1. Which is incorrect when a change in the type of engagements is with justifiable reason?

a. The report on the new engagement should qualify the opinion due to scope limitation.

b. The report on the new engagement should not contain a separate paragraph that refers to the old
engagement.

c. The report on the new engagement should omit reference to the old engagement.

d. The report on the new engagement should not refer to the procedures performed in the old
engagement.

2. The Professional Regulatory Board of Accountancy consists of a chairman and:

a. 7 members

b. 6 members

c. 5 members

d. 8 members

3. The following regarding assurance engagement risk are true except

a. Engagement circumstances affect the extent to which the practitioner considers the relevant
components of engagement risk.

b. It is the risk that the practitioner will provide an appropriate conclusion that the subject matter
conforms in all material respects with suitable criteria.

c. Components of the engagement risk model are not significant for all types of assurance engagements.

d. Business risk is not a part of engagement risk and does not affect the application of the assurance
engagement standards.

4. Which of the following statements concerning ownership of working papers is incorrect?

a. Working papers include schedules and memoranda prepared and submitted by the client of the CPA.

b. All working papers made by a CPA and his/her staff in the course of an examination remain the
property of such CPA in the absence of a written agreement between the CPA and the client to the
contrary.

c. Working papers include reports submitted by a CPA to his/her client.

d. Working papers shall be treated confidential and privileged unless such documents are required to be
produced through subpoena issued by any court, tribunal, or government regulatory or administrative
body.
5. A set of instructions provided to engagement team members to control the proper execution of
work.

a. Overall audit plan

b. Engagement letter

c. Audit program

d. Audit process flow

6. Which of the following types of engagement is mostly performed by professional accountants on a

contractual arrangement?

a. Government audit

b. Income tax audit

c. External audit

d. Operations audit

7. The following statements are correct except

a. An auditor considers materiality for audit planning in terms of the largest aggregate level of
misstatements that could be material to any one of the financial statements

b. Materiality concept recognizes that some matters are important, while others are not, for the fair
presentation of financial statements in conformity with the applicable financial reporting framework.

c. Materiality necessarily involve both quantitative and qualitative judgments.

d. The auditor’s perception of the needs of users of the financial statements influences the auditor’s
consideration of materiality.

8. Independent auditing can be best described as:

a. A regulatory function that prevents the issuance of improper financial information

b. A branch of accounting

c. A professional activity that measures and communicates financial and business data

d. A discipline which attests to the result of accounting the business transactions that are financial in
nature

9. The following are true regarding an agreed-upon procedure engagement except

a. The users of the report must form their own conclusions from the report of the auditor.

b. The report is restricted only to the parties who agreed to the procedures performed.

c. The report on factual findings is expressed in the form of negative assurance.

d. An auditor is engaged to carry out procedures of an audit nature.

10. Which may be occupied by a non-CPA?

a. Position in a private company which requires coordination with the internal auditors for the audit of
financial statements.

b. Position in a private company supervising the recording of financial transactions.

c. Position of the dean that supervises the BSA program of a university.

d. Position in a private company requiring the preparation of the financial statements.

11. The procedure, consulting the previous auditor and reviewing his working papers to reduce that
audit work,

a. Is unacceptable because the proposed auditor should be independent.

b. Is acceptable if the proposed auditor refers reliance upon the previous auditor’s work in his audit
report

c. Is acceptable if the client and the proposed auditor agree to it

d. Is required if the auditor is to render an unqualified opinion on the previous auditor’s report.

12. Which of the following statements concerning a CPA’s disclosure of confidential client information
is ordinarily correct?

a. Disclosure should not be made even if such disclosure will protect the CPA’s professional interests in
legal proceedings.

b. Disclosure should be made only if there is a legal or professional duty to make the disclosure.

c. Disclosure may be made to any party on consent of the client.

d. Disclosure may be made to any government agency without subpoena.

13. The following may be regarded as fundamental principles in auditing, except

a. The auditor acts exclusively as an auditor.

b. Economic assertions can be verified.

c. No long-term conflicts between the auditor and the management of the entity under audit

d. Audit benefits only the owners of the entity.

