ACCP301 End of Chapters MCQ PDF

ACCP301- CHAPTERS MULTIPLE CHOICES QUESTIONS
CHAPTER 1
END OF CHAPTER QUESTIONS
1- 1 TRUE OR FALSE
1. Assurance services help enhance the reliability of financial information throughout the capital markets.
2. Assurance refers to the practitioner's contentment that the information made by an entity is reliable.
3. Assurance services refer to engagements in which a practitioner expresses a conclusion designed to
enhance the degree of confidence of the practitioner about the outcome of evaluation of a subject
matter.
4. The practitioner must be independent to the responsible party and to the public.
5. The responsible party may not be from the same organization with the intended users but may be one
of the intended users.
6. The intended users must have at least one responsible party to constitute as an assurance
engagement.
7. Subject matter information relates to the nature of assertion with which the practitioner gathers
sufficient evidence.
8. A subject matter is considered appropriate if it can be subjected to audit procedures on a test basis.
9. The criteria serve as the yardstick to measure or evaluate the subject matter.
10. The criteria used to evaluate a subject matter must be included in any document that contains the
assurance report issued on such subject matter.
1-2 TRUE OR FALSE
1. Sufficiency and appropriateness of evidence are interrelated factors and, as such, are considered
complements.
2. The determination of materiality is a mathematical exercise which is a vital process in planning the
nature, timing and extent of assurance engagement procedures
3. Inherent risk refers to the susceptibility of the subject matter information to misstatements before
consideration of controls.
4. A practitioner may consider a procedure not applicable if it would entail high level of costs to the
assurance service.
5. The more the practitioner intends to exhibit the attitude of professional skepticism, the more
engagement procedures will be required.
6. A practitioner is not expected to be an expert in the verification of authenticity of documentation of audit
evidences.
7. Generally, evidence that is generated internally is more reliable than those from independent sources
when the related controls are effective.
8. Only limited procedures are performed by the practitioner on limited assurance engagements as a
basis for a negative form of conclusion.
9. Audits and reviews are assurance-based engagements as both the subject matter information and the
practitioner's assurance report are available to the intended users.
10. The three-party relationship still exists in non-assurance engagements which includes the practitioner,
the responsible party and the public.
11. IAASB sets high-quality international standards for assurance engagements and enhances quality
control that promote public confidence to the accountancy profession
12. Engagement standards are issued to provide interpretative guidance and practical assistance to
professional accountants that promote good practice in performing assurance engagements.
13. The report issued on non-assurance engagements must be expressed in a negative form
14. Procedures to be done in performing audits and reviews are exclusively determined by the auditor.
15. Only a moderate level of assurance is provided in management advisory services
1-3 MCQ
1. Assurance engagement
A. Is an engagement in which a practitioner is engaged to issue, or does issue, a written communication
that expresses a conclusion about the reliability of a written assertion that is the responsibility of
another party.
B. is a systematic process of objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence between those assertions and
established criteria and communicating the results to interested users
C. Is an engagement in which the auditor provides a moderate level of assurance that the information
subject to the engagement is free of material misstatement.
D. Is an engagement intended to enhance the credibility of information about a subject matter by
evaluating whether the subject matter conforms in all material respects with suitable criteria, thereby
improving the likelihood that the information will meet the needs of an intended user.
Reference page: 3
2. Assurance services can be best described as

A. Engagement designed to enable an independent practitioner to express an opinion as to the fairness of
historical financial information.
B. Processes that measures and communicates financial data to intended users.
C. Independent professional services intended to enhance the credibility of information to meet the needs
of an intended user.
D. Is broader than attestation but lesser in scope than audit.
Reference page: 3
3. Assurance engagement include the following, except

A. An engagement conducted to provide a high level of assurance that the subject matter conforms in all
material respects with identified suitable criteria.
B. An engagement conducted to provide a moderate level of assurance that the subject matter is plausible
in the circumstances.
C. An engagement in accordance with the Philippine Standard on Assurance Engagement(s) issued by
the Auditing and Assurance Standard Council as approved by the Board of Accountancy/Professional
Regulation Commission.
D. An engagement to perform agreed-upon procedures.
Reference page: 14-15
4. The three types of attestation services are:

A. Audits, review, and compilations
B. Audits, compilations, and other attestation services
C. Reviews, compilations, and other attestation services
D. Audits, reviews, and other attestation services
5. Which of the following is not an assurance engagement?

A. Audit of prospective financial statements
B. Review of interim historical financial statements
C. Comprehensive audit
D. Preparation of tax returns that use estimates
6. The single feature that most clearly distinguishes auditing, attestation, and assurance is
A. Type of service
B. Scope of services
C. CPA's approach to the service
D. Training required to perform the service
Reference page:
7. Unlike consulting services, assurance services:

A. Make recommendations to management
B. Report on how to use information
C. Report on quality information
D. Are two-party contracts
Reference page: 3
8. All, except one, are elements of an assurance engagement.

A. Subject matter
B. Written report
C. Sufficient appropriate evidence
D. Independence
Reference page: 4
9. In a financial statement audit, which is not an element of assurance engagement?

A. Independent auditor, audit client management, audit client shareholders and/or directors
B. Philippine Standards on Auditing
C. Independent auditor's report
D. Financial statements and the assertions
Reference page:
10. Which of the following is not included in the three-party relationship in an assurance engagement?
A. Auditor
B. Practitioner
C. Responsible party
D. Intended users
Reference page: 4
11. Which of the following is not a suitable criterion in the context of audit?
A. PSA
B. IFRS
C. GAAP
D. PFRS for SME
Reference page:
12. Characteristics of suitable criteria do not include

A. Relevance
B. Neutrality
C. Comparability
D. Understandability
Reference page: 7
13. One of the elements of an assurance engagement is appropriate subject matter. For the subject
matter to be considered appropriate, it
I. Should be identifiable, and capable of consistent evaluation or measurement against the identified
criteria.
II. Can be subjected to procedures for gathering sufficient appropriate evidence to support a reasonable
assurance or limited assurance conclusion, as appropriate
A. I only
B. II only
C. Both I and II
D. Neither I nor II
Reference page: 6
14. "Subject matter information" as used in the Framework to Assurance Engagement shall mean
A. The subject which is to be measured against suitable criteria
B. Outcome of the evaluation or measurement of a subject matter.
C. The assertion of the responsible party.
D. Any data relating to the subject matter to be measured against the criteria.
Reference page: 5
15. Which of the following can be subject matter?

A. Financial and non-financial performance or condition
B. Behavior
C. Physical characteristics (e.g. capacity)
D. All of the above can be subject matter
Reference page: 5
1-4 MCQ
1. Criteria that are embodied in laws or regulations or issued by authorized bodies of expert are called
A. Legal criteria
B. Suitable criteria
C. Established criteria
D. Specifically-developed criteria
Reference page: 7
2. The measure of the quality of evidence

A. Appropriateness
B. Sufficiency
C. Relevance
D. Reliability
Reference page: 8
3. The measure of the quantity of evidence

A. Appropriateness
B. Sufficiency
C. Relevance
D. Reliability
Reference page: 8
4. It refers to the level of auditor's satisfaction as to the reliability of an assertion being made by one
party for use by another party.
A. Confidence level
B. Assurance level
C. Reliability level
D. Tolerable level
Reference page: 3
5 Which of the following is not a component of engagement risk?

A. Control risk
B. Inherent risk
C. Business risk
D. Detection risk
Reference page:
6. The form of conclusion in an assurance engagement are

A. Positive and negative
B. High, medium; low
C. High and low
D. Reasonable and limited
Reference page: 13
7. The two levels of conclusion in an assurance engagement are
A. Positive and negative
B. Positive and negative
C. High and low
D. Reasonable and limited
Reference page: 13
8. These refers to assurance measurement of the subject matter is performed by the party, and the
subject matter information is in the form of responsible an assertion by the responsible party that is
made available to the intended users.
A. Assertion-based engagement
B. Direct reporting engagement
C. Indirect reporting engagement
D. Reasonable assurance engagement
Reference page: 14
9. These refers to assurance engagements in which 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 in
the assurance reports.
A. Assertion-based engagement
B. Direct reporting engagement
C. Indirect reporting engagement
D. Reasonable assurance engagement
Reference page: 14
10. Agreed-upon procedures engagement provides what level of assurance?

A. None
B. Absolute
C. High
D. Moderate
Reference page: 14
11. Practitioners who perform assurance engagements is governed by the following, except
A. The Framework to Assurance Engagements
B. Code of ethics for Professional Accountants in the Philippines
C. Philippine Standards on Quality Control
D. Philippine Financial Reporting Standards
Reference page:
12. An engagement conducted to provide: (a) a high level of assurance that the subject matter
conforms in all material respects with identified suitable criteria; or (b) a moderate level of assurance
that the subject matter is plausible in the circumstances.
A. Audit engagement
B. Review engagement
C. Reasonable assurance
D. Assurance engagement
Reference page: 13
13. Assurance service engagements:

A. Do not require independence
B. Require application of all attestation standards and GAAS
C. Are performed currently without professional standards
D. Do not require evidence
Reference page: 7
14. Which of the following may be under the scope of the Framework for Assurance Engagement?
A. Agreed-upon procedures engagements and compilation of financial and other information.
B. Preparation of tax returns where no conclusion conveying assurance is expressed.
C. Consulting (or advisory) engagements, such as management and tax consulting.
D. Preparation of tax returns where a conclusion conveying assurance is expressed.
Reference page:
15. Which of the following is incorrect regarding the "three-party relationship" element of assurance
engagements?
A. Professional accountants are those persons who are members of an be from IFAC member body, which
should be in public practice.
B. The responsible party and the intended user will often separate organizations but need not be.
C. The responsible party is the person or persons, either as individuals or representatives of an entity,
responsible for the subject matter.
D. The intended user is the person or class of persons for whom the professional accountant prepares the
report for a specific use or purpose.
Reference page: 13
1-5 MCQ
1. Which of the following is incorrect regarding the practitioner?
A. The term practitioner is broader than the term auditor.
B. The practitioner is governed by ethical requirements (ie. professional competence) regarding the
conduct of the engagements.
C. The practitioner must be independent to the responsible party but not necessarily to the intended
users.
D. The practitioner is responsible for determining the nature, timing or extent of procedures required by
the engagement.
Reference page: 4
2. Which is incorrect regarding the responsible party?
A. The responsible party and the intended party should not be from the same entity
B. The responsible party may be one of the intended users and may or may not be the engaging party
C. The responsible party ordinarily provides the practitioner with a written representation
D. The responsible party may be responsible for the subject matter information and may also be
responsible for the subject matter
Reference page: 4
3. The following relates to intended users, choose the exception:

A. Intended users are the person/s for whom the practitioner prepares the assurance report
B. Intended users may be identified by agreement between the practitioner and the responsible party or
engaging party, or by law.
C. Intended users may include either the practitioner or the responsible
D. In case of broad range of interests by the readers of assurance report, intended user may be limited
to major stockholders with significant and common interest.
Reference page: 5
4. The Framework of Philippine Standards on Auditing provides that financial statements needed to be
prepared in accordance with one, and common interests combination of the following, except:
A. Accounting standards generally accepted in the Philippines
B. Philippine Accounting Standards.
C. Another authoritative and comprehensive financial reporting framework designed for use in financial
reporting and is identified in the financial statements.
D. Accounting standards developed by the accountant of the business enterprise herself/ himself
Reference page:
5. The following cannot be a suitable criterion for an assurance engagement, except?

A. Practitioner's own expectations
B. Practitioner's judgment
C. Practitioner's experience
D. Agreement between the responsible party and the intended users
Reference page: 5
6. According to the framework for assurance engagement, the criteria must be

A. Sufficient and appropriate
B. Sufficient or appropriate
C. Suitable and available to intended users
D. Suitable or available to intended users
Reference page: 7
7. The following factors could affect the quantity and quality of available evidence that are attributable
to the circumstance of the engagement. Which is the exception?
A. The fact that the subject matter information is prospective.
B. The timing of the practitioner's appointment.
C. An entity's document retention policy.
D. Restriction imposed by the responsible party.
Reference page:
8. Which is incorrect concerning evidence?

A. The higher the risk of material misstatement is involved; the more is required.
B. The better the quality, the less is required.
C. The volume of evidence can compensate for its poor quality.
D. The reliability of evidence is influenced by its source and its nature.
Reference page: 8
9. Select the incorrect statement from the following generalization on the reliability of evidence.
A. Evidence is more reliable when it is obtained from independent sources outside the entity.
B. Evidence that is generated internally is more reliable when the related controls are effective.
C. Evidence obtained directly by the practitioner is more reliable than when obtained indirectly, even if the
source is not competent
D. Evidence provided by original documents is more reliable than evidence provided by photocopies or
facsimiles.
Reference page: 12
10. Which is incorrect?

A. Consistent evidence obtained from various sources or of different nature is more reliable
B. It is generally more difficult to obtain assurance about subject matter information at a point in time than
about subject matter information covering a period of time.
C. When it is cost prohibitive or difficult to obtain an evidence, the auditor may shift to obtain from other
alternatives.
D. The practitioner considers the relationship between cost of obtaining the evidence and the usefulness
of the information
Reference page: 9
11. Which is correct concerning the concept of professional skepticism

A. An assumption that the responsible party is dishonest
B. A critical assessment, with a questioning mind on the validity of evidence obtained
C. An assumption that responsible party is trustworthy
D. Disregarding contradicting information against several of consistent evidence
Reference page: 11
12. Which of the following statements is false regarding the consideration of materiality?
A. It is taken into consideration in the context of both qualitative and quantitative factors
B. It is a matter of professional judgment
C. It requires understanding and assessment of the factors that might influence the decision of the
intended users
D. It is defined as a certain percentage (eg., 5% of total asset, 1% of gross sales)
Reference page: 9
13. When the professional accountant 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. Moderate level of assurance
B. High level of assurance
C. Absolute assurance
D. No assurance
Reference page:
14. Which of the fundamental principles in the Code of Ethics are required in the performance of
non-assurance engagements?
I. Professional competence and due care
II. Independence II. Confidentiality
A. I and II only
B. I and III only
C. II and III only
D. I, II and III
Reference page:
15. In an agreed-upon engagement, which of the following statements is incorrect?

A. Management, the auditor and any appropriate third-party user agree on the procedures to be
performed.
B. Although procedures required are of an audit nature, independence is not required.
C. No assurance is rendered in the report.
D. The report is provided to a wide range of users for decision making.
Reference page: 15
1-6 MCQ
1. Evidence is more reliable when it is obtained from

A. Internal sources within the entity
B. Independent sources outside of the entity
C. Internal sources outside of the entity
D. Independent sources inside the entity
Reference page: page 12
2. Which of the following primarily refers to the relevance and reliability of evidence?
A. Sufficiency
B. Adequacy
C. Appropriateness
D. Suitability
3. A professional following engagements?

I. Audit of historical financial information
II. Review of historical financial information Procedures
III. Agreed-Upon
A. I only
B. I and II only
C. II and III only
D. I, II, and III
Reference page: page 15 (for B)
4. Which of the following statements is/are correct?

I. Audit is an assurance engagement while review is not.
II. More procedures are performed by a practitioner in a review than in an audit
A. Ionly
B. II only
C. Both I and II
D. Neither I nor II
5. Which of the following is true about assurance services?

A. All assurance services are financial statement audits
B. An assurance engagement must have five fundamental elements
C. A fundamental element for an assurance engagement is engagement fee
D. A review of historical financial statements is not an assurance service

I. Responsible parties and intended users may be from the same entity.
II. Responsible parties and intended users may be from the different entities.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
Reference page: pages 4-5
7. The ____is the outcome of the evaluation or measurement of a (an)______

A. Subject matter; subject matter information
B: Subject matter information; subject matter
C. Subject matter; evidence
D. Evidence; subject matter
8. Classify the following subject matter:

I. Internal controls
II. Facility capacity
A. Physical characteristics, systems and processes

B. Systems and processes, physical characteristics
C. Behavior, physical characteristics
D. Physical characteristics, behavior

I. Reliability of evidence is influence by its source and nature
II. Generalizations about reliability of evidence can be made exceptions
A. 1 only
B. 11 only
C. Both I and II
D. Neither I nor II
Reference page:
10. Which of the following types of evidence is most reliable?

