered them, “Have faith in God. I assure you that whoever tells this hill to get up and throw itself into the sea and does not doubt in his heart, but believes that what he says will happen, it will be done for him. For this reason I tell you: “when you pray and ask for something; believe that you have received it, and you will be given whatever you ask for. And when you stand and pray, forgive anything you may have against anyone, so that Your Father in heaven will forgive the wrongs you have done.” Mark 11: 22-25 AT-06Q: TERMS OF ENGAGEMENT AND AUDIT PLANNING Pre-Engagement 1. Where the client is changing auditors, PSA requires communication between the predecessor and successor auditors. The burden of initiating the communication rest with: A. The client. B. The predecessor auditor C. The Philippines SEC. D. The successor auditor. 2. Before accepting an audit engagement, a successor auditor should make specific inquiries of the predecessor auditor regarding|: A. Disagreement which the predecessor had with the client concerning auditing procedures and accounting principles. B. The predecessor‘s evaluation of matters continuing accounting significance discussed after accepting engagement. C. The degree of cooperation the predecessor received concerning the inquiry of the client’s legal counsel. D. The predecessor assessments of inherent risk and judgments about materiality. 3. If the prospective client refuses to permit the predecessor to respond or limits the predecessor’s response the successor should: A. Continue to ask the predecessor auditor questions on facts that might bear on the integrity of management. B. Accept the engagement but only after an equitable increase in the professional fee. C. Issue a disclaimer of opinion because the limited response of the predecessor auditor constitutes a significant scope of limitation D. Inquire as to the reasons and consider the implications in deciding wither to accept the management. 4. If permission from the client to discuss its affairs with the proposed auditor is denied by the client, the predecessor auditor should be: A. Keep silent about the denial. B. Disclose the fact that the permission to disclose is denied by the client C. Disclose adequately to proposed auditor all noncompliance made by the client. D. Seek legal advice before responding to the proposed auditor. 5. Reasons for discontinuing clients might include the following, except: A. Difficulty in working with client personnel. B. Evidence indicating a client’s management has integrity. C. Inability to negotiate an acceptable increase in the audit fee. D. Client need for specialized services the current audit firm is unable or unwilling to provide. Engagement Letters 6. Engagement letters are widely used in practice for: A. Audits only C. Assurance engagements only B. Professional engagements of all types. D. related services only. 7. An engagement letter is prepared with the interest(s) of ______ in mind. A. The auditor. C. The public B. The client D. Both the client and the auditor. 8. The engagement letter will do one, some, or all of the following: A 1. State whether the CPA will perform audit, review or compilation services Yes 2. State whether the CPA will perform tax or management advisory or other services Yes 3. State any restriction to be imposed on the CPA’s work No 4. Identity deadlines for completing the work/ Yes 5. State the amount and type of work to be done by Clients personnel ingenerating auditor’s workplace No 6. States the CPA’s fees for the engagement. Yes 7. Inform the client that the CPA does have responsibility For detecting fraud No B C D Yes Yes Yes Yes Yes Yes No Yes No Yes Yes Yes No Yes Yes No Yes Yes No Yes Yes 9. The primary purpose of the engagement letter is to: A. Remind management that the primary responsibility for the financial statements rest with management. B. Provide a written record of the agreement with the client to the services to be provided. C. Provide a starting point for the auditor’s preparation of the preliminary audit program. D. Satisfy the requirements of the CPA’s liability insurance policy. 10. The following are valid reasons for sending an engagement letter, except” A. To confirms the auditor’s appointment B. To disclose the objective and scope of the audit. C. To avoid misunderstanding with respect to the engagement. D. To assure the CPA’s compliance to the Philippine Standards on Auditing. 11. Which of the following is least likely to be included in an audit engagement letter? A. Identification of specific audit procedures that the auditor needs to undertake. B. Description of any letters or reports that the auditor expects to submit to the client. C. A reference to the inherent limitations of an audit that there is an unavoidable risk that some material misstatements may remain undiscovered.\ D. Basis on which fees are computed and any billing arrangements. 12. After preliminary audit arrangements have been made, an engagement confirmation letter should be sent to the client. The letter usually would not include: A. A reference to the auditor’s responsibility for the detection of error or irregularities. B. An estimation of the time to be spent on the audit work by audit staff and management. C. A statement that management advisory services would be made available upon request. D. A statement that a management letter will be issued outlining comments and suggestions as to any procedures requiring the client’s attention. Engagements Letters – Audit of Complements 13. When a CPA is the auditor of a parent entity and also the auditor of its subsidiary, branch or division (component), which of the following factors need not to be considered in deciding whether to send a separate engagement letter to component? A. Who appoints the auditor of the component? B. Legal requirements. C. Number of reports to be prepared during the peak audit season. D. Whether a separate audit report is to be issued on the component. Engagements Letters – Recurring Audits. 