AUDITING THEORY

AT.CDrill13-Philippine Accountancy Act of 2004

CLASSROOM DRILL
1. Who has the power to suspend or remove any member d. may be reinstated as a CPA by the Board of
of the Board of Accountancy? Accountancy after two years if he has acted in an
a. The President of the Philippines exemplary manner.
b. The Chairman of the PRC
c. The Chairman of the FRSC 9. Which of the following is not one of the specified
d. The Chairman of the AASC objectives of the Philippine Accountancy Act of 2004?
a. Examination for registration of CPAs
2. An applicant for the CPA licensure examination should b. Promulgation of auditing and accounting standards
meet the following requisites, except c. Supervision, control and regulation of accounting
a. A Filipino citizen practice
b. Of good moral character d. Standardization and regulation of accounting
c. A holder of the degree of Bachelor of Science in education
Accountancy
d. Has not been convicted of any crime. 10. Which of the following is not one of the functions of the
Board of Accountancy as specifically provided under RA
3. A Professional Identification Card bearing the 9298?
registration number, date of issuance, expiry date, a. To determine and prescribe minimum requirements
duly signed by the chairperson of the Commission, leading to the admission of candidates to the CPA
shall be issued to every registrant examination.
a. Is renewable every three years b. To investigate violations of the Accountancy Law
b. Is renewable every five years and the rules and regulations promulgated
c. Shall bear the signature of the PRC Chairperson thereunder.
and the Chairman and Members of the Board of c. To perform visitorial powers or review professional
Accountancy work of accounting practitioners in a general or
d. Shall remain in full force and effect until random basis.
withdrawn, suspended or revoked. d. After due process, to suspend, revoke, or reissue
certificates of registration for causes provided for
4. The Board of Accountancy may reinstate the validity of by law by the rules and regulations promulgated
a revoked Certificate of Registration after the therefore
expiration of how many years from the date of
revocation? 11. A CPA whose certificate have been revoked may be
a. 1 c. 3 reinstated if he has acted in exemplary manner and
b. 2 d. 5 has not committed any illegal, immoral or dishonorable
conduct for a period not less than
5. A CPA shall not practice under a firm name that a. One year c. Five years
includes or indicates the following except b. Two years d. Depends on the offense
a. Fictitious name
b. Specialization 12. A member of the BOA shall, at the time of his/her
c. Misleading as to the type of the organization appointment, possess the following qualifications,
d. Name(s) of past partner(s) in the firm name of except
successor partnership a. Must be a natural-born citizen and resident of the
Philippines.
6. Are the following CPAs required to comply with the b. Must be a duly registered CPA with more than ten
requirements on continuing professional education? (10) years of work experience in any scope of
a b c d practice of accountancy.
CPAs in Public Accountancy Yes Yes Yes Yes c. Must be of good moral character and must not
CPAs in Commerce and Yes Yes No No have been convicted of crimes involving moral
Industry turpitude.
CPAs in Education/Academe Yes Yes Yes No d. Must not be a director or officer of the APO at the
CPAs in Government Yes No Yes No time of his/her appointment.

7. How many credit units per hour is (are) earned by a 13. Which statement is incorrect regarding the term of
CPA who serves as a facilitator at a CPE seminar? office of the chairman and the members of the Board
a. 1 CU per hour c. 3 CU per hour of Accountancy (BOA)?
b. 5 CU per hour d. 2 CU per hour a. The Chairman and members of the Board shall
hold office for a term of three years.
8. A person whose CPA certificate has been revoked b. No person who has served two (2) successive
a. can no longer be reinstated as a CPA. complete terms shall be eligible for reappointment
b. is automatically reinstated as a CPA by the PRC until the lapse of one (1) year.
after two years if he has acted in an exemplary c. A person may serve the BOA for not more than
manner. twelve years.
c. may be reinstated as a CPA by the PRC after two d. A member of the BOA may continuously serve
years if he has acted in an exemplary manner office for more than nine years.