A. Original copy of the Omnibus Loan and Credit Agreement
B. Photocopy of the Omnibus Loan and Credit Agreement
C. Scanned copy of the Omnibus Loan and Credit Agreement
D. Faxed copy of the Omnibus Loan and Credit Agreement is obtained from consistent evidence from different
sources or of
11. _______ is obtained from consistent evidence from different sources or of a different nature than
from items or evidence considered individually.
A. More assurance
B. Less assurance
C. No assurance
D. Little assurance
Reference page:
12. Which of the following is an example of a formal criterion(a)?

I. Philippine Public Sector Accounting Standards
II. Number of times a committee meets in a year
A. I only
B. I only
C. Both I and II
D. Neither I nor I
13. Which refers to reliability of criteria?

A. Contribute to conclusions that assist decision making by users
B. Allow reasonably consistent evaluation or measurement of subject matter
C Contribute to conclusions that are clear, comprehensive, and not subject to significantly different
interpretations
D. Contribute to conclusions that are free from bias
14. Which is true about assurance engagement risk?

A. It is more specific than audit risk, since it encompasses audits, reviews and compilation.
B. It is wider in scope than audit risk, since it encompasses audits, reviews and other assurance engagements.
C. It is more specific than audit risk, since it encompasses audits, reviews and other assurance engagement.
D. It is wider in scope than audit risk, since it encompasses audits, reviews and compilations.
Reference page: page 15 (compilation is not under assurance engagement)
15. Evaluate the following statement as to (1) level of assurance and (2) form of conclusion:
"In our opinion internal control is effective, in all material respects, based on the COSO Framework."
A (1) Positive; (2) Reasonable

B. (1) Reasonable; (2) Positive
C. (1) Negative; (2) Limited
D. (1) Absolute; (2) Positive
1-7 MULTIPLE CHOICE QUESTIONS
1. Which of the following statements is/are incorrect?

I. Financial statements audit are assurance services
II. Review of historical financial statements are assurance services
A . I only
B. Il only
C. Both I and II
D. Neither I nor II
2. Which of the following is a distinguishing characteristic of attest engagements over direct reporting
engagements?
A. Assertions
B. Assurance
C. Written report
D. Independence of the practitioner
Reference page:
3. Who is responsible for determining the nature, timing, extents of assurance procedures?
A. Practitioner
B. Practitioner and Responsible Party
C. Practitioner and Intended User
D. Practitioner, Responsible Party, and Intended User

I. Whenever practical, the assurance report is addressed to all the intended users
II. In certain cases, intended users may be limited to major stakeholders with significant and common
interests.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
5. Which of the following statements best describes the logical relationship among audits, attest
engagements, and assurance engagements?
A. All attest engagements are audits, but not all audits involve attestation.
B. All assurance engagements, including review, involve attestation.
C. An audit provides assurance, but does not involve attestation.
D. All audits are attest engagements, but not all attest engagements are audit.
Reference page:
6. Which of the following statements is incorrect?
A. Intended users refer to the person, persons, or class of persons for whom the practitioner prepares the
assurance report.
B. Responsible party pertains to the person or persons who in a direct reporting engagement, is responsible for
the subject matter; or in an assertion-based engagement, is responsible for the subject matter information (the
assertion), and may be responsible for the subject matter.
C. Criteria represent the benchmarks used to evaluate or measure the subject matter, including where
relevant, benchmarks for presentation and disclosure.
D. Assertions pertain to All information gathered by the practitioner in evaluating the subject matter against
criteria, on which the conclusion is based:
Reference page: page 14 (practitioner is the subject matter in Direct reporting)
7. Which of the following procedures ordinarily performed during an audit are also performed in a
review engagement?
A. Assessment of accounting and internal controls
B. Tests of controls
C Tests of records and responses to inquiries
D. Inquiry and analytical procedures
8. Assurance engagements may be classified according to (1) level of assurance being provided and
(2) structure of the assurance engagement. Classify the following assurance engagements as to either
(1) as to level of assurance or (2) as to structure.
I. Reasonable assurance engagement
II. Limited assurance engagement
III. Attestation engagement
IV. Direct reporting engagement
A. I and III; (2) II and IV

B. I and II; (2) III and IV
C. Ill and IV; (2) and II
D. II and IV; (2) and III
9. These are representations by management, explicit or otherwise, that are embodied in the financial
statements.
A Assertions
B. Criteria
C. Evidence
D. PSAS
Reference: https://www.ifac.org/system/files/downloads/a017-2010-iaasb-handbook-isa-315.pdf
10. It refers to the risk that a practitioner would express an inappropriate conclusion when the subject
matter information is materially misstated.
A Information risk
B. Assurance engagement risk
C. Risk of material misstatement
D. Audit risk
11. Which of the following is an example of an assurance engagement providing limited assurance?
A. An engagement to express an opinion whether the financial statements are prepared in all material
respects, in accordance with an identified financial reporting framework
B. An engagement, 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 practitioner's attention that causes the practitioner to
believe that the financial statements are not prepared in all material respects, in accordance with an identified
financial reporting framework.
C. An engagement to carry out those procedures of an audit nature to which the auditor and the entity and any
appropriate third parties have agreed and to report on factual findings.
D. An engagement to use accounting expertise as opposed to auditing expertise to collect, classify and
summarize financial information.
Reference page:
12. The practitioner's independence is not required in which of the following engagements?
A. Audit of historical financial statements
B. Review of historical financial statements
C. Examination of prospective financial statements
D. Installation of accounting information systems
Reference page:
13. An engagement is classified as a limited assurance engagement if:

A. The objective is a reduction in assurance engagement risk to an acceptably low level as the basis for a
positive form of expression of the practitioner's conclusion.
B. The objective is a 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. The evaluation or measurement of the subject matter is performed by the responsible party, and the subject
matter information is in the form of assertion by the responsible party that is made available to the intended
users.
D. 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.
14. Which of the following is most likely a form of conclusion for a reasonable assurance engagement?
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 attention that causes us to believe that
internal control is not effective, in all material respects, based on XYZ criteria."
C. Both A and B.
D. Neither A nor B.
15. Which of the following engagements is not covered by the pronouncement of AASC (Auditing and
Assurance Standards Council)?
A. Audit and review engagements
B. Agreed-upon procedures engagements
C. Compilation engagements
D. Tax consulting engagements
Reference page:
CHAPTER 2
2-1 TRUE OR FALSE
1. Auditors serve numerous parties, but most importantly is the public, as exemplified by investors, creditors
and other stakeholders.
2. External auditors enhance credibility of information by helping the management in preparing the financial
statements and designing and implementing internal controls.
3. Assertions are representations made by an audit client, explicit or otherwise, about economic actions and
events.
4. Providers of external audits and internal audits are both independent from the management which allows
them to perform financial statements audit.
5. The overall objective of the auditor in financial statements audit is to have an opinion on whether the
financial statements are prepared, in all material respects, in accordance with the criteria.
6. The opinion to be expressed by the auditor must pertain individually and separately to each financial
statement presented by management.
7. Comparability means that different knowledgeable and independent observers could reach consensus.
8. Financial statements should not favor one user over another, as such, the interest of the users must have no
conflicts.
9. External audit benefits the public by lending credibility to the items presented in the financial statements.
10. Financial information is more reliable when the internal controls of the entity are effective, as such, external
auditors also express an opinion over the effectiveness of these controls.
2-2 TRUE OR FALSE
1. The auditor is expected to detect both fraud and error during the course of performing external audits.
2. The financial statements must be adequately supported by records anddocuments to be considered an
appropriate subject matter.
3. The applicable financial reporting framework used as criteria in performing the audit is driven by the
information needs of its users.
4. The opinion to be expressed by the auditor depends on the materiality of non-compliance from the
framework and pervasiveness of the related effects of such non-compliance.
5. Depending on the magnitude of audit procedures, the level of assurance provided by auditors ranges from
high to absolute level.
6. The accumulation of persuasive evidences leads to the establishment of conclusive evidences in detecting
material misstatements.
7. Inherent limitations of an audit arise due to the auditor's exposure inherent risks, control risks and detection
risks
8. External audits provide value to organizations through reduction of information risk that may lead to lower
cost of capital. 9. The high demand for audit is present because it is required by law.
10. One of the ways to reduce information risk is to share such risk with the preparer of the information.
11. The auditor is not, and cannot, be held responsible for fraud and error.
12. The audit of financial statements relieves the management and/or those charged with governance of their
responsibilities with the financial statements.
13. An audit, when carried out, may act as a deterrent for fraud and error.
14. When the auditor is unable to gather sufficient appropriate evidence, he or she ordinarily selects between
qualified and adverse opinion.
15. An auditor may provide an absolute level of assurance in extremely rare circumstances.
2-3 MULTIPLE CHOICE QUIZZERS
1. Which of the following statements refers to the definition of auditing?

A. A service activity which function is to provide quantitative information primarily financial in nature about
economic entities that is intended to be useful in making economic decisions.
B. The art of recording, classifying and summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the results thereof.
C. The process of identifying, measuring and communicating economic information to permit informed
judgment and decisions by users of the information.
D. A systematic process of objectively obtaining and evaluating evidence regarding assertions about economic
actions and events to ascertain the degree of correspondence between these assertions and established
criteria and communicating the results thereof.
Reference page: 38
2. Which of the following types of auditing is performed most commonly by CPAs on a contractual
basis?
A. Internal auditing
B. Government auditing
C. BIR auditing
D. External auditing
Reference page: 40
3. This type of audit involves a review of an organization's procedures and methods for the purpose of
evaluating efficiency and effectiveness of operations, identifying areas for improvement, and making
recommendations to improve performance.
A. Financial statement
B. Operational audit
C. Compliance audit
D. Internal audit
Reference page: 41
4. An objective of operational audit is to assess whether

A. Specific units of the entity are functioning effectively and efficiently
B. Financial statements fairly reflect the results of operations
C. An organization's procedures adhere to specific procedures, rules or regulations set by an authoritative
body
D. Internal control structure is designed and implemented
Reference page: 39 & 41
5. An audit to determine whether an entity is following specific procedures or rules set down by some
higher authority is classified as a(n):
A. Audit of financial statements.
B. Compliance audit.
C. Operational audit.
D. Production audit.
Reference page: 40
6. The internal auditing profession is believed to have advanced primarily as a

A. Increased interest by graduating students and experienced auditors consequence of
B. The limitation of external audit scope
C. Job qualification specifications that include added emphasis on background knowledge and skills
D. Increased complexity and sophistication of business operations
Reference page: 38
7. The internal audit staff has been asked to conduct an audit of the purchasing department. Top
management feels that there have been some production bottlenecks recently because of out-of-stock
situations. What is the primary objective of the auditors in this assignment?
A. To appraise the economy with which resources are employed.
B. To review the means of safeguarding assets and verifying the existence of such assets.
C. To ascertain whether results are consistent with established objectives and whether operations are being
carried out as planned.
D. To review the reliability and integrity of financial and operating information.
Reference page:
8. Which is incorrect regarding internal auditing?

A. It encompasses both financial and operational auditing.
B. An internal audit department reports to the audit committee and senior C. It provides assistance primarily to
management and those charged with governance.
D. It can be performed only by internal auditors.
Reference page: 40
9. To operate effectively, an internal auditor must be independent of

A. the line functions of the organizations.
B. the employer-employee relationship which exists for other employees in the organization.
C. the entity.
D. all of the above.
Reference page: 40
10. The internal auditor typically reports directly to

A. The management of the company.
B. The audit committee and the management of the company.
C. The audit committee and the board of director.
D. The board of director and the external auditor.
Reference page: 40
11. Which of the following types of audit uses as its

A. Operational audit
B. Financial statement auditcriteria laws and regulations?
C. Compliance audit
D. Financial audit
Reference page: 41
12. Which of the following is both true for external financial statements auditor and an internal auditor?
A. They help the entity's employees to perform their functions effectively
B. The focus of the engagement is financial information only
C. They are required to be independent of the entity
D. They ultimately report their findings to the audit committee
Reference page: 40
13. These audits are similar in most respects.

A. Operational and compliance
B. Operational and government
C. Financial and compliance
D. Financial and operational
Reference page: 41
14. Which statement is correct regarding the relationship between internal auditing and the external
auditor?
A. Some judgments relating to the audit of the financial statements are those of the internal auditor. - judgment
is made by external auditor
B. The external audit function's objectives vary according to management's requirements.
C. Certain aspects of internal auditing may be useful in determining thennature, timing and extent of external
audit procedures.
D. The external auditor is responsible for the audit opinion expressed, however that responsibility may be
reduced by any use made of internal auditing. - responsibility of external auditor alone
Reference page:
15. Which of the following terms best describe the audit of a taxpayer's return by a BIR auditor?
B. Internal audit
C. Compliance audit
D. Government audit
Reference page:
1. Audits of historical financial information are governed by:

I. Philippine Standards on Auditing
II. Philippine Standards on Assurance Engagements
III. Philippine Standards on Quality Control
A. I and II only
B. I and III only
C. II and III only
D. I, II and III
Reference page: 18
2. The predominant type of attestation service performed by CPAs is
A. Audit - is an assurance service
B. Review
C. Compilation
D. Management consulting
Reference page: 38
Assurance - largest
Attestation
Audit - smallest
Lahat ng audit ay assurance, pero hindi lahat ng assurance ay audit.
3. Which of the following is an incorrect phrase?