14. On recurring audit engagements, the auditor may decide not to send a new engagement letter each period. In which of the following situations will there be no need to send a new letter? A. Revision or special terms of the engagements. B. Significant change in nature or size of the client’s business C. Recent change of middle management and rank and file organizational structure. D. Indications of misunderstanding of the objective and scope of the audit. Change in Engagement 15. The following may lead the client to request for a change in engagement, except: A. Restrictions on the scope of the engagement. B. Misunderstanding as to the nature of an audit or related services originally requested. C. Recent changes in rank and file employees. D. Change in circumstances affecting the need for the service. 16. An auditor who, before the engagement is completed, is requested to change the engagement to one which provides a lower level of assurance, should: A. Consider the appropriateness of doing so. B. Issue a qualified or disclaimer of opinion. C. Agree with the client the terms of the new engagement, without any need to assess the reason for changes in the engagement. D. Include the reason for the change in the report of the revised engagement. 17. If a change in the type of engagement from higher to lower level of assurance is reasonably justified, the report based on the revised engagement: A. Should qualify the opinion due to a scope limitation. B. Omits reference to the original engagement. C. Should always refer to any procedures that may have been performed in the original engagement. D. Should refer to the original engagement in a separate paragraph preceding the opinion paragraph. 18. If a change in the type of engagement from the higher to lower level of assurance is not justified, the auditor should: A. Qualify the report on the original engagement. B. Continue with the revised engagement, but make explicit reference about original engagement. C. Refuse to agree to management’s request on the change of engagement and continue with the original engagement. D. Withdraw from the engagement. 19. Which of the following actions may appropriate if the auditor is unable to agree to a change of the engagement and is not permitted to continue the original engagement: A. Withdraw from the engagement. B. Consider whether there is any obligation to report to the other parties (e.g. Board of Directors). C. Both a and b. D. Neither a nor b. Disagreement on Terms and Scope Limitations 20. A client insistence that the audited results are reported quickly after the fiscal year end is concern to auditors because: A. Many uncertainties inherent in the financial statements cannot be resolved until several months after the year-end closing of the books. B. The financial statements are less reliable because the period covered by the review for subsequent events is shortened. C. Many clients have December 31 year ends and it is difficult to complete the audit when many of the client’s personnel are on holidays. D. Time pressure created by unrealistic deadlines increases the risk of errors in judgment and in the performance of audit procedures. Audit Planning – Basic Concepts 21. One of the first things that the auditor will do after accepting new client is: A. Communicate with the predecessor auditor. B. Contact the client’s attorney to discover legal obligations. C. Study the clients internal control structure. D. Tour the client’s facilities. 22. S1Planning is not a discrete phase of an audit, but rather it is a continual and iterative process. S2 Planning often begins shortly after (or in connection with) the completion of the previous audit and continues until the finalization of the audit program until issuance of the audit report. A. True, False B. false, true C. True, True D. False, false 23. The extent of planning will vary according to the following: A. Size of the client. B. Auditor’s experience with the entity and knowledge in the business. C. The nature and complexity of the audit engagement. D. All of these affect the extent of planning. Planning Consideration – Understanding of the Entity and Its Environment 24. PSA 315 requires: A. Obtaining an understanding of the entity and its environment. B. Discussion among engagement team members about the risk of material misstatement in the financial statements. C. Indentifying and assessing the risk of material misstatement D. All of the answers. 25. Risk assessment procedures include the following except: A. Inquiries of the management C. Observation and inspection. B. Confirmation of accounts receivable D. Analytical procedures. 26. Which of the following statements best describes “inquiry”? A. Physical examination of tangible assets, or the examination of records or documents, whether internal or external, in paper form, electronic form, or other media. B. Looking at a process or procedure being performed by others. C. Seeking information of knowledgeable persons, both financial and non-financial information. D. Evaluating financial information through a study of plausible relationships among both financial and non-financial data. 27. The auditor’s understanding of the entity and its environment consists an understanding of the following aspects: A. Industry, regulatory and other external factors, including the applicable financial reporting framework. B. Nature of the entity, including the entity’s selection and application of accounting policies. C. Objectives and strategies and related business risks that may result in a material misstatement of the financial statements. D. All of these 28. An auditor obtains understanding of the entity and its environment in order to A. Make constructive suggestions concerning improvements to the clients internal control. B. Develop an attitude of professional skepticism concerning management’s financial statements assertions. C. Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated. D. Understand the events and transactions that may have an effect on the clients financial statements. Planning Considerations – Need for Experts 29. A person or firm possessing special skill, knowledge and experience in particular field excluding accounting and auditing. A. Expert C. Multiskilled personnel B. Quality control reviewer D. Taxation specialist 30. Experts maybe: A. Contracted by the entity B. Contracted by the auditor C. Either a and b D. Neither a or b 31. In which of the following situations would an expert be least likely contracted by a CPA? A. Application of accounting methods in computing inventory balances B. Determination of fair values using specialized statistical techniques. C. Legal opinions concerning interpretations of engagements, statutes and regulations. D. Valuations of a certain types of assts like land and buildings. Planning Consideration – Materially and Risk 32. Which of the following statements is not correct? A. Materially is a relative rather than an absolute concept. B. Normally, the most important base used as a criterion for deciding materiality is Net Income. C. Qualitative factors as well as quantitative factors affect materiality. D. Given equal peso amounts, irregularities are usually considered more important than errors. 33. Religious Corp. has a few large accounts receivable that total P1,000,000. Pilgrim corp. has large number of small accounts receivable that also total P1,000,000. The importance of an error in any one account is, therefore, greater for religious Corp. than Pilgrim Corp. this is an example of an error in any account is, A. Materiality. C. reasonable assurance B. Comparative analysis D. Relative risk. 34. In considering materiality for planning purposes, an auditor believes that misstatements aggregating P10,000 would have a material effect on an entity’s profit and loss, but that misstatements would have to aggregate P20,000 to materially affect the statement of financial position. Ordinarily, it would be appropriate to design auditing procedures that would be expected to detect misstatements that aggregate: A. P30,000 B. P20,000 C. P15,000 D. 10,000 35. When the auditors allocate the preliminary judgment about materiality to account balances, the materiality allocated to any given account balance referred to as: A. The error range C. Tolerable misstatement. B. The materiality range D. tolerable materiality 36. In allocating materiality, most practitioners choose to allocate to: A. Balance sheet accounts C. Other comprehensive income accounts B. Income statement accounts D. Equity accounts 37. Regardless of how the allocation of preliminary judgment about materiality was done, when the audit is complete the auditor must ne confident that the combined errors in all accounts are A. Less than the preliminary judgment. B. Equal to preliminary judgment. C. More than preliminary judgment. D. Less than or equal preliminary judgment. 38. The relationships between materiality and audit risk are. A. Direct B. Inverse C. Indeterminable D. None of these 39. When setting the preliminary judgment about materiality, A. More evidence is required for a low peso amount than a high peso amount. B. Less evidence is required for a low peso amount than a high peso amount. C. The same amount of evidence is required for either low or a high peso amount. D. There is no relationship between it and the peso amount of evidence needed. Planning Considerations – Fraud and Non-Compliance 40. These are events or conditions that provide an opportunity, a motive or a means to commit fraud, or indicate that fraud may already have occurred. A. Audit risk C. Risk of material misstatement. B. Fraud risk factor D. Fraud indications. 41. Which of the following characteristic most likely would heighten an auditor’s concern about the risk of intentional manipulation of financial statements? A. Turnover of senior accounting personnel in low B. Insiders recently purchased additional shares of the entity’s stock. C. Management places substantial emphasis on meeting earning projections. D. The rate of change in the entity’s industry is slow. 42. This refers to acts of omission or commission by the entity being audited which are contrary to the prevailing laws or regulations: A. Fraud B. Error C. Non-Compliance D. Misstatements 43. With respect to error and irregularities, the auditor should plan to A. Search for errors that would have a material effect and for irregularities that would have either material or immaterial effect on the financial statements. B. Search for irregularities that would have a material effect and for error that would have either material or immaterial effect on the financial statements. C. Search for errors or irregularities that would have a material effect on the financial statements. D. Discover error or irregularities that have either material or immaterial effect on the financial statements. 44. S1 An audit cannot be expected to detect non compliance with all laws and regulations S2 Non compliance does not included personal misconduct of entity management or employers if they are unrelated to the entity’s business activities. A. True, false B. False, True C. True, true D. False, false 45. In connection with the examination of financial statements, an independent auditor could be responsible for failure to detect a material fraud if A. Statistical sampling techniques were not used on the audit engagement. B. The auditor planned the work in hasty and inefficient manner. C. Accounts performing important parts of the work failed to discover a close relationship between the treasurer and the cashier. D. The fraud perpetrated by one client employee, who circumvented the existing internal controls. Planning Considerations – Going Concern and Related Parties. 