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14. The following statements relate to CPA examination 20. A meaningful experience shall be considered as
ratings. Which of the following is incorrect? satisfactory compliance with the requirements of
a. To pass the examination, candidates should obtain Section 28 of RA 9298 if it is earned in (Choose the
a general weighted average of 75% and above, incorrect one)
with no rating in any subject less than 65%. a. Commerce and industry and shall include
b. Candidates who obtain a rating of 75% and above significant involvement in general accounting,
in at least four subjects shall receive a conditional budgeting, tax administration, internal auditing,
credit for the subjects passed. liaison with external auditors, representing his/her
c. Candidates who failed in four complete employer before government agencies on tax and
examinations shall no longer be allowed to take matters related to accounting or any other related
the examinations the fifth time. functions.
d. Conditioned candidates shall take an examination b. Academe/education and shall include teaching for
in the remaining subjects within two years from at least three (3) trimesters or two (2) semesters
the preceding examination. subjects in either financial accounting, business
law and tax, auditing problems, auditing theory,
15. Which of the following is not one of the grounds for financial management and management services.
proceedings against a CPA? c. Government and shall include significant
a. Gross negligence or incompetence in the practice involvement in general accounting, budgeting, tax
of his profession. administration, internal auditing, liaison with the
b. Engaging in public practice while being employed Commission on Audit or any other related
in a private enterprise. functions.
c. Insanity. d. Public practice and shall include at least two years
d. Immoral or dishonorable conduct. as audit assistant and at least one year as auditor
in charge of audit engagement covering full audit
16. In all of the following situations except one, a person is functions of significant clients.
deemed to be engaged in professional accounting
practice. Which of them is the exception? 21. In order to achieve the objectives of the accountancy
a. Performing audits or verification of financial profession, professional accountants have to observe a
transactions and records for more than one client. number of prerequisites or fundamental principles.
b. Employed as the department chairman that The fundamental principles include the following,
supervises the BSA program of an educational except
institution. a. Professional behavior c. Independence
c. Employment as controller of a private business b. Confidentiality d. Objectivity
enterprise and such employment requires that the
holder thereof should be a CPA. 22. The principle of integrity imposes an obligation on
d. Appointment in the government where first grade professional accountants to
civil service eligibility is a prerequisite. a. Comply with relevant laws and regulations
b. Avoid any action that may bring discredit to the
17. The Accountancy Law provides that all working papers profession
made during an audit shall be the property of the c. Both a and b
auditor. These working papers shall include the d. Neither a nor b
following, except:
a. Schedules and memoranda made by the CPA and 23. The principle of objectivity imposes which of the
his staff. following obligations on professional accountants?
b. Working papers prepared and submitted by the a. To maintain professional knowledge and skill at the
client. level required to ensure that clients or employers
c. Excerpts or copies of documents furnished the receive competent professional advice
auditor. b. To refrain from disclosing confidential information
d. Reports submitted by the CPA to the client. obtained as a result of professional and business
relationships
18. Which of the following are the grounds for suspension c. To comply with relevant laws and regulations and
or removal of members of BOA? avoid any situation that may bring discredit to the
I. Neglect of duty or incompetence. profession
II. Violation or tolerance of any violation of the d. Not to compromise professional or business
CPA’s Code of Ethics. judgment because of bias, conflict of interest or
III. Final judgment of crimes involving moral undue influence of others
turpitude.
IV. Rigging of the certified public accountant’s 24. Confidential client information may be disclosed in the
licensure examination results. following circumstances, except
a. I, II, III and IV c. III and IV a. When disclosure is authorized.
b. I, II and III d. I, III and IV b. When disclosure is required by law.
c. When the relationship between the client and the
19. The Board, subject to the approval of the Commission, auditor ceases.
may revise or exclude any of the subjects and their d. When there is a professional duty or right to
syllabi, and add new ones as the need arises. Provided disclose.
that the change shall not be more often than every
a. 2 years c. 4 years 25. Occurs when a professional accountant promotes a
b. 3 years d. 5 years position or opinion to the point that subsequent
objectivity may be compromised
a. Self-interest threat c. Advocacy threat
b. Self-review threat d. Familiarity threat