A. Auditing is a systematic process.
B. Auditing objectively obtains and evaluates evidence.
C. Auditing evaluates evidence regarding assurance.
D. Auditing communicates results to interested users.
Reference page: 39 or 47
4. The word auditing comes from the Latin audire, which means:
A. To see
B. To hear
C. To detect
D. To test
Reference page: This word still applies to someone who listens closely, but it also refers to a kind of
accountant who checks the financial records of other people, usually to make sure nothing illegal is
going on.
5. Which of the following types of audits is performed to determine whether an entity's financial
statements are fairly stated in conformity with generally accepted accounting principles?
B. Financial statement audit
C. Compliance audit
D. Performance audit
Reference page: 39
6. The overall objectives of the auditor in conducting an audit of financial statements are
I. To obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether caused by fraud or error.
II. To report on the financial statements.
III. To obtain conclusive rather than persuasive evidence.
IV. To detect all misstatements, whether due to fraud or error.
A. I and II only
B. II and IV only
C. I, II and III only
D. I, II, III and IV
Reference page: I. - 47, II. - 39
7. An auditor's overall objective in a financial statement audit is to

A. Determine that all individual accounts and footnotes are fairly presented.
B. Employ the audit risk model.
C. Express an opinion on the fair presentation of the financial statements in accordance with generally
accepted accounting principles.
D. Detect all errors and fraud.
Reference page: 39
8. Which of the following best describes the objective of an audit of financial statements?
A. To express an opinion whether the financial statements are prepared in accordance with prescribed criteria.
B. To express an assurance as to the future viability of the entity whose financial statements are being audited.
C. To express an assurance about the management's efficiency or effectiveness in conducting the operations
of entity.
D. To express an opinion whether the financial statements are prepared, in all material respect, in accordance
with an identified financial reporting framework.
Reference page: 42
9. It refers to the level of the auditor's satisfaction as to the reliability of an assertion being made by
one party for the use by another party.
A. Confidence Level
B. Reasonableness Level
C. Assurance Level
D. Tolerable Level
Reference page: 47
10. The auditor's opinion

A. Enhances the credibility of the financial statements.
B. Is an assurance as to the future viability of the entity.
C. Is an assurance as to the efficiency with which management has conducted the affairs of the entity, but not
effectiveness.
D. Certifies the correctness of the financial statements.
Reference page: 38
11. A difference between the amount, classification, presentation, or disclose of a reported financial
statement item and the amount, classification, presentation, or disclosure that is required for the item
to be in accordance with the applicable financial reporting framework.
A. Non-compliance
B. Misstatement
C. Fraud
D. Error
Reference page: https://www.ifac.org/system/files/downloads/a021-2010-iaasb-handbook-isa-450.pdf
12. Which does not describe the level of assurance provided in a financial statement audit?
A. High
B. Reasonable
C. Above average
D. Positive
Reference page: 47
13. Absolute assurance cannot be provided in an audit because of: (Choose the exception)
A. Human errors in judgment

B. The employment of test procedures
C. The need to obtain conclusive evidence
D. Limitations inherent in the client's internal controls
Reference page: 48
14. Which of the following statements does not properly describe a limitation of an audit?
A. Many financial statement assertions cannot be audited.
B. Many audit conclusions are made on the basis of examining a sample of evidence.
C. Some evidence supporting peso representations in the financial statements must be obtained by oral or
written representations of management.
D. Fatigue and carelessness can cause auditors to overlook pertinent evidence.
Reference page:
15. Absolute assurance is rare in practice due to limitations of assurance engagement. Which of the
following does not describe such limitation?
A. Use of selective testing
B. Inherent limitation of internal controls
C. The fact that most evidence are merely persuasive
D. The procedures applied to reasonable assurance engagement are usually comprehensive
Reference page: 48

1. Which of the following statements relating to elements of an audit engagement is incorrect?
A. Parties in an audit engagement only includes the auditor and the client's management.
B. The criteria used is the PFRS or IFRS.
C. The auditor shall obtain sufficient appropriate evidence which will be used as a basis in expressing an
opinion.
D. The recipient of the audit report may be restricted.
Reference page: page 45-46

a. “A restricted use audit report is a report that is expressly restricted for use by only the
intended users specified in the report (as discussed in the International Framework for
Assurance Engagements issued by the International Auditing and Assurance Standards
Board).”
2. Primary responsibility for the assertions in financial statements rests with the:
A. Audit partner assigned to the engagement - auditor depends on the financial statements prepared and
presented by the management.
B. Senior auditor in charge of field work
C. Staff auditor who drafts the statements
D. Clients management (Management pr those charge with governance)
Reference page: 45
Assertions in Financial statements are claims made by an organization's management regarding its
financial statements. The assertions form a theoretical basis from which external auditors develop a set
of audit procedures.
The financial statements are management’s responsibility. They prepare and present the fs w/ the
applicable financial reporting fr. The auditor’s responsibility is to express an opinion on the financial
statements.
3. The term that describes the role of persons entrusted with the supervision, control and direction of
an entity is
A. Management
B. Administration
C. Governance
D. Government
Reference page:
4. Which of the following describes the responsibility of the auditor?
A. Preparation and presentation of the financial statements in accordance with the applicable financial
reporting framework
B. Determining the scope of audit in accordance with PSAs and other applicable regulations of professional
bodies
C. Prevention and detection of fraud and error
D. Use the audit report which contains the opinion expressed by the auditor
Reference page: 45
5. Which of the following statements is correct concerning an auditor's responsibilities regarding

financial statements?
A. An auditor may not draft an entity's financial statements based on information from management's
accounting system.
B. The adoption of sound accounting policies is an implicit part of an auditor's responsibilities.
C. An auditor's responsibilities for audited financial statements are confined to the expression of the auditor's
opinion.
D. Making suggestions that are adopted about an entity's internal control environment impairs an auditor's
independence.
Reference page:
6. Which of the following accurately depicts the auditor's responsibility with respect to Statements on
Auditing Standards?
A. The auditor is required to follow the guidance provided by the Standards, without exception.
B. The auditor is generally required to follow the guidance provided by Standards with which he or she is
familiar, but will not be held responsible for departing from provisions of which he or she was unaware.
C. The auditor is generally required to follow the guidance provided by the Standards, unless following such
guidance would result in an audit that is not cost-effective.
D. The auditor is generally required to follow the guidance provided by the Standards, and should be able to
justify any departures.
Reference page:
7. Which of the following factors most likely would influence an auditor's determination of the
auditability of an entity's financial statements?
A. The complexity of the accounting system
B. The adequacy of the accounting records
C. The existence of related-party transactions
D. The operating effectiveness of control procedures
Reference page:
8. Which of the following presumptions is correct about the reliability of audit evidence?
A. Information obtained indirectly from outside sources (inside source) is the most reliable evidential matter.
B. To be reliable, audit evidence should be conclusive rather than persuasive.
C. Reliability (should be sufficiency) of audit evidence refers to the amount corroborative evidence obtained.
D. An effective internal control structure provides more assurance about the reliability of audit evidence.
Reference page: 12
9. Third-party users of the audit report expect the auditor to do all of the following except:
A. To evaluate measurements and disclosures made by management
B. To provide a biased evaluation of the FSS
C. To determine whether financial statements are presented in accordance with GAAP
D. To gather sufficient evidence to support their opinion
10. Management of a company is responsible for

A. Hiring the auditor
B. Preparing the financial statements
C. The audit workpapers
D. Independence and obtaining evidence
Reference page:
https://www.pwc.com/im/en/services/Assurance/pwc-understanding-financial-statement-audit.pdf
11. The auditor's responsibility in an audit engagement is limited to:

A. Expression of an opinion on the FSS
B. Expression of an opinion on the FSS and adequacy of the notes to FSs
C. Opinion issued and fairness of presentation of FSS
D. Expression of opinion and inclusion of supplementary information, if necessary
Reference page:
12. Which of the following statements is not true regarding the appropriateness of audit evidence?
A. Relevance (should be Validity) is enhanced by an effective information system.
B. To be appropriate, evidence must be both valid and relevant.
C. Validity (should be relevance) is related to the quality of the client's information system.
D. Relevance must always relate to audit objectives.
Reference page:
13. Theoretically, it is possible to provide an infinite range of assurance from a very low level of
assurance to an absolute assurance. In practice, professional accountants cannot provide absolute
assurance because of the following, except
A. Professional accountants employ testing process
B. The internal control has inherent limitations
C. The use of judgement in gathering evidence and drawing conclusions based on that evidence
D. The lack of expertise of professional accountants in doing a systematic engagement process
14. The independent audit is important to readers of financial statements because it

A. Determines the future stewardship of the management of the company whose financial statements are
audited
B. Measures and communicates financial and business data included in financial statements - done by
management
C. Involves the objective examination of and reporting on management prepared statements
D. Reports on the accuracy of all information in the financial statements
15. Which of the following statements is/are true?

Statement 1: In an audit of financial statements, the auditor may decide to eliminate audit sampling.
Statement 2: The auditor shall obtain conclusive evidence.
Statement 3: All throughout the audit, the auditor shall exercise professional judgment.
A. Only 1 statement is correct

B. Only 2 statements are correct
C. All statements are correc
D. All statements are incorrect
Reference page:
Statement 1: Audit sampling is the application of audit procedures to less than 100% of items within a
class of transactions or account balance such that all sampling units have a chance of selection. It is
based on the premise that a sample can be sufficiently representative of an audit population to warrant
valid and reliable conclusions without testing the entire population.
the only way to eliminate any chance of an audit sampling error is to test 100% of the
population.
Statement 1: In performing compliance audits, a CPA issues a report on the degree of compliance with the
criteria used for the engagement (e.g. laws, rules or regulations set by the auditor).
Statement 2: Independent auditors are expected by management to be experts who actively participate in
management decision-making.
Statement 3: A typical objective of an operational audit is for the auditor to determine whether the financial
statements fairly presents the entity's financial position, results of operations, and cash flows.
Reference page: 41
Statement 1: Government Auditors perform compliance audit - pg.41
Statement 2: Independent auditors does not actively participate in the management’s decision-making
processes. Their purpose of conducting an audit is to confirm that all the transactions recorded in the
books of the business are authentic. Their audit report provides a precise and complete picture of the
financial health of the company and helps in deciding the future course of the business.
Statement 3: The statement refers to Financial Audit - pg. 39
A. Only one statement is correct

B. Only two statements are correct
C. All statements are correct
2. Auditors of the Commission on Audit perform the role of
A. Internal auditors.
B. Financial consultants.
C. Independent auditors.
D. Management accountants.
Reference page: None.

Constitution reiterated COA's role as the sole official external auditor of government agencies as well as
government-owned- and-controlled corporations (GOCCs). External auditors are independent of the
organisation they are auditing.
3. AAA Corp. has engaged a public accounting firm to issue a report on the accuracy of product quality
specifications included in trade sales agreements. This is an example of a (an):
A. Financial statement audit

B. Attestation service
C. Compliance audit
D. Operational audit
Reference page: 41
4. A government auditor evaluates a disbursement to determine if it is necessary, excessive or

extravagant in accordance with existing rules and Compliance audit regulations. What kind of audit is
he conducting?
Compliance Audit Economy Audit
A. Yes No
B. No Yes
C. Yes Yes
D. No No

Based ni sa net, HAHAHAHHAHAHA
- in accordance with existing rules and Compliance audit regulations. - Compliance Audit
5. Operational audits generally have been conducted by internal and COA auditors, but may be
performed by certified public accountants. A primary purpose of an operational audit is to provide
A. A measure of management performance in meeting organizational goals.

B. The results of internal examinations of financial and accounting matters to a company's top-level
management.
C. Aid to the independent auditor, who is conducting the examination of the financial statements.
D. A means of assurance that internal accounting controls are functioning as planned.
Reference page: 39 or 41

Statement 1: The assumption underlying an audit of financial statements is that they will be used by
different groups for similar purposes. different
Statement 2: Information risk refers to the risk that the auditor may express an unqualified opinion on
the financial statements when in fact the financial statements are materially misstated. pg. 49
Statement 3: The biases and motives of the information provider may be a cause of information risk.
pg. 50
A. Only one statement is correct

B. Only two statements are correct
C. All statements are correct
Reference page: 49,50
7. Which of the following is a cause of information risk?
A. Voluminous data
B. Remoteness of the Information.
C. Bias motives of the provider of information
D. Each of the above is a cause of information risk
Reference page: 49
8. The need for an independent audit arises due to the following reasons. (Choose the expectation)
A. Expertise of auditors
B. Competing interests
C. Remoteness of users
D. Complexity of decision-making
Reference page: 50
I think confusing ang word na ‘expectation’. In this problem, the exception is letter D but if the thing
asked is expectation, answer may be B.
Note: This problem is repeated to No. 13.
9. Which of the following statements does not describe a condition that creates a demand for auditing?
A. Conflict between an information preparer and a user can result in biased information.
B. Information can have substantial economic consequences for a decision maker.
C. Expertise is often required for information preparation and verification.
D. Users can directly assess the quality of information.
Reference page: 50
10. Generally, as audit quality increases then

A. The cost of capital increases
B. The cost of capital decreases
C. The cost of capital remains the same
D. The cost of capital increases in an exponential rage
Reference page: 52
11. Which of the following is the best reason why audits are necessary?
A. Several regulations require financial statements to be audited

B. So that management and the auditor will share the responsibility for the financial statements
C. So that additional confidence is available to users of financial statement through the audit report
D. So that responsibility for the financial statements is transferred from management to the auditor
Reference page: 51
12. Which of the following best describes the reason why an independent auditor reports on financial
statements?
A. A poorly designed internal control system may be in existence.

B. A management fraud may exist and it is more likely to be detected by independent auditors.
C. Different interest may exist between the company preparing the statements and the persons using the
statements.
D. A misstatement of account balances may exist and is generally corrected as the result of the independent
auditor's work.
Reference page: 44
13. The need for an independent audit arises due to the following reasons.
(Choose the expectation)
A. Expertise of auditors
B. Competing interests
C. Remoteness of users
D. Complexity of decision-making
Reference page: 50
I think confusing ang word na ‘expectation’. In this problem, the exception is letter D but if the thing
asked is expectation, answer may be B.
Note: This problem is repeated to No. 8.
14. The following may be considered as value-adding characteristics of an FS audit, except for:
A. Audit helps reduce information risk
B. Audit reduces management's responsibility to prepare financial statements
C. Audit may be used to deter inefficiency and fraud
D. Audit may be used to enhance systems of internal controls
Reference page: 52
A, C, D are considered as value-adding characteristics.
15. As per SRC Rule 68, the following shall submit financial statements audited by an independent CPA
to the SEC, except
A. Stock corporations with total assets or total liabilities greater than or equal to Php 600,000
B. Nonstock corporations with assigned capital greater than or equal to Php
C. Branch offices/representative offices of stock foreign corporations with an assigned capital greater than or
equal to Php 1,000,000
D. Regional operating headquarters of foreign corporations with total revenues greater than or equal to Php
1,000,000
Reference page: 51
Refer to the table. It should be Nonstock corporation with total assets or total liabilities greater than
or equal to 600,000
1. In "auditing" accounting data, the concern is with
A. Determining whether recorded information properly reflects the economic events that occurred during the
accounting period.
B. Determining if fraud has occurred.
C. Determining if taxable income has been calculated correctly.
D. Analyzing the financial information to be sure that it complies with government requirements.
Reference page:
2. Which of the following is incorrect regarding the general principles of an audit?
A. The auditor should comply with the "Code of Ethics for Professional Ethics for Certified Public Accountants"
promulgated by the Philippine Professional Regulation Commission.
B. The auditor should conduct an audit in accordance with PSAs.
C. The auditor should plan and perform an audit with an attitude of professional skepticism recognizing that
circumstances may exist that cause the financial statements to be materially
D. The auditor would ordinarily expect to find evidence to support management representations and assume
they are necessarily correct. -should not assume that they are necessarily correct (professional skepticism)
Reference page: page 43 (CPP PJ SAE)
3. Because of the risk of material misstatement, an audit of financial statements in accordance with
generally accepted auditing standards should be planned and performed with an attitude of:
A. Objective judgment.
B. Independent integrity.
C. Professional skepticism.
D. Impartial conservatism.
Reference page: page 43 (General Principles - #3)
4. Which of the following is not an example of the application of professional skepticism?
A. Designing additional auditing procedures to obtain more reliable evidence in support of a particular financial
statement assertion.
B. Obtaining corroboration of management's explanations through consultation with a specialist.
C. Inquiring of prior engagement personnel regarding their assessment of management's honesty and integrity.
- assessing whether to accept letter enagagement
D. Using third party confirmations to provide support for management's representations.
Reference page:
5. Which statement below improperly describes the PSAs?
A. They are interpretations of "generally accepted auditing standards"

B. They are minimum guidelines on which the auditor professional judgment bases his professional judgment
C. They constitute set of procedures to be followed in the conduct of audit
D. The measure the quality of auditor's performance in audit engagement
Reference page:
The Philippine Standards on Auditing (PSA) deals with the auditor's responsibility to form an opinion on
the financial statements. It establishes the independent auditor's overall responsibilities when
conducting an audit of financial statements.
6. Which of the following is a correct statement relating to the theoretical framework of auditing?
A. The financial data to be audited can be verified.

B. Short-term conflicts do not exist between managers who prepare data and auditors who examine data.
C. Auditors do not necessarily need independence.
D. An audit has a benefit only to the owners.
Reference page: page 44 (Theoretical Framework - #1)
7. Auditing is based on the assumption that the financial data are verifiable. Data are verifiable when
two or more qualified individuals,
A. Working together, can prove, beyond doubt, the accuracy of the data.
B. Working independently, each reach essentially similar conclusions.
C. Working independently, can prove, beyond reasonable doubt, the truthfulness of the data..
D. Working together, can agree upon the accuracy of the data.
Reference page:
8. Which is not a theoretical postulate framing an audit?
A. Financial data can be subjected to verification.