46. The auditor should remain alert for evidence of events or conditions which may cast significant doubt on the entity’s ability to continue as a going concern: A. During planning and consideration of internal controls B. During interim audit work C. During year-end audit work D. All of the answers. 47. Which of the following factors is not good indicator of potential financial failure? A. Clients is constantly short of cash and working capital. B. Clients retained earnings were reduced by half as a result of large dividend payout. C. Client relies heavily on debt financing, especially by financing permanent assets with short term loans. D. Client has had increasing net losses for several years. 48. Throughout the course of the audit, the auditor needs to be alert for transactions which appear unusual in the circumstances and may indicate the existence of previously unidentified related parties. Examples include the following, except: A. Transactions in which substance differs from form. B. High volume or significant transactions with certain customers or suppliers as compared with the others. C. Transactions which have normal terms of trade. D. Unrecorded transactions, such as the receipt or provision of management services at no charge. Planning Consideration – Preliminary Analytical Procedures 49. Analytical procedures are required: A As a risk assessment procedure performed during planning Yes As a substantive test procedure during evidence gathering Yes As an overall review at audit completion No B C D Yes Yes Yes Yes Yes No No Yes Yes 50. Analytical procedures used in planning should focus on: A. Evaluating the adequacy of evidence gathered concerning unusual balances. B. Testing individual account balances that depend on accounting estimates. C. Enhancing the auditor’s understanding of the client’s business D. Identifying material weakness in the control structure. 51. The objective of performing analytical procedures in planning an audit engagement is to identify the existence of: A. Unusual transactions and events. B. Illegal acts that went undetected because of internal control weaknesses. C. Related party transaction. D. Recorded transactions that were not properly authorized. Planning Considerations – Audit Strategy 52. The establishments of the overall audit involves: A. Determining the characteristic of the engagement that defined its scope. B. Ascertaining the reporting objectives of the engagement to plan the timing of the audit and the nature of the communication required. C. Considering the important factors that will determined the focus of the enagaement team’s efforts D. All of the answers. 53. The scope of the audit engagement includes the following except: A. The financial reporting framework on which the financial information to be audited has been prepared, including any need for reconciliations to other financial reporting framework. B. The entity’s timetable for reporting such as interim and final stages. C. Industry-specific reporting requirements, such as reports mandated by industry regulators. D. The expected audit coverage, including the number and locations of components to be included. 54. The timing of the audit and nature of communications required include the following, except: A. The organization of meetings with the management, and those charged with the governance, to discuss the nature, extent and timing of the audit work. B. The discussion with the management and those charged with the governance regarding the expected type and timing of reports to be issued and other communications. C. Audit areas where there is a higher risk of material misstatement. D. The entity’s timetable for reporting, such as interim and final stages. 55. With the respect to planning an audit, which of the following statements is always true? A. It is acceptable to perform a portion of the audit of a continuing client at interim dates. B. An engagement should not be accepted after the clients year-end C. An inventory count must be observed at year-end. D. Final staffing decisions must be made prior to completion of the planning stage. 56. The element of the audit planning process most likely to be agreed upon with the client before implementation of the audit strategy is the determination of the A. Evidence to be gathered to provide a sufficient basis for the auditor’s opinion. B. Procedures to be undertaken to discover litigation, claims and assessments. C. Pending legal matters to be included in the inquiry of the client’s attorney. D. Timing of inventory observation procedures to be performed. 57. In developing the overall audit strategy, the focus of the engagement team’s effort is considered. Which of the following is not appropriately classified as a factor affecting the focus of the team’s efforts? A. The financial reporting framework on which the financial information to be audited has been prepared, including any need for reconciliations to another financial reporting framework. B. Setting the materiality for planning purposes. C. Audit areas where there is a higher risk of material misstatement. D. Volume of transactions, which may determine whether it is more efficient for the auditor to rely on internal control. Planning Considerations – Audit Plan 58. The audit plan should (select the exception) A. Succeed action C. Be cost-beneficial B. Be flexible D. Precede performance of procedures 59. Which of the following is least likely considered by the auditor in establishing the oeverall audit strategy and developing the audit plan? A. Understanding of the accounting and internal control systems. B. Risk and materiality. C. The involvement of other auditors in audit of major subsidiaries. D. The terms of payment pertaining to other and their respective clients. 