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26. Immediate family includes c. Disclosing confidential information to another
a. Parent c. Non-dependent child accountant interested in purchasing the CPAs
b. Sibling d. Spouse practice
d. Disclosing confidential information in an
27. Close family include the following, except investigation conducted by the PRC thru the Board
a. Parent c. Non-dependent child of Accountancy
b. Sibling d. Spouse
34. During the course of an audit engagement, the CPA
28. Using the same lead engagement partner on an audit needed additional studies and consultation with
over a prolonged period may most likely create experts. This additional study and consultation is
a. Self-interest threat c. Intimidation threat deemed to be
b. Self-review threat d. Familiarity threat a. An unusual practice which should have voided the
audit engagement.
29. Examples of circumstances that may create familiarity b. Lack of competence on the part of the CPA.
threat include c. An appropriate part of the professional conduct of
I. A member of the assurance team having an the audit engagement.
immediate family member or close family member d. Undertaken as a responsibility of management.
who is a director or officer of the assurance client.
II. Dealing in, or being a promoter of, share or other 35. A CPA shall not disclose confidential information
securities in an assurance client. obtained during an audit engagement in which one of
III. Threat of replacement over a disagreement with the following situations?
the application of an accounting principle. a. When the security of the State so requires
IV. Potential employment with an assurance client. b. With the consent of the client
V. Long association of a senior member of the c. In defense of himself when sued by the client
assurance team with the assurance client. d. Under the rule against disclosing information
a. I, IV and V only
b. II and V only 36. In which of the following may confidential information
c. II, III and IV only not be disclosed?
d. I and V only a. To comply with the quality review of a member
body or professional body
30. Safeguards created by the profession, legislation or b. To submit evidence in the course of legal
regulation, include the following proceedings
I. Educational, training and experience requirements c. Acquiring information in the course performing
for entry into the profession professional services and use that information for
II. Continuing education requirements personal advantages
III. Legislation governing the independence d. When consent to disclose information is given by
requirements of the firm. the client
IV. Policies and procedures that emphasize the
assurance client’s commitment to fair financial 37. Occurs when a professional judgment needs to be re-
reporting evaluated by the professional accountant responsible
V. Policies and procedures to implement and monitor for that judgment
quality control of assurance engagements. a. Self-interest threat c. Advocacy threat
a. I, II, III and IV only c. I, II and III only b. Self-review threat d. Familiarity threat
b. I, II and V only d. I and III only
38. The network firms are required to be independent of
31. Occurs when a professional accountant promotes a the client
position or opinion to the point that subsequent a. For assurance engagements provided to an audit
objectivity may be compromised client.
a. Self-interest threat c. Advocacy threat b. For assurance engagements provided to clients
b. Self-review threat d. Familiarity threat that are not audit clients, when the report is not
expressly restricted for use by identified users.
32. There are fundamental principles that the professional c. For assurance engagements provided to clients
accountant has to observe when performing assurance that are not audit clients, when the assurance
engagements. The requirement of which principle is of report is expressly restricted for use by identified
particular importance in an assurance engagement in users.
ensuring that the conclusion of the professional d. All of the above.
accountant has value to the intended user?
a. Integrity c. Confidentiality 39. The following are not allowed form of advertising and
b. Professional competence d. Objectivity publicity
I. Self laudatory statements
33. The rules of professional conduct states that a CPA II. Discrediting or attacking other firms or CPA
shall not disclose any confidential information obtained practitioners
in the course of a professional engagement with III. Giving too much emphasis on competitive
certain exceptions. In which of the situations given differences
below would disclosure by the CPA be in violation of IV. Publishing services in billboard advertisements
the rules of professional conduct? a. I, II and III only
a. Disclosing confidential information in order to b. I, III and IV only
properly discharge the CPAs responsibilities in c. II, III and IV only
accordance with his professional standards d. I, II, III and IV
b. Disclosing confidential information in compliance
with a subpoena by a court

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40. When performing a review engagement, the following 45. Safeguards created by the profession, legislation or
should be independent of the client regulation include the following, except:
a. Professional standards.
a. b. c. d. b. Professional or regulatory monitoring and
The members of the Yes Yes Yes Yes disciplinary procedures.
assurance team c. External review by a legally empowered third party
The firm Yes Yes No No of the reports, returns, communications or
Network firms Yes No No Yes information produced by a professional accountant.
d. An explicitly stated duty to report breaches of
41. Which of the following is a “self review” threat to ethical requirements by the employing
engagement team member’s compliance with organization.
fundamental principles?
a. An engagement team member has a spouse that 46. Indicate the normal pattern of development for a
serves as CFO of the attest client. professional accountant.
b. A second partner review is required on all attest I. A period of work experience.
engagements. II. High standard of general education.
c. An engagement team member prepares invoices III. Specific education, training and examination in
for the attest client. professionally relevant subjects
d. An engagement team member has a direct a. I, II, III c. III, II, I
financial interest in the attest client. b. II, III, I d. II, I, III

42. The underlying reason for a code of professional 47. Which of the following is not explicitly referred to in
conduct for any profession is: the Code of Ethics as source of technical standards?
a. the need for public confidence in the quality of a. Commission of Audit (COA)
service of the profession. b. Financial Reporting Standards Council (FRSC) and
b. that it provides a safeguard to keep unscrupulous Auditing standards and Assurance Council (AASC)
people out. c. Securities and exchange Commission (SEC)
c. that it is required by federal legislation. d. Relevant legislation
d. that it allows licensing agencies to have a yardstick
to measure deficient behavior. 48. Which of the following is a misunderstanding created
by the use of the word “independence?”
43. Society has attached a special meaning to the term a. A person exercising professional judgment should
“professional.” A professional is: be free from all economic, financial and other
a. someone who has passed a qualifying exam to relationships.
enter the job market. b. Possessing the ability to act with integrity and
b. a person who is expected to conduct himself or objectivity.
herself at a higher level than the requirements of c. Independence precludes relationships that may
society’s laws or regulations. appear to impair objectivity in rendering assurance
c. any person who receives pay for the services services.
performed. d. Possessing the ability to express a conclusion
d. someone who has both an education in the trade without being affected by influences that
and on-the-job experience received under an compromise professional judgment.
experienced supervisor.
49. When CPAs are able to maintain their actual
44. Safeguards created by the profession, legislation or independence, it is referred to as independence in:
regulation include the following, except: a. conduct. c. fact.
a. Educational, training and experience requirements b. appearance. d. total.
for entry into the profession.
b. Continuing professional development 50. “Independence” in auditing means:
requirements. a. maintaining an indirect financial interest.
c. Corporate governance regulations. b. not being financially dependent on a client.
d. Effective, well-publicized complaint systems c. taking an unbiased and objective viewpoint.
operated by the employing organization, which d. being an advocate for a client.
enable colleagues, employers and members of the
public to draw attention to unprofessional or
unethical behavior.
☺ - done - ☺

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