B. Long-term conflict between the auditor and client may exist.
C. An audit benefits the public.
D. The auditor is independent of the client.
Reference page: page 44 (Theoretical Framework - #3 - “No Long-term Conflict”)
9. The need for independent audits of financial statements can be attributed to all of the following
conditions except
A. Remoteness
B. Consequence
C. Validity
D. Complexity of subject matter
10. The need for assurance services arises for all of the following reason except
A. Potential bias in providing information

B. Closeness between a user and the organization
C. Complexity of the processing systems
D. Remoteness between a user and the organization
Reference page: sir’s answer
11. One reason that an auditor only obtains reasonable, and not absolute, assurance that financial
statements are free from material misstatement is
A. Comprehensive basis reporting

B. Professional skepticism
C. Material misstatements
D. Employee collusion audit.
Reference page:
12. The auditor is required to maintain profession skepticism throughout the Which of the following
statements concerning professional skepticism is false?
A. A belief that management and those charged with governance are honest and have integrity relieves the
auditor of the need to maintain professional skepticism.
B. Maintaining professional skepticism throughout the audit reduces the risk of using inappropriate
assumptions in determining the nature, timing, and extent of the audit 'procedures and evaluating the results
thereof.
C. Professional skepticism is necessary to the critical assessment of audit evidence.
D. Professional skepticism is an attitude that includes questioning contradictory audit evidence obtained.
Reference page:
13. Professional skepticism dictates that when management makes a statement to the auditors, the
auditors should
A. Disregard the statement because it ranks low of the evidence quality scale
B. Corroborate the evidence with other supporting documentation whenever possible
C. Require that the statement be put in writing
D. Believe the statement in order to maintain the professional client auditor relationship
Reference page:
14. Which statement is incorrect concerning audit-evidence?
A. The greater the risk of material misstatement, the more audit evidence is likely to be required B. The higher
the quality, the more may be required
C. Merely obtaining more audit evidence may not compensate for its poor quality
D. Obtaining audit evidence relating to a particular assertion is not substitute for obtaining audit evidence
regarding another assertion.
Reference page:
15. The risk that the client's financial statements may be materially false and misleading is referred to
as the
A. Business risk
B. Information risk
C. Client riskf
D. Risk assessment
Reference page: page 49 (definition of information risk)

CHAPTER 3
3-1 TRUE OR FALSE
1. The accountancy act governs the accountancy education, examination, registration and practice of
accountancy in the Philippines.
2. It is the primary duty of PRC, with the support of BOA, to effectively enforce or implement the provisions of
the accountancy act.
3. An employee in an accounting or auditing firm is considered to be in the practice of public accountancy.
4. The chief financial officer (CFO) of a private sector company with retained earnings of five million pesos and
an annual revenue of fifteen million pesos is required to be a duly registered CPA.
5. The dean of a college that offers business and management programs, including the BSA program, must be
a registered CPA.
6. The chairman and members of BOA are all appointed by the President of PICPA.
7. If a person has served the board of accountancy for more than 12 years, he shall be eligible for
reappointment until the lapse of 1 year.
8. Tampering of CPALE grades is a ground for suspension or removal of any member of the board.
9. A CPA candidate must be a natural-born citizen and resident of the Philippines.
10. The certificate of registration of CPAS is renewable every three years on the month and day of his birthday.
3-2 TRUE OR FALSE
TRUE 1. Violation of the CPA's code of ethics is a ground for suspension and revocation of a practitioner's
certificate of registration and professional identification card.
TRUE2. Three years of work in public practice are considered meaningful experience as prescribed by RA
9298. P.84
TRUE3. Working papers are confidential, privileged and property of the audit client
TRUE4. Competence refers to an ability that extends beyond the possession of knowledge and skills, which
include cognitive, functional, personal and ethical competence.
TRUE5. Non-formal learning refers to learning that has been acquired in addition to formal learning, which may
be structured and made more flexible according to educational and training arrangements.
FALSE6. The Financial Reporting Standards Council must be composed of 14 members. P. 93 - 15 members
FALSE7. The chairman of the Auditing and Assurance Standards Council must have been or at present a
senior practitioner in any of the scope of accounting practice. P. 93 - only in public accountancy
FALSE8. The Education Technical Council was established to assist the Board of Accountancy in continuously
upgrading the accountancy education in the Philippines to make Filipino CPAs locally competitive. - P. 94 -
globally competitive
TRUE9. The Quality Review Committee and Education Technical Council shall be both composed of seven
members. - P. 94
FALSE10. PICPA shall have a full-time or part-time career Executive Director who shall implement the policies
promulgated by the PICPA Board of Directors to maintain its recognition as APO. - P.96 - full-time only
TRUE 11. The body tasked to monitor the implementation of the CPD program is the called CPD Council.
(page 98 - #3 bullet from important notes)
FALSE 12. COA has the power, authority and the duty to examine, audit, and settle all accounts pertaining to
the management of funds of the government excluding government-owned and controlled corporations. (page
98 - #2 paragraph 2)
TRUE 13. SEC can issue cease and desist orders to prevent fraud or injury to the investing public. (page 99 -
#3 from powers and functions)
TRUE 14. BIR also prescribes additional requirements for audited financial statement that accompany tax
returns of entities. (page 100 - #4)
FALSE 15. The insurance commission has the function of verifying the financial condition and methods of
doing business of entities engaged in insurance business, pre-need, mutual benefit associations, trusts for
charitable uses, and HMO companies. (page 100 - #6)
1. Which of the following is not one of the specified objectives of the Accountancy Act of 2004?
A. The standardization and regulation of accounting education.

B. The examination for registration of certified public accountants.
C. Integration of the practice of accountancy
D. The supervision, control, and regulation of the practice of accountancy in the Philippines.
Reference page: page 71 ( RA 9298 Objectives)
2. It is the area of practice of accountancy namely public accountancy, commerce and industry,
academe/education and government.
A. Scope of Services
B. Sector
C. Practice Fields
D. Fields of accountancy
Reference page: 72 RA 9298 practice of accountancy which are known as sectors
3. Which of the following does not constitute a practice of accountancy?
A. A person holding out himself as one skilled in the knowledge, science and practice of accounting and as
qualified person to render professional services as a CPA to more than one client. (Practice of Public
Accountancy)
B. A person representing his/her employer before government agencies on tax and other accounting related
matters. (Practice in Commerce and Industry)
C. A person in educational institution teaching accounting, auditing, business law, taxation or other technically
related subjects. (Practice in Education/Academe)
D. A person is appointed as a marketing director of a government-owned and controlled corporation.
Reference page: page 72 - 73
4. The following should be occupied only by a duly registered CPA, (choose the exception)
A. Any position in any business or company in the private sector which requires supervising the recording of
financial transactions. (pg. 73) (practice in Commerce/ Industry)
B. Any position in any business or company in the private sector which requires preparation of financial
statements. (pg. 72- practice of public accountancy)
C. Any position in any business or company in the private sector which requires coordinating with the internal
auditors for the audit of financial statements. (practice in Commerce/ Industry)
D. The position of the dean that supervises the BSA program of an educational institution. (pg. 73 - academe)
Reference page: page 73 (coordinating w/ external auditors)
5. Practice in commerce and industry shall constitute in a person
A. In an educational institution which involves teaching of accounting, auditing, management advisory services,
finance, business law, taxation, and other technically related subjects. (Practice in Education/Academe)
B. Holding out himself/herself as one skilled in the knowledge, science and practice of accounting, and as a
qualified person to render professional services as a certified public accountant; or offering or rendering, or
both, to more than one client on a fee basis or otherwise. (Practice of Public Accountancy)
C. Involved in decision making requiring professional knowledge in the science of accounting, or when such
employment or position requires that the holder thereof must be a certified public accountant.
D. Who holds, or is appointed to, a position in an accounting professional group in government or in a
government owned and/or controlled corporation, including those performing proprietary functions, where
decision making requires professional knowledge in the science of accounting, (Practice in the Government)
Reference page: page 72 - bullet # 1 & 3
6. Any position in any business or company in the private sector which requires supervising the
recording of financial transactions, preparation of financial statements, coordinating with the external
auditors for the audit of such financial statements and other related functions shall be occupied only
by a duly registered CPA. Provided (choose the incorrect one)
A. That the business or company where the above position exists has a paid-up capital of at least P5,000,000
and/or an annual revenue of at least P10,000,000.
B. The above provision shall apply only to persons to be employed after the effectivity of the Implementing
Rules and Regulations of RA 9298.
C. The above provision shall not result to deprivation of the employment of incumbents to the position.
D. That the business or company where the above position exists has an annual revenue of at least
P5,000,000 and/or paid-up capital of at least P10,000,000.
Reference: A, B, and C is in page 73 (top part)
7. The Professional Regulatory Board of Accountancy of the Philippines created under Republic Act
No. 9298.
A. PRC
B. BOA
C. PICPA
D. FRSC
8. The following statements relate to the Board of Accountancy. Which statement is correct?
A. The chairman and members are appointed by the President of Philippines upon recommendation of PICPA.
(PRC)
B. The Professional Regulation Commission may remove from the Board any member whose certificate to
practice has been removed or suspended. (President of the Philippines)
C. The Board consists of a Chairman and six members.
D. Majority of the board members shall as much as possible be in public practice. (Majority of the board
members isn’t required to be in the public practice. Board members should be as much as possible be
equitably represent the 4 sectors.)
Reference page: page 74 (Composition part of BOA definition)
9. The following statements relate to the submission of nominations to the Board of Accountancy.
Which is correct?
A. The Accredited National Professional Organization of CPAS (APO) shall submit its nominations to the
president of the Philippines not later than sixty (60) days prior to the expiry of the term of an incumbent
chairman or member
B. The APO shall submit its nominations to the president of the Philippines not later than thirty (30) days prior
to the expiry of the term of an incumbent chairman or member
C. If the APO fails to submit its own nominee(s) to the PRC within the required period, the PRC in consultation
with the Board of Accountancy shall submit to the president of the Philippines a list of five (5) nominees for
each position.
D. There should be adequate documentation to show the qualifications and primary field of professional activity
of each nominee
Reference page: page 74 - #1 (paragraph 2)
10. Choose the incorrect statement.
A. Any vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term
only.
B. No person who has served two successive complete terms as chairman or member shall be eligible for
reappointment as chairman or member until the lapse of one year.
C. Appointment to fill up an unexpired term is to be considered as a complete term.
D. No person shall serve in the Board for more than twelve (12) years.
Reference page: page 75 - number 4 bullet (Appointment to fill up an unexpired term is NOT to be
considered as a complete term.)
11. Which of the following is not included in powers and functions of BOA?
A. To prescribe and adopt the rules and regulations necessary for carrying out the provisions of the Philippine
Accountancy Act of 2004
B. To supervise the registration, licensure and practice of accountancy in the Philippines
C. To administer oaths in connection with the administration of RA 9298
D. To issue, suspend, revoke, or reinstate the Professional Identification Card for the practice of the
accountancy profession
Reference page: page 75 - letter D (Certificate of Registration)
12. A member of the Board shall, at the time of his/her appointment, must possess the following
qualifications, except
A. Must be a Filipino citizen and a resident of the Philippines

B. Must be a duly registered CPA with at least ten (10) years experience in any scope of practice of
accountancy. of work (b)
C. Must be of good moral character and must not have been convicted of crimes involving moral turpitude (c)
D. Must not have any pecuniary interest, directly or indirectly, in any school, college, university or institution
affecting the provision of BS Accountancy. (d)
Reference page: page 75 - Qualification of Members (“must be a natural-born citizen and a resident of
the Philippines”)
13. Which of the following is not one of the functions of the Board of Accountancy specifically
provided under the RA 9298?
A. To monitor the conditions affecting the practice of accountancy and adopt such measures deemed proper for
the enhancement and maintenance of high professional, ethical, accounting and auditing standards (letter g)
B. To conduct an oversight into the quality of audits of financial statements through a review of the quality
control measures (letter h)
C. To delegate its power and function to determine and prepare test questions for the CPA licensure
examination
D. To make investigations as it deems necessary to determine whether any person has violated any provisions
of this law or any standards promulgated by the Board as part of the rules governing the practice of
accountancy (letter j)
14. The president of the Philippines, upon the recommendation of the Commission, may suspend or
remove any member of the Board of Accountancy. Which of the following is not a valid ground for
suspension or removal of members of the Board of Accountancy?
A. Neglect of duty or incompetence.

B. A member of the Board manipulated the CPA licensure examination results.
C. A member of the Board has violated RA9298.
D. A member of the Board has been sued of crimes involving moral turpitude.
Reference page: page 77 (letter c. - final judgment involving moral turpitude)

15. All applicants for registration for the practice of accountancy shall be required to undergo a
licensure examination to be given by the Board in such places and dates as the Commission may
designate subject to the compliance with the requirements prescribed by the Commission in
accordance with
A. RA 9892
B. RA 9298
C. RA 8981
D. RA 8882
Reference page:
1. Which of the following is (are) among the qualifications of applicants for CPA Licensure examination?
I. He/ She must be a natural born Filipino Citizen

II. He/ She must be of good moral character
III. He/ She must be a holder of the degree of Bachelor of Science in Accountancy
IV. He/ She is at least 21 years of age
A. I, II and III
B. I and II only
C. II and III only
D. I, II, III and IV
Reference page: p. 78
2. The following statements relate to CPA examination ratings. Which statement is incorrect?
A. To pass the examination, candidates should obtain a general weighted average of 75% and above, with no
rating in any subject less than 65%. (Passed)
B. Candidates who obtain a rating of 75% and above in at least four (4) subjects shall receive a conditional
credit for the subjects passed. (Conditional)
C. Conditioned candidates shall take an examination in the remaining subject within three (3) years from the
preceding examination.
D. Candidates who fail in two (2) complete CPA examinations may be allowed to take examinations a third time
provided he or she submits evidence to the satisfaction of the Board that he/she enrolled in and completed at
least twenty-four (24) units of subject given in the board exam. (Failed)
Reference page: p. 79 (within 2 years lang dapat)
3. The following ratings were obtained by an examinee during the October 2021 examination:
Auditing 98
Financial Accounting and Reporting 95
Advanced Financial Accounting and Reporting 74
RFBT 64
Management Advisory Services Taxation 98
Taxation 72
Based on the above information, the examinee is considered
A. Passed
B. Topnotcher
C. Conditional
D. Failed
4. The Board shall submit to the Commission the ratings obtained by each candidate within
A. 2 calendar days after the examination

B. 5 calendar days after the examination
C. 10 calendar days after the examination
D. 15 calendar days after the examination
Reference page: p. 80 , Report of Ratings
5. The following statements relate to roster of CPAs. Identify the incorrect statement:
A. A roster showing the names and place of business of all registered CPAs shall be prepared and updated by
the Board
B. Copies of the roster shall be made available to any party as may be deemed necessary
C. The Board, upon approval of the Commission, may delegate the preparation of this roster to the APO
D. The publication of the roster in the official gazette or in any major newspaper of public circulation shall be
deemed compliance with the requirement of RA 9298
Reference page: 80 (?)
6. Which of the following statements is incorrect?
A. Professional identification card is a card with validity of three (3) years, bearing the registration number, date
of issuance with an expiry date, due for periodic renewal, duly signed by the Chairperson of the Commission
issued by the PRC to a registered CPA upon payment of the annual registration fees for three (3) years.
B. A certificate of registration is a certificate under seal with a validity of three (3) years, bearing a registration
number, issued to an individual, by the Commission, upon recommendation by the Board, 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.
C. Both certificate of registration and professional identification card shall be issued to a candidate who passes
the CPA Licensure examination.
D. The Board has the power to issue, suspend, revoke and/or reinstate the certificate of registration. (pg. 75,
powers and Functions of BOA (d))
Reference page: p. 81 - CoR has a lifetime validity unless suspended/ revoked. Ang tinutukoy sa letter
B ay Certificate of Accreditation. (p.84-85)
7. Under foreign reciprocity, special/temporary permit may be issued by the Board subject to the approval of
the Commission and payment of the fees the latter has been prescribed and charged thereof to the following
persons except
A. A foreign CPA called for consultation or for a specific purpose which, in the judgment of the Board, is
essential for the development of the country.
B. A foreign CPA engaged as a professor, lecturer or critic in fields essential to accountancy education in the
Philippines
C. A foreign CPA who is an internationally recognized expert or with specialization in any branch of
accountancy and his/her service is essential for advancement of accountancy in the Philippines
D. A foreign certified public accountant who visits the Philippines to study additional learning in the field of
computer system and design.
8. Application for initial registration, renewal and request for reinstatement, shall be subject to the fee of
A. One Thousand Pesos (P1,000.00) or to such an amount as the Commission may prescribe.
B. Five Thousand Pesos (P5,000.00) or to such an amount as the Commission may prescribe. C. Fifteen
Thousand Pesos (P15,000.00) or to such an amount as the Commission may prescribe.
D. Twenty-five Thousand Pesos (P25,000.00) or to such an amount as the Commission may prescribe.
Reference page: IRR, FEES AND PENALTIES