14. I. Non-assurance engagements include: compilations, tax consulting and compliance audits

II. Consulting services are two-party contracts.

III. The CPA’s conclusion provide a level of assurance about the subject matter.

a. All statements are true.

b. None of the statements are false.

c. Not all statements are true.

d. All of the statements are false.

15. Which of the following most likely would indicate the existence of related parties?

a. Depending on a single product for the success of the entity.

b. Writing down obsolete inventory just before year-end.

c. Borrowing money at an interest rate significantly below the market rate.

d. Failing to correct previously identified internal control deficiencies.

16. I. The responsible party and the intended user need not be from separate organizations.

II. The subject matter of an assurance engagement may be presented as a point in time or
covering a period of time.

III. Evidence obtained indirectly by the practitioner is less reliable than evidence obtained by
inference.

a. All statements are true.

b. None of the statements are false.

c. Not all statements are true.

d. All of the statements are false.

17. Which of the following is not an assurance service?

a. Review of financial statements

b. Examination of prospective financial information

c. Audit of historical financial statements

d. Compilation of financial information

18. It is the measure of quality of audit evidence and its relevance to a particular assertion and its
reliability.

a. materiality

b. assurance

c. appropriateness

d. sufficiency

19. 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 auditor
may be able to provide the successor with information that will assist the proposed auditor in
determining whether

a. The company rotates auditors

b. The previous auditor’s work should be used

c. In the previous auditor’s opinion, the control risk is low

d. The engagement should be accepted

20. I. The level of assurance which may be provided is indirectly related to the scope of procedures
performed and their results.

II. The responsible party must be one of the intended users.

III. In audit of financial statements, the suitable criteria to be used are the Philippine Standards
on Auditing.

a. All statements are true.

b. None of the statements are false.

c. Not all statements are true.

d. All of the statements are false.

21 Which is not a qualification of the members of BOA?

a. Must be a duly registered CPA with at least 10 years of work experience in any scope of practice of
accountancy.

b. Must not have any pecuniary interest, direct or material indirect, in any school, college, university of
institution offering BS Accountancy.

c. Must be a natural-born Filipino citizen and a resident of the Philippines.

d. Must be of good character and must not have been convicted for crimes involving moral turpitude.

22. The accredited national professional organization of CPAs in the Philippines

a. FRSC

b. AICPA

c. PICPA

d. AASC

23. It is not a requirement for a person applying for the CPALE.

a. BSA degree

b. No conviction of any criminal offense involving moral turpitude.

c. Natural-born Filipino citizen

d. Good moral character

24. The following are planning procedures, except

a. Considering the risk of the existence of related-party transactions.

b. Identifying items requiring adjustments

c. Assessing the conclusions reached and the evaluation of the overall financial statement presentation.

d. Considering the nature of the reports to be rendered.

25. The following regarding the external auditor’s consideration of the work of the internal auditor
are true except

a. The external auditor should obtain a sufficient understanding of internal audit activities to assist in
audit planning.

b. The external auditor need not evaluate and test the work of the internal auditor to confirm its
adequacy for the external audit purposes.
c. The external auditor should consider the activities of the internal auditors and their effects on
external audit procedures.

d. The external auditor should perform a preliminary assessment of the internal audit function when it
appears relevant to the external audit in specific areas.

26. Operational audit

a. Concentrates on implementing financial and accounting control in a newly organized company.

b. Attempts and is designed to verify the fair presentation of the company’s results of operations.

c. Requires the constant review by internal auditors of the administrative controls as they relate to the
operations of the company.

d. Concentrates on seeking out aspects of operations in which waste would be reduced by the
introduction of controls.

27. In the planning stage, the auditor is required to obtain an understanding of the entity and its
environment, including its internal control.

a. Audit planning

b. Risk assessment procedures

c. Audit process

d. Test of details

28. The auditor’s work in formulating an opinion on the financial statement consist mostly of

a. Examining cash transactions

b. Studying and evaluating internal control

c. Obtaining and examining evidential matter

d. Comparing recorded accountability with assets

29. Which of the following statements is correct?

a. The Professional Identification Card issued to successful examinees shall remain in full force and
effect until withdrawn, suspended or revoked in accordance with RA 9298.

b. The Certificate of Registration issued to successful examinees is renewable every three (3) years.

c. The BOA shall not register and issue a Certificate of Registration and Professional Identification Card
to any successful examinee of unsound mind.
d. The BOA may, after the expiration of three (3) years from the date of revocation of a Certificate of
Registration, reinstate the validity of a revoked Certificate of Registration.