60. Which of the following considered by the CPA when he makes an overall audit plan? A. Identification of complex accounting areas including those involving accounting estimates. B. The effect of information technology on the audit. C. The content of the representation letters. D. The nature and timing of reports and other communication with the entity that are expected under the engagement. 61. In relation to audit planning, the auditor should document the following: A. Overall audit strategy. B. The detailed audit plan C. Significant changes made during the audit engagement D. All of the answers. Planning Considerations – Audit Program 62. This is a listing of all the things which the auditor will use to gather sufficient appropriate audit evidence: A. Audit procedures. C. Audit program B. Audit plan D. Audit risk model. 63. The auditor should design the written audit program so that: A. All material transactions will be selected for substantive testing. B. Substantive test prior to the balance sheet date will be minimized. C. The audit procedures selected will achieve specific audit objectives. D. Each account balance will be tested under either tests of controls or test of transactions. 64. In designing audit programs, an auditor should establish specific audit objectives that related primarily to the A. Timing of audit procedures C. Selected audit techniques. B. Cost benefit of gathering evidence D. Financial statement assertions. 65. The audit program should set out the: A. Nature of planned procedures B. Timing of planned procedures C. Extent planned procedures. D. All of the answers. 66. Cost-benefit considerations are part of audit planning. In relation to this, which of the following audit procedures is usually the least costly to perform? A. Test of balances. C. Analytical procedures. B. Substantive test of transactions. D. Test of controls. 67. The audit program usually cannot be finalized until the A. Consideration of the entity’s internal control has been completed. B. Engagement letter has been signed by the auditor and the client. C. Reportable conditions have been communicated to the audit committee. D. Searched for unrecorded liabilities has been performed and documented. Other Planning Procedures 68. The senior auditor responsible for coordinating the field work usually schedules a preaudit conference with the audit team primarily to A. Give guidance to the staff regarding both technical and personnel aspects of the audit. B. Discuss staff suggestions concerning the establishment and maintenance of time budgets. C. Establish the need for using the work of specialist and internal auditors. D. Provide an opportunity to document staff disagreements regarding technical issues 69. Which of the following procedures is not performed as a part of planning an audit engagement? A. Reviewing working papers of the prior year C. Test of controls B. Performing analytical procedures. D. Designing an audit program 70. Which of the following procedures would an auditor least likely perform in planning a financial statement audit? A. Coordinating the assistance of entity personnel in data preparation. B. Discussing matters that may affect the audit with the firm personnel responsible for non-audit services to the entity. C. Selecting a sample of vendor’s invoices for comparison to receiving reports. D. Reading the current year’s interim financial statements. AT- 06Q: TERMS OF ENGAGEMENT AND AUDIT PLANNING 1. D 2. A 3. D 4. B 5. B 6. B 7. D 8. D 9. B 10. D 11. A 32. 12. C 13. C 14. C 15. C 16. A 17. B 18. C 19. C 20. D 21. D 22. A 23. D 24. D 25. B 26. C 27. D 28. D 29. A 30. C 31. A AT-04: QUALITY CONTROLS 1. D 2. C 3. C 4. A 5. C 6. C 7. A 8. B 9. A 10. D 11. D 12. B 13. A 14. D 15. C 16. C 17. C 18. C 19. C 20. D 21. D 22. – 23. B 24. D 25. A 26. E 27. C 28. D 29. B 30. A 31. C 32. B 33. A 34. A 35. B 36. C 37. A 38. D 39. D 40. A 41. D 42. B 43. B 44. C 45. B 46. A 47. A 48. A 49. B 50. D 51. D 52. C 53. A 54. C 55. C 56. B 57. A 58. D 59. D 60. D 61. D 62. A/C 63. A 64. A 65. C 66. C 67. D 68. B 69. D 70. B What is the relationship between assurance services and attest services?An assurance service is an independent professional service to improve the quality of information for decision makers. An attestation service is a form of assurance service in which the CPA firm issues a report about the reliability of an assertion that is the responsibility of another party.
Which of the following best describes the relationship between attestation services and audit services?Which of the following best describes the relationship between attestation services and audit services? Auditing is a subset of attestation that involves the issuance of an opinion regarding the fairness of financial statements.
What is the relationship between audit services attestation services and assurance services?Using an independent third-party to perform auditing, attestation and assurance services can ensure that you receive unbiased reports and informative opinions in regards to the procedures, protocols, internal systems and accounting data used throughout your organization.
Which of the following would best be described as an attest engagement quizlet?Which of the following would best be described as an attest engagement? An engagement to implement an ERP system.
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Which phrase best describes the relationship between the terms attest and assurance as they pertain to services provided by CPAs?
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