(a) Application for initial registration, renewal and request for reinstatement, shall
be subject to the fee of One Thousand Pesos (P1,000.00) or to such an amount
as the Commission may prescribe.
This fee is stated in the RA 9298.
9. The Board shall have the power, upon due notice and hearing, to suspend or revoke the practitioner's
Certificate of Registration and Professional Identification Card or suspend him/her from the practice of his/her
profession or cancel his/her special permit for any of the causes or grounds mentioned under Section 23 of RA
9298 or for any unprofessional or unethical conduct, malpractice, violation of any of the following, except
A. The provisions of RA No. 9298

B. The provisions of implementing rules and regulations
C. Certified Public Accountant's Code of Ethics
D. Financial Reporting Standards
10. A person whose CPA certificate has been revoked
A. Can no longer be reinstated as a CPA

B. Is automatically reinstated as a CPA after two years if the has acted in an exemplary manner
C. May be reinstated as a CPA by the Board of Accountancy after two years if he has acted in an exemplary
manner
D. May be reinstated by the PRC after two years if he has acted in an exemplary manner
11. A certificate under seal, issued by the Commission upon the recommendation by the Board pursuant to this
revised rules and regulation, attesting that Individual CPAs, including the staff members thereof, Firms,
including the sole proprietors and the staff members thereof and Partnerships of CPAs including the partners
and the staff members thereof, are duly accredited to practice public accountancy in the Philippines.
A. Business Permit
B. Certificate of Registration
C. Certificate of Accreditation
D. Professional Identification Card
12. A CPA shall not practice under a firm name that includes or indicates the following, except
A Fictitious name (p.83)

B. Specialization
C. Misleading as to the type of organization (p.83)
D. Name(s) of past partner(s) in the firm name of successor partnership.
Reference page: p. 84 (?) The surviving partner can continue the partnership for 2 years before he/she
changed it into his/ her own name. (magiging sole proprietorship na siya)
13. Meaningful experience shall be considered as satisfactory compliance with the requirements of Section 28
of RA No. 9298 if it is earned in
A. Commerce and industry and shall include significant involvement in general accounting, budgeting, tax
administration, internal auditing liaison with the Commission on Audit, representing his/her employer before
government agencies on tax and matters related to accounting or any other related functions.
B. Academe/education and shall include teaching for at least three (3) trimesters or two (2) semesters subjects
in either financial accounting, business law and tax, auditing problems, auditing theory, financial management
and management services and the accumulated teaching experience on these subjects shall not be less than
three (3) school years.
C. Government and shall include significant involvement in general accounting, budgeting, tax administration,
internal auditing, liaison with external auditors or any other related functions
D. Public practice and shall include at least one year as auditor in charge and at least two years as audit
assistant of audit engagement covering full audit functions of significant clients.
14. Which of the following is not an objective of requiring registration of individual CPAs and Firms of
partnership of CPAs engaged in public accounting practice?
A. The required registration will give equal opportunities to CPAs practice of their profession.
B. It will enable the Board of Accountancy to formulate and implement rules and regulations more effectively for
the enhancement and maintenance of high professional, ethical, and technical standards of the accounting
profession.
C. To protect the public against fraud, deception, unethical practices and from the consequences of ignorance,
incompetence and incapacity in the practice of public accounting.
D. It will help PRC and BOA to identify and impose corresponding sanction and penalties on individual CPAs.
There’s no guarantee that CPAs will have equal opportunities
RA 9298 provided that the person indicated in this certificate is entitled to the practice of the
accountancy profession with all the privileges accompanied thereto. The said certificate shall remain in
full force and effect until withdrawn, suspended or revoked in accordance with RA 9298.
Simply stated, the certificate of registration is the primary proof of a person's acceptance in the
accountancy profession and it has a lifetime validity unless suspended or revoked.
15. Which of the following is required for a partnership for public accountancy practice?
A. At least one of the partners must be a CPA.

B. All partners must be PICPA members.
C. All partners must be CPAs.
D. Firm name must contain names of partners only.
Reference page: p. 83 & 84
1. Which of the following statements concerning the use of firm or partnership name is incorrect?
A. In the case of an individual CPA, he/she shall do business under his/her registered name with the BOA and
the PRC and as printed in his/her CPA certificate (for example, Juan dela Cruz, CPA).
B. In the case of a firm, it shall do business under its duly registered and authorized firm appearing in the
registration documents issued by the Department of Trade and Industry (DTI) and other government offices
and such firm name shall include the real name of the sole proprietor as printed in his/her certificate (for
example, Juan dela Cruz and Associates).
C. In the case of a registered partnership, it shall do business under its name as indicated in its current Articles
of Partnership and Certificate of Registration issued by the Securities and Exchange Commission (SEC) (For
example, Santos, Reyes and Diaz, CPAs).
D. A CPA shall practice only under an individual firm or partnership name in accordance with Philippine laws
and shall not include any fictitious name but may indicate specialization.
Reference page: p.
2. Individual CPAs, Firms or Partnerships of CPAs, including partners and staff members thereof shall register
with the BOA and the PRC. If the application for registration of ABC and Co., CPAs was approved on August
25, 2020, it shall file for renewal on or before
A. 09/30/2022 - September is for renewal

B. 09/30/2023
C. 12/31/2022 - December is for the expiration
D. 12/31/2023
Reference page: p. 85 - Renewal and Expiration Illustration

August 25, 2020 (Given), 2020 is already counted as 1 one year, so the renewal and expiration is only for 3
years, so their lapse is only until 2022.
Expiration date - december 31, 2022
Statement 1: It shall be the primary duty of the Commission and the Board to effectively enforce the provisions
of RA 9298 and its Implementing Rules and Regulations.
Statement 2: Any person may bring before the Commission, Board, or the aforementioned officers of the law,
cases of illegal practice or violations of RA 9298 and its Implementing Rules and Regulations.
A. Only statement 1 is correct

B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Reference page: p.
4. The following statements relate to the use of seal by registered CPAs. Which is incorrect?
A. A registered CPA shall obtain and use a seal of a design that will suit his/her taste
- dapat uniform ang design ng seal ng mga CPAs as they have the prescribed form and format given to them
B. The seal should be a design prescribed by the Board bearing the CPA's name, registration number, and title
C. The auditor's report shall be stamped with CPA's seal, indicating therein his/her current Professional Tax
Receipt (PTR) number, date/place of payment when filed with government authorities or when used
professionally
D. The seal of a CPA shall be circular form (pg. 86)
Reference page: p. 86 (IRR)
Prescribed format on the design of the seal
SEC. 33. Seal and Use of Seal. - All registered certified public accountants shall obtain and use a seal
of a design prescribed by the Board bearing the registrant’s name, registration number and title. The
auditor’s reports shall be stamped with said seal, indicating therein his/her current Professional Tax
Receipt (PTR) number, date/place of payment when filed with government authorities or when
usedprofessionally.
5. Any person who shall violate any of the provisions of the Act, or any of its implementing rules and
regulations as promulgated by the Board subject to the approval of the Commission shall upon conviction, be
punished by
A. Lethal injection.
B. A fine of not more than fifty thousand pesos.
C. Imprisonment for a period not exceeding two years.
D. A fine of not less than fifty thousand pesos or by imprisonment for a period not exceeding two years or both.
Reference page: p.
6. As defined in Annex "C" of the IRR, this refers to the inculcation, assimilation and acquisition of knowledge,
skills, proficiency and ethical and moral values, after the initial registration of a professional that raise and
enhance the professional's technical skills and competence.
A. Professional Development
B. Continuing Professional Development - RA 10912 Act. 2016 (New Term)
C. Continuing Professional Education- IRR (RA 9298) (Old Term)
D. Professional Growth and Development
Reference page: p.32
- The term use in the implementing rules and regulations or IRR is continuing Professional Education
- Old term yung continuing professional education
- New term yung continuing professional development
7. The following are the objectives of the Continuing Professional Education (CPE) programs according to
Section 32 of IRR of RA9298, except:
A. To promote the general welfare of the public.

B. To raise and maintain the professional's capability for delivering professional services.
C. To provide and ensure the continuous education of registered professional with the latest trends in the
profession brought about by the modernization and scientific and technological advancements.
D. To make the professional locally competitive.
Reference page: IRR (RA 9298) p. 32
8. How many CPE credit units must be accumulated by a registered accounting professional within the 3-year
period starting 2019?
A. 60 credit units
B. 80 credit units
C. 100 credit units
D. 120 credit units
CPAs must complete at least 120 hours of CPE for each three-year reporting period, according to
the American Institute of CPAs (AICPA).
https://www.aicpa.org/membership/landing/aicpa-membership-cpe-requirements
https://www.accelerapro.com/pages/cpd-law-and-boa-accreditation?fbclid=IwAR34Vdt3kPcnDQPsNfiw
L4iIbQyiJJmZ-pwKU8dHWnc6Oo9-GhdVouxQU_0
9. The minimum credit units that shall be earned in each year.
A. 15 credit units in each year

B. 20 credit units in each year
C. 25 credit units in each year
D. 30 credit units in each year
Reference page: p.
10. Are the following CPAs required to comply with the requirements on continuing professional education?
A B C D
CPAs in Public Accountancy Yes Yes Yes Yes
CPAs in Commerce and Industry Yes Yes No No
CPAs in Government Yes No Yes No
CPAs in Education/Academe Yes Yes Yes No
Reference page: Yes, because all sectors should comply with the CPE requirements.
Since all of them should comply with continuing professional education
11. Which statement is correct regarding CPE (Continuing Professional Education) requirements for renewal of
professional license?
A. The total CPE credit units required for CPAs shall be sixty (60) units for three (3) years provided that a
minimum of fifteen (15) credit units shall be earned in each year.
B. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of
65 years old.
C. A 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 (2) year
immediately prior to the date of renewal.
D. Senior citizens are not exempted from CPD requirements.
Reference page: p.
12. Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed the
CPE requirements shall
A. Be dropped from the roster of CPAs.

B. Not be allowed to renew their professional licenses.
C. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills and
experience to discharge their professional responsibility.
D. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE requirements.
● CPE extensions are requested on your renewal application.
- It is the consequence if you are not able to comply with the CPE requirements
- In the case the CPAs required 120 credit units if you fail to achieve the 120 requirements then
you will not be allowed to renew your professional license
- 120 (required for accreditation)
- 15 credit units (renewal of PRC ID) Except: OFWs and Newly licensed professionals for the first
renewal cycle after obtaining their license
- As trusted advisors, Certified Public Accountants advise their clients on a wide range of important
accountancy issues that have a material impact on businesses and their stakeholders. The field of
accounting is built on a vast knowledge base that is continuously expanding, changing, and
becoming more complex. In order to ensure that CPAs provide the quality of advice and service
that their clients depend on, CPE is vital.
13. Which of the following describes seminars?
A. Shall refer to the gathering of professionals which shall include, among others, workshops, technical
lectures or subject matter meetings, non degree training courses and scientific meetings.
B. Shall refer to a gathering of professionals which shall include, among others, conferences, symposia or
assemblies for round table discussions.
C. Shall refer to the ownership of intellectual property which includes technical or professional books,
instructional materials and the like.
D. None of the above
Reference page: p.
14. Which of the following describes masteral degree?
A. Shall refer to a graduate degree in accountancy, business or related field from a recognized school, college
or university. - MASTERS DEGREE
B. Shall refer to a post graduate degree in accountancy, business or field from a recognized school, college or
university. - DOCTORAL
C. Shall mean training or specialization at the post graduate level for a relate minimum period of one (1) week.
- POST GRADUATE/IN-SERVICE TRAINING
Reference page: https://www.prc.gov.ph/uploaded/documents/IRR_cpa.pdf p.35

This is stated in the RA 9298 and IRR.
Programs, Activities and Sources for Accreditation and Equivalent Credit Units
iii. Masteral Degree shall refer to a graduate degree in accountancy, business or related field from a
recognized school, college or university.
iv. Doctoral Degree shall refer to a post graduate degree in accountancy, business or related field from
a recognized school, college or university.
vii. Post Graduate/In-Service Training shall mean training or specialization at the post graduate level
for a minimum period of one (1) week.
15. Which of the following describes resource speaker?
A. Shall refer to a professional who acts as discussion leader or lecturer in a convention or seminar or similar
gathering.
B. Shall refer to a professional who acts as an evaluator of a research paper, conference paper or journal
article before it is presented or published.
C. Shall refer to a natural person or a juridical entity which includes among others, accredited or
non-accredited professional organization, firm partnership, corporation or institution which offers, organizes or
arranges CPE programs, activities or sources for implementation and administration.
Reference page: p.
1. The Commission upon the recommendation of the Board shall within ninety (90) days from the effectivity of
the IRR, create an accounting standard setting body to be known as the
A. Accounting Standards Council

B. Financial Reporting Standards Committee
C. Financial Reporting Standards Council
D. Accounting Standards Committee
Reference website: Professional Regulation Commission (PRC) - RULES AND REGULATIONS

IMPLEMENTING REPUBLIC ACT NO. 9298 OTHERWISE KNOWN AS THE PHILIPPINE ACCOUNTANCY
ACT OF 2004 AND FOR OTHER PURPOSES
SEC. 9 (A). Accounting and Auditing Standard Setting Council - The Commission upon the
recommendation of the Board shall within ninety (90) days from the effectivity of this IRR, create an
accounting standard setting body to be known as the Financial Reporting Standards Council (FRSC)
and an auditing standard setting body to be known as the Auditing and Assurance Standards Council
(AASC) to assist the Board in carrying out its powers and functions provided in Rule II, Section 7 (g)
hereof;
2. Per R.A. 9298, AASC shall be composed of
A. Fifteen (15) members with a Chairman

B. Fourteen (14) members with a Chairman
C. Fourteen (14) members and a vice-chairman
D. Seventeen (17) members
Reference page: p. 93-94
3. Specifically, the board of accountancy is officially represented in the AASC by:
A. Secretary of the BOA

B. Chair, PRC
C. Chair, BOA
D. BOA member who handles Auditing theory subject
Reference page: https://aasc.org.ph/auditing-standards-council-about-aasc/key-contacts
The current member of the AASC (Board of Accountancy) - Maria Teresita Z. Dimaculangan “Tess”
The Hon. Maria Teresita Socorro “Marites” Z. Dimaculangan, ME 2005, was recently appointed by President
Rodrigo Duterte to the Professional Regulatory Board of Accountancy (PRBOA). She took her oath on February
8, 2022 at a formal ceremony presided by Hon. Teofilo S. Pilando, Jr., current Chairman of the Professional
Regulatory Commission (PRC).
4. The creation of FRSC and AASC is intended to assist the BOA in carrying out its function to
A. To monitor the conditions affecting the practice of accountancy and adopt such measures, rules and
regulations and best practices as may be deemed proper for the enhancement and maintenance of high
professional, ethical, accounting and auditing standards. - this is because the PRC created FRSC and
AASC to assist BOA in promulgating accounting and auditing standards ang generally accepted best
practices.
B. To supervise the registration, licensure and practice of accountancy in the Philippines. -
C. To prescribe and adopt the rules and regulations necessary for carrying out the provisions of RA 9298 It is
the primary duty of them PRC and the BOA to effectively enforce the provisions of RA 9298
D. To prepare, adopt, issue or amend the syllabi of the subjects for examinations. (CHED/ ETC) (?)
Reference page: p. 93, 76 letter g.
5. The following are represented both to the Financial Reporting Standards Council (FRSC) and Auditing and
Assurance Standards Council (AASC), except
A. Securities and Exchange Commission

B. Bangko Sentral ng Pilipinas
C Bureau of Internal Revenue
D. Board of Accountancy
6. Which of the following statements is (are) correct?