30. Which is an objective of a review engagement?

a. Report that the financial statements, in all material respects, fairly present the financial position and
operating results of the client.

b. Report whether material modifications should be made to such financial statements to make them
conform with generally accepted accounting principles.

c. Express a positive opinion that the financial information is presented in conformity with generally
accepted accounting principles.

d. Express a limited assurance to users who have agreed as to procedures that will be performed by the
CPA.

31 Any person who shall violate any of the provisions of the Accountancy Act or any of its
implementing rules and regulations promulgated by the Board of Accountancy subject to the approval
of the PRC, shall, upon conviction, be punished by

a. A fine of not more than P50,000.

b. Imprisonment for a period not exceeding two years.

c. A fine of not less than P50,000 or by imprisonment for a period exceeding two years or both.

d. A fine of not less than P50,000 or by imprisonment for a period not exceeding two years or both.

32. Which of the following statements concerning professional skepticism is false?

a. 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

b. A belief that management and those charged with governance are honest and have integrity relieves
the auditor of the need to maintain professional skepticism

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

33. I. A CPA may not practice in more than one sector

II. To pass the CPALE, a candidate must have a general average of 75%, and grade of 65% in any
given subject.

a. Both statements are true.

b. None of the statements are false.

c. None of the statements are true.

d. Statement I is false, Statement II to is true.

34. Self-review threat is least likely created when

a. A firm provides internal audit service to an audit client.

b. A former employee of the audit client is a member of the audit team.

c. A firm assists an audit client in preparing accounting records.

d. An employee of the audit client is a former auditor of the firm.

35. A measure of how willing the auditor is to accept that the financial statements may be materially
misstated after the audit is completed and an unmodified opinion has been issued is the

a. Detection risk.

b. Acceptable audit risk.

c. Control risk.

d. Inherent risk.

36. It is not a ground for suspension or removal of members of BOA.

a. Rigging of the CPA licensure exam results.

b. Final judgment of crimes involving moral turpitude.

c. Lack of professional competence.

d. Intolerance of violations of the RA 9298.

37. The internal control has the fundamental purpose of

a. Ensuring the accuracy, reliability and timeliness of information.

b. Safeguarding the resources of the organization

c. Providing reasonable assurance that the objectives of the organization are achieved.

d. Encouraging compliance with the organization’s goals and objectives.

38.You were engaged to audit the Mobile Legends Co.’s financial statements after the close of the
company’s fiscal year. Because you were not engaged until after the balance sheet date, you were not
able to physically observe inventory count. You determined that inventory of the company is highly
material. On the completion of your audit, you are satisfied that the company’s financial statements
are presented fairly, including inventory about which you were able to satisfy yourself by the use of
alternative audit procedures. What appropriate audit opinion should you provide?

a. Unmodified opinion

b. Qualified opinion

c. Adverse opinion

d. Disclaimer of opinion

39. An expert whose expertise is used by the entity in preparing the financial statements

a. AIS expert

b. Auditor’s expert

c. Management’s expert

d. Financial expert

40. An increase in the extent of audit procedures normally result from

a. decrease in materiality level

b. decrease in the pre-determined control risk

c. decrease in assessed inherent risk

d. increase in the risk of material misstatement

41. Auditing includes both a (an):

a. Documentation process and an evaluation process

b. Evaluation process and a reporting process

c. Investigative process and a reporting process

d. Documentation process and a reporting process

42. The primary purpose of the representation letter.

a. Agreement by management to engage the auditor for the next annual audit.

b. Acceptance of the auditor’s engagement letter

c. Acknowledgement of the management’s responsibility for the financial statements.

d. Evaluation by management of the auditor’s performance.

