1.

In which situation would a CPA be in violation of the rules of professional ethics in determining professional
fees?
A. A fee that is based on 10% of the client's adjusted net income for the current year.
B. A fee which is lower compared to the fee charged in the prior year for similar services.
C. A fee based on appropriate rates per hour or per day for the time of each person engaged inperforming
professional services.
D. A fee based on appropriate rates per hour, where the appropriate rate is based on the fundamentalpremise
that the organization and conduct of the CPA and the services provided to clients are wellplanned,
controlled and managed.

2. The Code of Ethics would be violated if a CPA represents that specific consulting services will be performed for
astated fee and it is apparent at the time of the representation that the
A. fee was a competitive bid.
B. CPA would not be independent.
C. actual fee would be substantially higher.
D. actual fee would be substantially lower than the fees charged by other professional accountants
forcomparable services

3. A CPA in public practice should not pay or receive a referral fee or commission, unless the CPA in public
practice has established
A. internal controls designed to scientifically compute the referral fee or commission.
B. safeguards to eliminate or reduce threats to fundamental principles to an acceptable level.
C. another company as recipient, whose name does not include the name of the CPA in public practice.
D. that explicit approval to pay or receive commissions has been obtained from the Securities andExchange
Commission.

4. When a CPA in business is pressured to become associated with misleading information or to become
associated withmisleading information through the actions of others, what kinds of threats might arise?
A. Familiarity and self-review threats C. Self-interest and self-review threats
B. Self-interest and intimidation threats D. Self-review and advocacy threats

5. The receipt of gifts and hospitality from a client may create threats to fundamental principles. Which of the
following is a correct combination of threat and fundamental principle created by this situation?
A. Intimidation threat- integrity
B. Advocacy threat - objectivity
C. Self-interest threat - objectivity
D. Self-interest threat - professional competence and due care.

PSAs
6. Philippine Standards on Auditing (PSAs) should be looked upon by practitioners as
A. ideals to strive for, but which are not achievable.
B. maximum standards which denote excellent work.
C. benchmark to be used on all audits, reviews, and compilations.
D. minimum standards of performance which must be achieved on each audit engagement.

Client acceptance & continuance

7. The following are considered by a CPA firm in deciding whether to accept a new client, EXCEPT the client’s
A. financial ability.
B. relations with its previous CPA firm.
C. standing in the business community.
D. probability of achieving an unqualified opinion.

8. One of the first things that the auditor will do after accepting a new client is
A. tour the client's facilities
B. study client's internal control structure
C. communicate with predecessor auditor
D. contact client's attorney to discover legal obligations

9. A client seeking a second opinion does not permit the CPA to communicate with the existing accountant. In
such cases, the CPA should
A. communicate the client's refusal directly to the existing accountant.
B. issue a disclaimer of opinion due to a significant client-imposed scope limitation.
 C. consider whether, taking all the circumstances into account, it is appropriate to provide the opinionsought.
D. consider whether to issue a qualified opinion or disclaimer of opinion due to a significant client-imposed
scope limitation.

Error, fraud & illegal acts

10. The primary responsibility for the prevention and detection of fraud and error rests with
A. the company's management
B. those charged with governance
C. the company's management and those charged with governance
D. the external auditor, the company's management, and those charged with governance