I. Within two (2) years, subject to certain conditions, the Board may order the reinstatement of a CPA whose
certificate of registration has been revoked. - After two years dapat
II. Punishment for any violations of the Philippine Accountancy Act of 2004 is a fine of at least P50,000 or
imprisonment of at least two (2) years, or both. - not exceeding two (2) years. (w/in 2 years lang ang
imprisonment)
A. I only
B. Il only
C. Both I and II
D. Neither I nor II
Reference page:
Statement 1 - pg. 82
Statement 2 - pg. 86 (Penal Provision)
7. Maintenance of professional competence is achieved through which of the following?
A. Initially, a high standard of general education

B. Specific education, training and examination in professionally relevant subjects
C. Whether prescribed or not, a period of work experience
D. A continuing awareness of development in the accountancy profession
Reference site: Code of Ethics.

Professional competence may be divided into two separate phases: (a) Attainment of professional
competence; and (b) Maintenance of professional competence.
The maintenance of professional competence requires a continuing awareness and an understanding

of relevant technical professional and business developments. Continuing professional development
develops and maintains the capabilities that enable a professional accountant to perform competently
within the professional environments.
8. The number of additional credit units earned upon completion of a post graduate degree is
A. 30
B. 45
C 1 per academic unit
D 2 per academic unit
Reference page: p. 90 - Maximum of 30 CU for an 18-month period or a fraction thereof upon

completion.
9. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of
A 55
B. 60
C. 65
D. 70
Reference site: Professional Regulation Commission - RULES AND REGULATIONS IMPLEMENTING
SECTION 32, ARTICLE IV OF REPUBLIC ACT NO. 9298 OTHERWISE KNOWN AS THE PHILIPPINE
ACCOUNTANCY ACT OF 2004 COVERING THE CONTINUING PROFESSIONAL EDUCATION (CPE)
PROGRAMS FOR CPAs IN THE PRACTICE OF ACCOUNTANCY
7. Exemption from CPE Requirements Procedures
(a) Permanent Exemption
A registered professional shall be permanently exempted from CPE requirements upon
reaching the age of 65 years old. To avail of this exemption, the professional must
i. Submit an application for exemption which should include the following data:
- Full name, residence address and phone number of applicant
- PRC License Number
- Employment history
• Position • Name of employer • Address of employer
ii. Submit an authentic or authenticated copy of birth certificate. If birth certificates is not
available, submit any of the following: Voter’s ID or Driver’s License.
10. The APO shall submit its nominations with complete documentation to the Commission not later than prior
to the expiry of the term of an incumbent chairman or member
A 30 days
B. 60 days
C. 90 days
D 120 days
Reference page: p. 74 (Accredited Professional Organization)
11. The Board shall be composed of a chairman and six (6) members to be each position
appointed by the President of the Philippines from a list of <List A> for each position and ranked by the
Commission, from a list of <List B> nominees for each position submitted by the APO
<List A> <List B>
A. Three (3) Five (5)

B. Five (5) Three (3)
C Six (6) Three (3)
D Five (5) Six (6)
Reference page: p. 74 or;

PROFESSIONAL REGULATORY BOARD OF ACCOUNTANCY
SEC. 5. The Professional Regulatory Board of Accountancy and its Composition. – The Board
shall be composed of a chairman and six (6) members to be appointed by the President of the
Philippines from a list of three (3) recommendees for each position and ranked by the
Commission, from a list of five (5) nominees for each position submitted by the APO. The Board
shall elect a vice-chairman from among its members for a term of one (1) year. The chairman
shall preside in all meetings of the Board and in the event of a vacancy in the office of the
chairman, the vice-chairman shall assume such duties and responsibilities until such time as a
chairman is appointed.
12. The Board shall elect a vice-chairman from among its members for a term of
A. 1 year - p. 74 (Composition)
B. 2 years
C. 3 years - p. 75 (Term of office)
D. 6 years
Reference page: p. 74, Composition
13. All of the following are grounds for suspension or removal of members of the board, except
A Neglect of duty or incompetence

B. Violation or tolerance of any violation of RA 9298 and its implementing rules and regulations or the Certified
Public Accountant's Code of Ethics and the technical and professional standards of practice for certified public
accountants
C Final judgment of crimes involving moral turpitude
D. Having a pecuniary interest, directly or indirectly, in any school, or university college
14. The Board shall, at the close of each calendar year, submit annual report that gives a detailed account of
its proceedings and accomplishments during the year to the
A. Secretary of Department of Justice

B. Professional Regulation Commission
C President of the Philippines
D. Senate President and the Speaker of the House of Representatives
Reference page: p. 77, Other Provisions of RA 9298 related to BOA

BOA shall, at the close of each calendar year, submit an annual report to the President of the Philippines
through PRC the following:
● a detailed account of its proceedings and accomplishments; and
● making recommendations for the adoption of measures that will upgrade and improve the conditions
affecting the practice of accountancy.
15 The powers and functions of the Board include the following, except
A To prescribe and adopt the rules and regulations necessary for carrying out the provisions of this Act (letter
a)
B. To supervise the registration, licensure and practice of accountancy in the Philippines (letter b)
C. To administer oaths in connection with the administration of this Act (letter c)
D. To remove a member of the Board upon due investigation from the Commission
Reference page: p. 75-76 (Powers and Function of BOA)
1. Which of the following is not one of the main objectives of the Philippine Accountancy Act of 2004?
A The standardization and regulation of accounting education
B. The examination for registration of certified public accountants
C. The supervision, control, and regulation of the practice of accountancy in the Philippines
D. The prescription and/or adoption of a Code of Ethics for the practice of accountancy
Reference page: p.
2 Practice of commerce and industry shall constitute in a person
A When he/she is appointed as a marketing director of a government owned and controlled corporation. -
Practice in the Government
B. When he/she holds out him/herself as one skilled in the knowledge, render science and practice of
accounting and as a qualified person to professional services as a CPA to more than one client. - Public
Accountancy
C Where a civil service eligibility as a CPA is a prerequisite - Government
D. When he/she represents his/her employer before government agencies on tax and accounting related
matters
3 Which of the following is incorrect on the practice of public accountancy?
A. A Certificate of Accreditation shall be issued to CPAs in public practice

B. CPAs in public practice may register as general or limited partnerships, but not a corporation. C.
Registration shall be valid for three (3) years, renewable for another three (3) years on or before December 31
on the third year following its approval
D. The name of a CPA firm must not indicate specializations.
Reference page: p.
4. Which of the following names will not be registered for public practice?
A. Loida Amutan, CPA

B. Loida Amutan and Associates
C. Amutan, Renato, Bercaslo, and Company
D. Amutan and Renato, CPAs (Renato died more than two years ago)
Reference page: p. 84.

- Surviving or Remaining partner may continue to use the old partnership name for a period of
not more than (2) years after becoming a sole proprietorship.
5. The minimum meaningful experience required in public accountancy shall include
A. At least 1 year as audit assistant and at least 1 year as auditor in charge

B. At least 2 years as audit assistant and at least 2 years as auditor in charge
C. At least 1 year as audit assistant and at least 2 years as auditor in charge
D. At least 2 years as audit assistant and at least 1 years as auditor in charge
Reference page: p.
6. Which of the following is incorrect?
A. All successful examinees in the Philippine CPA examinations shall take an oath of profession.
B. The Certificate of Registration issued to successful examinees shall be renewed every after three (3) years,
upon payment of registration fees - Incorrect because CoR has a lifetime validity unless revoked/
suspended, and withdrawn in accordance with RA 9298.
C. The Professional Identification Card bears the registration number of the new CPA, date of issuance, expiry
date and is duly signed by the chairman of the PRC.
D. A roster showing the names and place of business of all registered CPAs shall be prepared and updated by
the Board.
Reference page: p.81 top part
7. Which of the following bodies is not created or its members not appointed by the Professional Regulation
Commission?
A. PRC CPE Council

B. Education Technical Council (ETC)
C. Financial Reporting Standards Council (FRSC)
D. Quality Review Committee (QRC)
Reference page: p.
8. All of the following bodies are composed of a chairperson and 6 members. Which one is not?
A. Education Technical Council

B. Board of Accountancy
C. Quality Review Committee
D. PRC CPE Council - 3 members
Reference page: p.
9. Which is a correct statement concerning the FRSC?

A. The chairman must have been or is presently a senior practitioner in public accountancy.
B. A total of six representatives must come from the public practice sector of the accredited national
professional organization.
C. It is created within 60 days upon the effectivity of the IRR to RA 9298.
D. The Bureau of Internal Revenue has one representation in the Council.
Reference page: p.
10. The number of nominees for each position in the Board to be submitted by the APO is
A. One
B. Three
C. Five
D. Seven
Reference page: p.
11. All of the following are qualifications to be appointed to the Board. Which one is not?
A. Filipino citizenship (natural-born) and residence
B. Must not be a member of the APO at the time of appointment
C. Ten (10) years of experience as a CPA in any scope of practice
D. Must not be convicted of crimes involving moral turpitude
Reference page: p.
12. Which of the following is not among the specific powers, functions and responsibilities of the Board?
A. To investigate violations of the Philippine Accountancy Act of 2004
B. To conduct an oversight into the quality of audits of financial statements
C. To prescribe and/or adopt a Code of Ethics for the practice of accountancy
D. To determine the minimum standard curriculum for the study of accountancy
Reference page: p.
13. Which of the following is incorrect regarding term of office of chairman and members of the Board?
Reference page: p.
A. No member shall serve for more than 12 years.

B. No person who has served two successive terms shall be eligible for reappointment until the lapse of one
year.
C. Appointment to fill up an unexpired term is not to be considered as a complete term.
D. A vice-chairman shall be elected by the Board among themselves to serve a vice chairman for three years,
renewable.
14. The following statements relate to the rating in the CPA exams. Identify the correct statement.
A. A candidate must have a general weighted average of at least 75% with no grades lower than 75% in any
given subject in order to pass the CPA exams.
B. In the event a candidate obtains a rating of 75% and above in at least a majority of the subjects, he/she
shall receive conditional credit for the subjects failed.
C. Any candidate who fails in 2 complete CPA Board Exams shall be disqualified from taking another set of
examination unless he or she submits evidence to the satisfaction of the Board he/she enrolled in and
completed at least 24 units of subjects given in the licensure examination within two years from the last
examination taken.
D. The Board shall submit to the PRC the ratings obtained by each candidate within ten (10) calendar days
after the examination.
Reference page: p.
15. All of the following are qualifications of applicants for the Philippine CPA examinations. Which one is not?
A. Must not be convicted of any criminal offense involving moral turpitude

B. Must be a resident citizen
C. Must be a holder of the degree of Bachelor of Science in Accountancy
D. Must be of good moral character
Reference page: p.
CHAPTER 4
0-1 TRUE OR FALSE
1. The audit process is a structures series of steps taken by the auditor to achieve his audit objectives.
2. Assertions relating to classes of transactions generally relate to line items presented in the statement of
financial performance while assertions relating to account balances generally relate to line items presented in
the statement of financial position.
3. Management has the responsibility for the preparation and presentation of the face of financial statements
which allows the auditor to prepare the related disclosures.
4. Management has the responsibility to provide the auditor with unrestricted access to any information
maintained by them.
5.Audit evidence serve as the basis in expressing the opinion required by the audit of financial statements.
6. Risk assessment procedures are performed to obtain understanding of the entity that lead to the
identification of risk of material misstatements at the assertion level.
7. Substantive procedures are designed to detect material misstatements at the financial statement level.
8.. Observation consists of looking at a process or procedure being performed by others.
9. Confirmation is a specific type of inquiry to obtain representation of information or of an existing condition
from management.
10. The audit process is comprised of two sub-phases namely, investigative phase and reporting phase.
4-2 TRUE OR FALSE
1. Preliminary engagement activities help eliminate the likelihood of being associated to a client whose
management lacks integrity.
2. If the results of the study and evaluation of internal control support its operating effectiveness, the auditor
proceeds with the completion of the audit and expression of opinion.
3. An auditor may accept an engagement that is beyond his capacity and capability provided that relevant
training and expertise will be obtained during the performance of the audit.
4. In an audit engagement, the audit engagement team must be independent from the client which excludes
the auditor's expert.
5. Matters to be discussed with the previous auditor include the reason for change and disagreements with
management.
6. The auditor must obtain the acknowledgement by management of its responsibility to design, implement and
monitor internal controls during the investigative phase of the audit.
7. The agreement of the audit terms before the commencement of the audit help avoid misunderstandings
between the entity and the auditor.
8. The form and content of engagement letters are prescribed by the engagement standards.
9. To comply with ethical requirements, the audit fee and its basis of computation must be excluded from the
engagement letter.
10. The auditor must determine if there is a reasonable justification for a change in the audit engagement prior
to its completion.
4-3 MULTIPLE CHOICE QUIZZERS - (Les)
1. Acts to be performed in order to obtain audit evidence.
A. Audit standards
B. Audit procedures
C. Audit program
D. Audit strategy
Reference page: p.
2. Audit procedures performed to obtain an understanding of the entity and its environment, including its
internal control, and to assess the risks of material misstatements at the financial statement and assertion
levels.
A. Risk assessment procedures

B. Tests of control
C. Substantive procedures
D. Analytical procedures
3. Audit procedures to test the operating effectiveness of controls in preventing or detecting and correcting
material misstatements at the assertion level.

B. Tests of control
4. Audit procedures to detect material misstatements at the assertion level.

B. Tests of control
5. If a company's external auditor expresses an unqualified opinion as a result of the audit of the company's
financial statements, readers of the audit report can assume that
A. The external auditor found no fraud

B. The company is financially sound and the financial statements are accurate
C. Internal control is effective
D. All material disagreements between the company and the auditor about the application of accounting
principles were resolved in the satisfaction of the external auditor.
Reference page: p.
6. Ultimately, the decision about whether or not an auditor is independent must be made by
A. Auditor
B. Public
C. Client's management
D. Audit committee
Reference page: p. 45 or 40
7. With regard to independence, which of the following statements is correct?
A Audit engagements provide assurance to a wide range of potential users; consequently, both independence
in mind and independence in appearance are of particular importance.
B. Only the engagement partner is required by the Code of Ethics to be independent from their assurance
clients.
C. In case of audits of financial statements, the Code of Ethics requires member of the assurance team, the
firm but not network firms to be independent of the client.
D. In case of audits of financial statements, the Code of Ethics requires the auditor to be independent from
their assurance team from the start of performing procedures required by the engagement up to the issuance
of the report.
Reference page: p.
8. Prior to beginning the fieldwork on a new audit engagement in which a CPA does not possess expertise in
the industry in which the client operates the CPA should
A. Reduce audit risk by lowering the preliminary levels of materiality.