43. Which should be included in the audit plan?

I. Nature, timing and extent of planned risk assessment procedures.

II. Nature, timing and extent of planned further audit procedures at the assertion level.

a. I only

b. II only

c. Both I and II

d. Neither I and II

44. In all cases, audit reports must

a. Be signed by the individual who performed the audit procedures.

b. Certify the accuracy of the quantitative information which was audited.

c. Communicate the auditor’s finding to the general public.

d. Inform readers of the degree of correspondence between the quantifiable information and the
established criteria.

45. Professional judgment

a. Should be exercised in planning and performing an audit of FS but need not be documented

b. Can be used as the justification for the decisions made by the auditor that are not supported by the
facts and circumstances of the engagement

c. Is necessary in the evaluation of management’s judgments in applying the entity’s applicable financial
reporting framework

d. Is not used in making decisions about materiality and audit risk

46. Analytical procedures used in planning an audit should focus on

a. Reducing the scope of tests of controls and substantive tests.

b. Enhancing the auditor’s understanding of the client’s business and identifying areas of potential risk.

c. Assessing the adequacy of the available evidential matter.

d. Providing assurance that potential material misstatements will be identified.

47. Which of the following cannot be considered as “auditor’s expert” as per PSA 620?
a. An individual with expertise in the valuation of assets acquired and liabilities assumed in business
combinations.

b. An individual with expertise in applying methods of accounting for deferred income tax.

c. An expert in taxation law.

d. An individual with expertise complex modeling for the purpose of valuing financial instruments.

48. Which of the following actions may be appropriate if the auditor is unable to agree to a change of
the engagement and is not permitted to continue the original engagement?

I. Issue a qualified opinion due to a significant scope limitation.

II. Auditor should withdraw from the engagement.

III. Consider whether there is any obligation to report to the board of directors or shareholders the
circumstances necessitating withdrawal

a. I only

b. I and II

c. II and III

d. I, II and III

49. Which of the following an auditor should perform as part of risk assessment?

a. confirmation

b. reperformance

c. analytical procedure

d. recalculation

50. The most common type of audit report contains a(n):

a. Adverse opinion

b. Qualified opinion

c. Disclaimer of opinion

d. Unqualified opinion

51 When material misstatements in the financial statements are not covered in the audit, the best
defense of the auditor is
a. The client is guilty of contributory negligence.

b. The management’s representation letter to the auditor

c. The audit was conducted in accordance with PSAs

d. The audit was conducted in conformity with generally accepted accounting principles.

52. When an independent auditor expresses an unqualified opinion, he asserts that:

(1) He performed the audit in accordance with generally accepted auditing standards.

(2) The company is a profitable and viable entity.

(3) The financial statements examined are in conformity with GAAP.

(4) The financial statements are accurate and free of errors.

a. All of the above statements are true.

b. Only statements (1) and (3) are true.

c. Only statements (2) and (4) are true.

d. All of the above statements are false.

53. The following describe the interrelationship of audit risk components. Which is incorrect?

a. When the inherent and control risks are high, the acceptable level of detection risk needs to be low to
reduce audit risk to an acceptably low level.

b. There is an inverse relationship between detection risk and the combined level of inherent and
control risks.

c. When the inherent and control risks are low, an auditor can accept a higher detection risk and still
reduce audit risk to an acceptably low level.

d. The assessed level of inherent and control risks can be sufficiently low to eliminate the need for the
auditor to perform any substantive procedures.

54. Inherent and control risk differ from detection risk in that detection risk is

A. Elements of audit risk while inherent and control risks are not

B. Change at the auditor’s discretion while inherent and control risks are not

C. Functions of the client and its environment and while inherent and control risks are not.

D. None of the above

55. The primary purpose of establishing quality control policies and procedures for deciding whether
to accept a new client is to

a. Minimize the likelihood of association with clients whose management is with integrity.

b. Anticipate before performing any fieldwork whether an unqualified opinion can be expressed.

c. Enable the CPA firm to attest to the reliability of the client.

d. Minimize the likelihood of association with clients whose management lacks integrity.

56. The auditor, when planning a financial statements audit, should assess inherent risk

a. at the financial statement level

b. at the account balance or transaction class level

c. both at the financial statement and account balance level

d. neither at the financial statement level nor account balance level

57. The CPA shall be required to indicate which of the following numbers on the documents he/she
signs, uses or issues in connection with the practice of the profession

a. CPA’s date of birth

b. Professional tax receipt

c. All of these are required to be indicated

d. Neither a nor b

Correct answer

b. Professional tax receipt

58. Which is not true regarding the general principles of an audit?

a. The auditor should plan and perform an audit with an attitude of questioning mind recognizing that
circumstances may exist that cause the financial statements to be materially misstated.

b. The auditor would ordinarily expect to find evidence to support management representations and
assume they are necessarily correct.

c. The auditor should comply with the ethical requirements promulgated by the Philippine Professional
Regulation Commission.

d. The auditor should conduct an audit in accordance with PSAs.

59. In a review engagement, the independent accountant’s procedures include:

a. Examining bank reconciliation.

b. Confirming accounts receivable with debtors.

c. Reading the financial statements to consider whether they appear to conform with GAAP.

d. Obtaining a letter of audit inquiry from all attorneys of record.

60. Which of the following best describes an independent audit?

a. Professional activity that prevents the issuance of incorrect financial information

b. Professional activity that measures and communicate financial accounting data

c. Regulatory activity that attests to the fair presentation of financial statements

d. Professional activity that attests to the fair presentation of financial statements

1. hich of the following provides moderate level of assurance?

a. Audit b. Review c. Agreed-upon procedures d. compilation
2. What level of assurance does an accountant give on compilation report?
a. Moderate b. Nonec. Low d. High
3. The statement “nothing came to our attention which would indicate that these statements are
not fairly presented” express which of the ff.? Negative assurance
4. Which of the ff. Is not one of the elements of an assurance engagement?
An opinion about whether the subject matter conform, in all material respects, with identified
criteria
5. Who has the primary responsibility for the fairness of the representations made in the financial
statements? Client’s management
6. By providing high level of assurance on audit reports on financial statements, the auditor
Enhances the credibility of the FS
7. The reason an independent auditor gathers evidence is to
Form an opinion on the FS
8. Which of the following is not one of the limitations of an audit?
Limitations imposed by clients
9. Professional skepticism requires that an auditor assume that management is
Neither honest nor dishonest
10. Which of the following statements does not properly describe an element of theoretical
framework of auditing?
Auditors act on behalf of the management
11. The procedures deemed necessary in the circumstances to achieve the objective of the audit
shall be determined by the
Independent auditor
12. Which of the ff. Is not a valid ground for suspension or removal of members of BOA?
Being charged of crimes involving moral turpitude
13. BOA shall submit to PRC the ratings obtained by each candidate within ___ days after the
examination, unless extended for just cause. 10
14. BOA may issue certificate of registration and professional identification card to any successful
examinee
Convicted by a court of political offense
15. A CPA whose certificate of registration has been revoked may be reinstated if has acted in
exemplary manner and has not committed any illegal, immoral or dishonorable conduct for a
period not less than 2 years
16. Any person who shall violate any provisions of RA 9298 or any of its IRRs promulgated by BOA
subject to the approval of PRC, shall upon conviction, be punished by
A fine of not less than P50,000, or imprisonment for a period not exceeding 2 years, or both
17. A CPA certificate is evidence of
Basic competence at the time of certification
18. The letters “CPA” shall be engraved in which part of the CPA’s seal?
Middle of the smaller circle
19. According to RA 9298, the following are qualifications of applicants for CPA examination except.
Natural born Filipino citizen
20. Which of the following is not represented in AASC?
BIR
21. The primary duty to enforce the provisions of RA 9298 and its IRRs rests with
BOA
22. The audit procedures used extensively throughout the audit but does not, by itself, provide
sufficient evidence.Answer: Inquiry
23. According to PSA 210, the auditor and the client should agree on the terms of engagement and
need to be recorded in a(n)Answer: Engagement letter
24. Assertions used by the auditor fall into the following categories, except
Answer: Assertions about the faithful representations
25. An engagement letter is prepared with the interest(s) of
Answer: Both the client and the auditor