B. Design special substantive tests to compensate for the lack of industry expertise.
C. Engage financial experts familiar with the nature of the industry.
D. Obtain knowledge of matters that relate to the nature of the entity's business.
9. When one auditor succeeds another, the proposed auditor should request the
A. Client to instruct its attorney to send a letter of audit inquiry concerning the status of the prior year's
litigation, claims, and assessments.
B. Previous auditor to submit a list of internal control weaknesses that have not been corrected.
C. Client to authorize the previous auditor to respond to inquiries.
D. Previous auditor to update the prior year's report to the date of the change of auditors.
Reference page: p.
https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditing-standards-interp
retations/details/AU315
The successor auditor should request permission from the prospective client to make an inquiry of the
predecessor auditor prior to final acceptance of the engagement.
10. On an audit engagement performed by a CPA firm with one office, at the minimum, knowledge of the
relevant professional accounting and auditing standards should be held by:
A. The auditor with final responsibility for the audit.

B. All professionals working upon the audit.
C. All professionals working upon the audit and the partner in charge of the CPA firm.
D. All working in the office.
Reference page: p.
(a) The requirement is to determine who, at a minimum, must have knowledge of the relevant professional
accounting and auditing standards when an audit is being performed. Answer (a) is correct because AU-C 200
requires that, at a minimum, the auditor with final responsibility have such knowledge. Answers (b), (c), and (d)
are all incorrect because they suggest a higher minimum requirement.
11. Prior to acceptance of the engagement, a CPA firm is not likely to
A. Make inquiries of previous auditor

B. Make inquiries of the proposed client's legal counsel
C. Review financial statements of proposed client
D. Review the personnel practices of the proposed client
Reference page: p.
12. Which of the following would not be a consideration of a CPA firm in deciding whether to accept a new
client?
A. The client's financial ability.

B. The client's standing in the business community.
C. The client's relations with its previous CPA firm.
D. The client's probability of achieving an unqualified opinion.
Reference page: p.129 (?) The auditor should investigate and consider the prospective client's standing in the
business community, financial stability, management's integrity, and relations with its bankers, attorneys, and
previous CPA firm. The auditor should also determine whether he or she possesses the required competence
and independence to do the audit.
13. Auditors must not only decide whether to accept new clients; they also should periodically review their list
of current clients and remove those clients the firm no longer wants to be associated with. Reasons for
discontinuing clients might include the following, except:
A. Difficulty in working with client personnel.

B. Inability to negotiate an acceptable increase in the audit fee.
C. Evidence indicating a client's management has integrity.
D. Client need for specialized services the current firm is unable or unwilling to provide.
Reference page: p.
14. Before accepting an engagement to audit a new client, a CPA is required to obtain:
A. An understanding of the prospective client's industry and business.

B. The prospective client's signature to the representation letter.
C. A preliminary understanding of the prospective client's control environment.
D. The prospective client's consent to make inquiries of the previous auditor, if any.
Reference page: p. 130 -131
Choice "d" is correct. Inquiry of the predecessor auditor is a required pre-acceptance procedure.
However, consent of the prospective client must be obtained before a CPA can make such inquiries of
the predecessor auditor
Choice "a" is incorrect. Obtaining an understanding of the client's industry and business is a planning
procedure performed after an engagement is accepted.
Choice "b" is incorrect. A management representation letter is not obtained until the end of the audit.
Choice "c" is incorrect. Obtaining a preliminary understanding of the client's control environment is an
audit procedure (required by the second standard of fieldwork) that would be performed after an
engagement is accepted. A successor auditor most likely would make specific inquiries of the
predecessor auditor regarding:
15. Prior to the acceptance of an audit engagement with a client who has terminated the services of the
previous auditor, the CPA should
A. Contact the previous auditor without advising the prospective client and request a complete report of the
circumstances leading to the termination of the engagement with an understanding that all information
disclosed will be kept confidential.
B. Accept the engagement without contacting the previous auditor since the CPA can include audit procedures
to verify the reason given by the client for the termination.
C. Not communicate with the previous auditor because this would in effect be asking the auditor to violate the
confidential relationship between an auditor and the client.
D. Advise the client of the intention to contact the previous auditor and request a permission for the contact.
Reference page: p.
4-4 MULTIPLE CHOICE QUIZZERS (Val)
1. If permission from the client to discuss its affairs with the proposed auditor is denied by the client, the
previous auditor should:
A. Keep silent of the denial

B. Disclose the fact that the permission to disclosure 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
Reference page: p.
2. Which of the following factors most likely would cause a CPA to not new audit engagement?
A. The prospective client has already completed its physical inventory count.
B. The CPA facks an understanding of the prospective client's operations and industry.
C. The CPA is unable to review the previous auditor's audit documentation,
D. The prospective client is unwilling to make all financial records available to the CPA
Reference page: p. 130:131 - Investigate the integrity of the prospective client’s management
3. Which of the following factors most likely would lead a CPA to conclude that a potential audit engagement
should be rejected?
A. The details of most recorded transactions are not available after a specified period of time.
B. Internal control activities requiring the segregation of duties are to management override. subject
C. It is unlikely that sufficient appropriate evidence is available to support an opinion on the financial
statements.
D. Management has a reputation for consulting with several accounting firms about significant accounting
issues.
Reference page: p. 130 - Evaluate Auditability

Choice "b" is correct. A CPA cannot render an opinion on financial statements unless he or she has
obtained sufficient appropriate audit evidence supporting that opinion. If such evidence were unlikely to
be available, the CPA would most likely reject the potential audit engagement
4. Before accepting an audit engagement, a proposed auditor should make specific inquiries of the previous
auditor regarding:
A. The previous auditor's evaluation of matters of continuing accounting significance

B. Disagreement which the previous had with the client concerning auditing procedures and accounting
principles
C. The degree of cooperation the previous received concerning the inquiry of the client's legal counsel
D. The previous auditor's assessment of inherent risk and judgments about materiality
Reference page: p.131 - Matters to be discussed..
5. If the prospective client refuses to permit the previous to respond or limits the previous auditor's response,
the proposed should:
A. Continue to ask the previous 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. Inquire as to the reasons and consider the implications in deciding whether to accept the engagement
D. Issue a disclaimer of opinion because the limited response of the previous auditor constitutes a significant
scope limitation
Reference page: p.
https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-auditing-standards-interpretations
/details/AU315#:~:text=If%20a%20prospective%20client%20refuses,whether%20to%20accept%20the%20eng
agement.
6. 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 would 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 the client relationship
D. Issue a disclaimer of opinion
Reference page: p.126 - Modified Opinion
7. According to PSA 210, the auditor and the client should agree on the terms of engagement. The agreed
terms would need to be recorded in a(n)
A. Client representation letter

B. Memo placed in the permanent section of the working papers
C. Engagement letter
D. Comfort letter
Reference page: p.
8 An engagement letter is best described as
A. A letter from the company to the auditors specifying management's expectations for completion of the audit
on a timely basis and the fees.
B. A letter from the auditors to company management specifying that management is responsible for the
financial statements, and the auditors will issue an opinion on the financial statements.
C. A letter from the auditors to company management that specifies the responsibilities of both the company
and the auditors in completing the audit and the timing for its completion.
D. A letter from the Board of Directors' audit committee to the auditor that indicates the auditor has been
engaged to perform the audit and the fees to be paid.
Reference page: p. 132 - Agreeing the Terms of Audit Engagements

It is in the interest of both the entity and the auditor that the auditor sends an engagement letter,
preferably before the commencement of the audit to help avoid misunderstandings with respect to the
audit.
9. Engagement letters are widely used in practice for:
A. Audits only
B. Related services only
C. Assurance engagements only
D. Professional engagements of all types
Reference page: p.
Statement 1: The auditor and the client should agree on the terms of the engagement. Such an agreement
may be in the form of audit engagement letter or other suitable form of contract.
Statement 2: Even in those countries where the scope of the audit is established by law, an engagement letter
may be informative for the client.

Reference page: Statement 1: p. 131 - Agree on Terms of the Engagement and prepare an engagement
letter
11. Engagement letter that documents and confirms the auditor's acceptance of the engagement would
normally be sent to the client.
A. Before the auditor report is issued

B. At the end of the fieldwork
C After the audit report is issued
D. Before the commencement of the engagement
Reference page: p.
12. An auditor's engagement letter most likely would include a statement regarding:
A. Management's responsibility to provide certain written representations to the auditor.

B. Conditions under which the auditor may modify the preliminary judgment about materiality.
C. Internal control activities that would reduce the auditor's assessment of risk
D. Materiality matters that could modify the auditor's preliminary assessment of fraud risk.
13. An audit engagement letter least likely include:
A. A reference to the inherent limitations of an audit that there is an unavoidable risk that some material
misstatements may remain undiscovered
B. Description of any letters or reports that the auditor expects to submit to the client
C. Identification of specific audit procedures that the auditor needs to undertake
D. Basis on which fees are computed and any billing arrangements
Reference page: p.
14. Which of the following statements would least likely appear in an auditor's engagement letter?
A. Fees for our services are based on our regular per diem rates, plus travel and other out-of-pocket-expenses.
(a - FRAP)
B. Management is responsible for making all financial records and related information available to us. (f - RA
FORMS)
C. Our engagement is subject to the risk that material errors or fraud, if they exist, will not be detected. (a - RA
FORMS)
D. After performing our preliminary analytical procedures, we will discuss with you the other procedures we
consider necessary to complete the engagements.
Reference page: p. 133 - RA FORMS & FRAP Reports

-
15. An engagement letter should ordinarily include information on objectives of the engagement and
A B C D
● CPA’s responsibilities Yes Yes Yes No
● Client’s responsibilities Yes No No No
● Limitations of engagement Yes Yes No No
Reference page: p.
An engagement letter should include information on the objectives of the engagement along with the following:
● Responsibilities of the CPA

● Responsibilities of the client
● Limitation or scope of the engagement
The engagement letter will not include arrangements concerning CPA investment in client securities and the
client engagement letter providing the summary of the audit plan should not be submitted to the client.
4-5 MULTIPLE CHOICE QUIZZERS (kath)
1. Arrangements concerning with which of the following are least likely to be included in the engagement
letter?
A. Fees and billing

B. A previous auditor
C. CPA investment in client securities
D. Other services to be provided in addition to audit
Reference page: p.
http://www.accountingmcqs.com/arrangements-concerning-which-of-the-following-are-mcq-5877
2. In making arrangements for an audit, there should be a clear understanding between the auditor and the
client as to the following except:
A. The type of audit to be performed

B. Assurance of auditor's independence
C. Terms of settlement for audit services
D. Official to whom audit report shall be addressed
Reference page: p.
https://www.studocu.com/ph/document/sti-college/accountancy/audit-theory-review-of-audit-process-q
uestions-and-answers-multiple-choice/14571457
3. An auditor's engagement letter most likely would include a statement that:
A. Lists potential significant deficiencies discovered during the prior year's audit.
B. Explains the analytical procedures that the auditor expects to apply.
C. Describes the auditor's responsibility to evaluate going concern issues.
D. Limits the auditor's responsibility to detect errors and fraud.
Reference page: p.
4. Statement 1: On recurring audits, the auditor should consider whether circumstances require the terms of
the engagement to be revised and whether there is a need to remind the client of the existing terms of
engagement.
Statement 2: The auditor should send a new engagement letter each year to an established client.

Reference page: p. 136 - Recurring Audits part
5. Which of the following factors most likely would cause an auditor not to accept a new audit engagement?
A. An inadequate understanding of the entity's internal control.

B. The close proximity to the end of the entity's fiscal year.
C. Concluding that the entity's management probably lacks integrity.
D. An inability to perform preliminary analytical procedures before accepting the engagement.
Reference page: p.
https://examposter.com/which-of-the-following-factors-most-likely-would-cause-an-auditor-not-to-acce
pt-a-new-audit-engagement/
Explanation:
Choice “C” is correct. A conclusion that management lacks integrity would probably cause the auditor not to
accept a new engagement.
Choice “A” is incorrect. Inadequate understanding of the client’s internal control would not prevent the auditor
from accepting the engagement, since that understanding could be obtained later.
Choice “B” is incorrect. Proximity to year-end would not prevent an auditor from accepting a new audit
engagement.
Choice “D” is incorrect. While analytical procedures are required during planning, this generally occurs
subsequent to accepting the engagement.
6. 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. Revisions or special terms of the engagement

B. Significant change in nature or size of the client's business
C. Indications of misunderstanding of the objective and scope of the audit
D. Recent change of middle management and rank and file organizational structure
Reference page: p. 136 - 137 dapat a recent change of management bod or ownership
7. An auditor who, before the completion of the engagement, is requested to change the engagement to one
which provides lower level of assurance, should
A. Withdraw and consider whether there is any obligation to report to other parties the circumstances
necessitating the withdrawal.
B. Issue a report that includes reference to the original engagement and any procedures that may have been
performed in the original
C. Not agree to a change of engagement where there is reasonable engagement. justification for doing so.
D. Consider the change reasonable if it relates to information that is incorrect, incomplete or otherwise
unsatisfactory.
Reference page: p.
8. Which of the following helps prevent misunderstandings during audit planning?
A. Auditor involvement in the preparation of the client's financial records.

B. Client involvement in determining specific audit planning issues.
C. A preliminary meeting conference with the client to discuss fees, timing, client assistance and related
issues.
D. Involvement of the client's internal auditors in setting materiality levels and determining the scope of audit
tests.
Reference page: p.
9. One of the first things that the auditor will do after accepting a new client is:
A. Communicate with the previous auditor.
B. Contact the client's attorney to discover legal obligations.
C. Study the client's internal control structure.
D. Tour the client's facilities.
Reference page: p.
10. An auditor may achieve audit objectives related to particular assertions by:
A. Performing analytical procedures,

B. Preparing audit documentation.
C. Adhering to a system of quality control.
D. Increasing the level of detection risk.
Reference page: p. 126 Analytical Procedures or p. 128 (Using the info…)

https://examposter.com/an-auditor-may-achieve-audit-objectives-related-to-particular-assertions-by/#:~
:text=CPA%20Part%2039-,An%20auditor%20may%20achieve%20audit%20objectives%20related%20to
%20particular%20assertions,Performing%20analytical%20procedures.
Explanation:
Choice “A” is correct. The auditor relies on substantive tests to achieve audit objectives related to particular
assertions. Analytical procedures are one type of substantive procedure.
Choice “B” is incorrect. CPA firms performing audits are required to adhere to a system of quality control, but
adhering to such a system does not directly help the firm achieve specific audit objectives.
Choice “C” is incorrect. Audit documentation is used to record the results of audit procedures that have been
performed to achieve audit objectives. Mere preparation of audit documentation does not achieve audit
objectives.
Choice “D” is incorrect. Increasing the level of detection risk does not enable the auditor to achieve audit
objectives related to a particular assertion.
11. Set the following phases in proper order:
i. Pre-Engagement
ii. Internal Controls
ii. Evidence-Gathering
iv. Planning
v. Post-Audit Responsibilities
vi. Reporting
A. i, ii, iii, iv, v, vi

B. i, iv, ii, iii, vi, v
C. i, iv, iii, ii, v, vi
D. i, iv, ii, iii, v, vi
Reference page: p. 127-129
12. Which of the following statements is a basic element of the auditor's standard report?
A. The disclosures provide reasonable assurance that the financial statements are free of material
misstatement.
B. The auditor evaluated the overall internal control.
C. An audit includes assessing significant estimates made by management.
D. The financial statements are consistent with those of the prior period.
Reference page: p.
https://www.examtopics.com/exams/test-prep/cpa-auditing-and-attestation/view/3/
Correct Answer: C 🗳️
Choice "c" is correct. The auditor's standard audit report includes a statement that "An audit includes
assessing...significant estimates made by management..."
Choice "a" is incorrect. The standard audit report does not state that disclosures provide reasonable assurance
that the financial statements are free of material misstatement. The correct statement is:
"...standards require that we plan and perform the audit to obtain reasonable assurance that the financial
statements are free of material misstatement."
Choice "b" is incorrect. The standard audit report does not state that the auditor evaluated the overall internal
control. The correct statement is "An audit includes...evaluating the overall financial statement presentation."
Internal control is not mentioned in the standard audit report.
Choice "d" is incorrect. The standard audit report does not state "The financial statements are consistent with
those of the prior period." According to the second standard of reporting, consistency is implicitly reported.
Only if there is an inconsistency is an explicit statement included.
13. An auditor most likely would express an unqualified opinion and would not add explanatory language to the
report if the auditor:
A. Wishes to emphasize that the entity had significant transactions with related parties.
B. Concurs with the entity's change in its method of computing depreciation.
C. Discovers that supplementary information required by FASB has been omitted.
D. Belleves that there is a probable likelihood of a material loss resulting from an uncertainty that is sufficiently
supported and disclosed.
Reference page: p.
https://www.examtopics.com/exams/test-prep/cpa-auditing-and-attestation/view/3/
Correct Answer: Explanation 🗳️

Choice "d" is correct. An auditor most likely would express an unqualified opinion and would not add
explanatory language to the report if the auditor believes that there is a probable likelihood of a material loss
resulting from an uncertainty that is sufficiently supported and disclosed.
Choice "a" is incorrect. Emphasis of a matter, such as the existence of significant transactions with related
parties, may result in an additional explanatory paragraph appended to an otherwise unqualified opinion.
Choice "b" is incorrect. A change in accounting principle does result in an additional explanatory paragraph
appended to an otherwise unqualified opinion.
Choice "c" is incorrect. Omission of supplemental information required by GAAP does result in an additional
explanatory paragraph appended to an otherwise unqualified opinion.
14. In which of the following circumstances would an auditor not express an unqualified opinion?
A. There has been a material change between periods in accounting principles.

B. Quarterly financial data required by the SEC has been omitted.
C. The auditor wishes to emphasize an unusually important subsequent event.
D. The auditor is unable to obtain audited financial statements of a consolidated investee.
Reference page: p.
https://examposter.com/in-which-of-the-following-circumstances-would-an-auditor-not-express-an-unqualified-o
pinion/
Explanation:
Choice “D” is correct. The inability to obtain audited financial statements of a consolidated investee
represents a scope limitation which may result in either a qualified opinion or a disclaimer of opinion.
Choice “A” is incorrect. A material change in accounting principles between periods is disclosed in an
explanatory paragraph added to an otherwise unqualified opinion.
Choice “B” is incorrect. Omission of selected quarterly data required by SEC regulations is disclosed in an
explanatory paragraph added to an otherwise unqualified opinion.
Choice “C” is incorrect. Emphasis of a matter is disclosed in an explanatory paragraph added to an otherwise
unqualified opinion.
15. Which of the following auditor concerns most likely could be so serious that the auditor concludes that a
financial statement audit cannot be performed?
A Management fails to modify prescribed internal controls for changes in information technology
B. Internal control activities requiring segregation of duties are rarely monitored by management
C Management is dominated by one person who is also the majority stockholder.
D. There is a substantial risk of intentional misapplication of accounting principles.
Reference page: p.
https://www.coursehero.com/file/9384680/CPA-Review-Audit-3/
Explanation
Choice "b" is correct. Intentional misapplication of accounting principles would indicate that management lacks
integrity and as a result, the auditor might conclude that a financial statement audit cannot be performed.
Choice "d" is incorrect. Management's failure to modify prescribed internal controls for changes in information
technology would preclude the auditor from relying on those controls but would not prevent the auditor from
performing a financial statement audit.
Choice "a" is incorrect. If management rarely monitors segregation of duties, the auditor would not rely on that
particular control, but this would not prevent the auditor from performing a financial statement audit.
Choice "c" is incorrect. If management is dominated by one person who is also the majority stockholder, the
risk of fraudulent financial reporting is increased, but this would not preclude the auditor from performing a
financial statement audit.
4-6 MULTIPLE CHOICE QUIZZERS (allea)
1. Which of the following factors most likely would cause a CPA to decide not to accept a new audit
engagement?
A. The CPA's lack of understanding of the prospective client's internal auditor's computer-assisted audit
techniques.
B. Management's disregard of its responsibility to maintain an adequate internal control environment.
C. The CPA's inability to determine whether related party transactions were consummated on terms equivalent
to arm's-length transactions.
D. Management's refusal to permit the CPA to perform substantive tests before the year-end.
Reference page: p.
Choice "b" is correct. The control environment is the foundation for all other components of internal control.
Management's disregard of its responsibility to maintain an adequate internal control environment therefore
compromises its ability to provide reasonable assurance regarding reliable financial reporting. Theauditor may
conclude that the risk of misrepresentation in the financial statements is great enough that an audit should not
be conducted
2. When an independent auditor is approached to perform an audit for the first time, he or she should make
inquiries of the previous auditor. Inquiries are necessary because the previous may be able to provide the
proposed with information that will assist the proposed in determining whether
A The company rotates auditors

B. The engagement should be accepted
C. The previous auditor's work should be used
D. In the previous auditor's opinion, control risk is less than high
Reference page: p. 131 - top part (investigation of the….)
3 Before accepting an audit engagement, a proposed auditor should make specific inquiries of the previous
auditor regarding the previous auditor's:
A. Opinion of any subsequent events occurring since the previous auditor's audit report was issued.
B Understanding as to the reasons for the change of auditors.
C. Awareness of the consistency in the application of PFRS between Periods
D. Evaluation of all matters of continuing accounting significance.
Reference page: p.
4. The primary purpose of the engagement letter is to:
A. Satisfy the requirements of the CPA's liability insurance policy

B. Remind management that the primary responsibility for the financial statements rests with management
C. Provide a written record of the agreement with the client as to the services to be provided
D. Provide a starting point for the auditor's preparation of the preliminary audit program
Reference page: p. 132 - Agreeing the Terms of Audit Engagements

Best answer is C but B is a possible answer
5. Which of the following matters generally is included in an auditor's engagement letter?
A. The factors to be considered in setting preliminary judgments about materiality.

B. The auditor's responsibility to search for significant internal control deficiencies.
C. Management's responsibility for the entity's compliance with laws and regulations.
D. Management's vicarious liability for illegal acts committed by its employees.
Reference page: p.
choice "c” is correct. An understanding with the client should be established regarding management's
responsibilities, which include identifying and ensuring that the entity complies with applicable laws and
regulations. The understanding should be documented through a written communication, such as an
engagement letter.
6. A proposed auditor makes specific inquiries of the previous auditor, prior to engagement acceptance, to
A. Have knowledge whether PFRS has been consistently applied

B. Inquire or significant subsequent events with respect to the prior period
C. Gain understanding on the reasons for the change of auditor
D. Compare audit fees
Reference page: p. 137 (Acceptance of a change in Engagement)
7. The terms of the audit engagement shall include: (choose the exception)
A. The objective of the audit

B. The scope of the audit
C. The responsibilities of the auditor
D. The overall audit strategy
Reference page: p.
8. Financial statement assertions are:
A. Directly related to PSAS

B. Directly related to GAAP
C. Indirectly related to PSAs
D. Indirectly related to GAAP
Reference page: p.
9. Assertions about account balances at the period-end include completeness, which means that
A. Assets, liabilities and equity interest exist.

B. All assets, liabilities and equity interests that should have been recorded have been recorded.
C. Assets, liabilities and equity interests are included in the financial statements at appropriate amounts and
any resulting valuation or allocation adjustments are appropriately recorded.
D. The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.
10. The assertion of accuracy means that:
A. Transactions and events have been recorded in the proper accounts

B. All transactions and events that should have been recorded are recorded
C. Transactions and events have been recorded in the correct accounting period
D. Amounts and other data relating to recorded transactions and events have been recorded appropriately

(end)
11. Which description refers to the classification and understandability assertion?
A. All disclosures that should have been included in the financial statements have been included. -
Completeness
B. Disclosed events, transactions and other matters have occurred and pertain to the entity. - Occurence
C. Financial information is appropriately presented and described, and disclosures are clearly expressed.
D. Financial and other information are disclosure fairly and at appropriate amounts. - Accuracy & Valuation
12. Which of the following is the best explanation of the difference, if any, between audit objectives and audit
procedures?
A. Audit procedures and audit objectives are essentially the same.

B. Audit objectives are tailor-made for each assignment, audit procedures are generic in application.
C. Audit procedures establish broad general goals, audit objectives specify the detailed work to be performed.
D. Audit objectives define specific desired accomplishments; audit procedures provide the means of achieving
audit objectives.
Reference page: p.
13. To provide reliable audit evidence with respect to a tangible asset's existence, which of the following
specific audit procedures may the auditor perform?
A. Observation
B. External confirmation
C. Inquiry
D. Inspection
14. Which of the following statements appropriately describes inquiry?
A. Physical examination of the assets.

B. Consists of looking at a process or procedures being performed by others.
C. Examining records or documents, whether internal or external, in paper form, electronic form, or other
media.
D. Consists of seeking information from knowledgeable persons, both financial and nonfinancial, within the
entity or outside the entity.
15. Which of the following statements appropriately describes reperformance?
A. The process of obtaining a representation of information or of an existing condition directly from third party. It
is a specific type of inquiry.
B. Auditor's independent execution of procedures or controls that were originally performed as part of the
entity's internal control.
C. Evaluation of financial information made by study of plausible relationships among both financial and
non-financial data.
D. Consists of checking the mathematical accuracy of documents or records.
1. The main deliverable in an audit engagement where the auditor communicates the conclusions reached is
A. Management letter
B. Audited financial statements
C. Audit report
D. Audit documentation
2. Which is not considered in deciding whether to accept an engagement?
A. Competence of the audit team

B. Ethical considerations
C. Potential client's reputation
D. Type of opinion to be issued
Reference page: p.
3. It is the use by management of an acceptable financial reporting framework (e.g. PFRS) in the preparation
of the financial statements and the agreement of management and, where appropriate, those charged with
governance to the premise on which an audit is conducted.
A. Engagement letter
B. Written representation
C. Preconditions for an audit
D. Fair presentation
4. An auditor may most likely decide not to accept a new audit engagement when
A. The prospective client's system is highly automated and the auditor lacks understanding of such system
B. The prospective client's CEO is also the chairman of the governing board
C. The CPA has knowledge of the prospective client's disregard of its responsibilities concerning internal
controls
D. The CPA has knowledge that the prospective client has too many related party transactions
5. The primary purpose of establishing quality control policies and procedures for deciding whether to accept a
new client is to
A. Enable the CPA firm to attest to the integrity of the client management.
B. Satisfy the CPA firm's duty to the public concerning the acceptance of new clients.
C. Minimize the likelihood of association with clients whose management
D. Anticipate before performing any field work whether an unmodified lacks integrity opinion can be expressed.
6. Which of the following matters is generally included in an auditor's engagement letter?
A. Summary of the timing and details of the planned audit procedures

B. Restricted access to some confidential records and files
C. Management's responsibility for the entity's compliance with laws and regulations
D. The type of opinion to be issued
7. While performing procedures for the audit engagement, the auditor was asked to change the engagement to
review. Assuming the change is not justifiable, which of these statements does not concur?
A. The auditor continues to perform audit procedures.

B. The auditor withdraws from the audit engagement.
C. The auditor communicates the matter to an appropriate level of management.
D. The auditor provides negative assurance on the new report.
8. Which of these circumstances would normally lead to a change in engagement?
A. Restrictions imposed by management

B. Financial statements departing from GAAP
C. Auditor's inability to gather evidence
D. Misunderstanding as to the nature of the engagement
9. The following factors may make it appropriate to revise the terms of the engagement, except for:
A. Indications that the client misunderstands the objective and scope of the audit.
B. Change in financial reporting framework adopted in the preparation for the financial statements
C. Change in the inventory supply chain of the entity
D. Change in legal or regulatory requirements.
10. The group audit team, who is also the appointed component audit team, may consider the following factors
on deciding whether to send a separate engagement letter to the component, except for:
A Legal requirements in relation to audit components

B. Degree of ownership by component
C. Whether a separate auditor's report is to be issued on the component
D. Degree of independence of the component's management from the parent entity
11. When there is a reasonable justification for the change in an engagement, the auditor shall perform the
following except:
A. The auditor stops performing the old engagement

B. The auditor stops referring to the old engagement
C. The auditor refers the work on the original audit engagement to a different practitioner
D. The auditor starts performing the new engagement
12. The auditor may include the following in the engagement letter, except for:
A. Unrestricted access to whatever records

B. Reference to further agreements between the auditor and the entity
C. The presence of sampling and non-sampling risk
D. The level of materiality and performance materiality
13. An auditor's engagement letter most likely would include:
A Management's acknowledgment of its responsibility for maintaining effective internal control.

B. The auditor's preliminary assessment of the risk factors relating to misstatements arising from fraudulent
financial reporting.
C. A reminder that management is responsible for illegal acts committed by employees.
D. A request for permission to contact the client's lawyer for assistance in identifying litigation, claims, and
assessments.
14. If the auditor concludes that there is reasonable justification for the change in engagement, the report to be
issued would
A. Be that appropriate for the revised terms of the engagement

B. Include reference to the original engagement
C. Include reference to any procedures that may have been performed the original engagement
D. Not include reference to any procedures that may have been performed, particularly when the new
engagement is to undertake agreed-upon procedures
15. If a change in the type of engagement from higher to lower 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 the 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.

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ACCP301- CHAPTERS MULTIPLE CHOICES QUESTIONS

2. Assurance services can be best described as

3. Assurance engagement include the following, except

Reference page: 14-15

4. The three types of attestation services are:

Reference page: 15-16

5. Which of the following is not an assurance engagement?

Reference page: 15-16

7. Unlike consulting services, assurance services:

8. All, except one, are elements of an assurance engagement.

9. In a financial statement audit, which is not an element of assurance engagement?

12. Characteristics of suitable criteria do not include

15. Which of the following can be subject matter?

2. The measure of the quality of evidence

3. The measure of the quantity of evidence

5 Which of the following is not a component of engagement risk?

6. The form of conclusion in an assurance engagement are

10. Agreed-upon procedures engagement provides what level of assurance?

13. Assurance service engagements:

3. The following relates to intended users, choose the exception:

5. The following cannot be a suitable criterion for an assurance engagement, except?

6. According to the framework for assurance engagement, the criteria must be

8. Which is incorrect concerning evidence?

10. Which is incorrect?

11. Which is correct concerning the concept of professional skepticism

15. In an agreed-upon engagement, which of the following statements is incorrect?

1. Evidence is more reliable when it is obtained from

Reference page: page 12

Reference page: page 8

3. A professional following engagements?

Reference page: page 15 (for B)

4. Which of the following statements is/are correct?

Reference page: page 14

5. Which of the following is true about assurance services?

Reference page: page 4

6. Which of the following statements is/are correct?

Reference page: pages 4-5

7. The ____is the outcome of the evaluation or measurement of a (an)______

Reference page: page 5

8. Classify the following subject matter:

A. Physical characteristics, systems and processes

Reference page: page 5

9. Which of the following statements is/are correct?

10. Which of the following types of evidence is most reliable?

Reference page: page 12

12. Which of the following is an example of a formal criterion(a)?

Reference page: page 6

13. Which refers to reliability of criteria?

Reference page: page 7

14. Which is true about assurance engagement risk?

Reference page: page 15 (compilation is not under assurance engagement)

A (1) Positive; (2) Reasonable

Reference page: page 13

1-7 MULTIPLE CHOICE QUESTIONS

1. Which of the following statements is/are incorrect?

Reference page: page 4

4. Which of the following statements is/are correct?

Reference page: page 5

Reference page: page 13

A. I and III; (2) II and IV

Reference page: page 14

Reference page: page 9

13. An engagement is classified as a limited assurance engagement if:

7. The is the outcome of the evaluation or measurement of a (an)__