1.Appropropriate safeguards during client acceptance may include:
a. Obtaining knowledge and understanding about client’s owners, managers and those
responsible for its governance and business activities
b. Securing the client’s commitment to improve corporate governance practices or internal
controls
c. All of these
d. Obtaining knowledge and understanding of the client
2. Work environment safeguards to eliminate or reduce threats for a professional accountant in
public practice to an acceptable level include the ff except
a. Documented internal policies and procedures requiring compliance with the fundamental
principle of quality controls
b. Absence of disciplinary mechanism to promote compliance with policies and procedures
c. Policies and procedures to monitor if necessary, management the reliance on revenue
received from a single client
d. Using different partners and engagement teams with separate reporting lines for the
provision of non-assurance services to an assurance client
3. Within the context of quality control, the primary purpose of continuing professional education
and training activities is to provide CPA firm with reasonable assurance that personnel within the
firm have
a. The ability to fulfill assigned responsibilities and the qualifications for advancement
b. Professional education that is required to perform with due professional care
c. Technical training that assures proficiency as an auditor
d. The degree of independence as required by the Code of Professional Ethics
4. If a firm had a material financial interest, whether direct or indirect, in the assurance client, the
self interest threat created:
a. Can be reduced by the application of appropriate safeguards as mentioned in Section
290.32 of the revised code
b. Must be eliminated by written disclosure to the BOA, SEC and the AASC of such
material financial interest, provided such disclosure is made within 60 days from the date
of acceptance of the engagement
c. Would be significant no safeguard could reduce the threat to an acceptable level
d. Would be insignificant if the financial interests are disposed of within the most
practicable time (i.e., within 3 months from the date of acceptance of the engagement)
5. In connection with the element of consultation, a CPA firm’s system of quality control should
ordinarily provide that all personnel
a. Have the knowledge required to enable them to fulfill responsibilities assigned
b. Demonstrate compliance with all quality control standards
c. Seek assistance from persons having appropriate levels of knowledge, judgment and
authority
d. Possess judgment, motivation and adequate experience
6. S1: It is practical to establish ethical requirements which apply to all situations and
circumstances that CPAs may encounter.
S2: CPAs should consider the ethical requirements as the ideal principles which they should
follow in performing their work.
a. False, True
b. False, False
c. True, True
d. True, False
7. What is the objective of monitoring as an element of quality control policies of a firm?
a. To evaluate prospective clients and for their approval as clients
b. To have reasonable assurance that right personnel is assigned to an audit engagement
c. To ensure that personnel are sufficiently directed, supervised and their work being
reviewed adequately
d. To provide reasonable assurance that the firm’s other quality control policies and
procedures are effectively operating
8. To comply with the quality control element of professional requirements, the auditor would
most likely
a. Identify criteria which will be considered in evaluating individual performance and
expected proficiency
b. Emphasize independence of mental attitude in training programs and in supervision and
review of the audits
c. Identify on a timely basis the staffing requirements of specific audits
d. Monitor the effectiveness of recruiting programs
9. A quality control policy that requires personnel in the firm to adhere to independence,
integrity, objectivity, confidentiality and professional behavior, relates to
a. Monitoring
b. Skills and competence
c. Professional requirements
d. Delegation
10. The Code of Ethics for Professional Accountant in the Phils is approved by ____,
recommended for adoption by the ______ and approval of the _____.
a. BOA, PICPA, PRC
b. SEC, BOA, PRC
c. PICPA, BOA, PRC
d. BOA, PRC, Pres of the Phils.
11. A CPA in public practice should not:
a. Engage in non-accounting related activities which also involve members of the
companies that comprise his/her audit clients.
b. Engage in any business, occupation or activity aside from his/her public accounting
practice.
c. Engage in any business, occupation or activity that impairs or might impair integrity,
objectivity or the good reputation of the profession
d. Engage in teaching or provision of accounting instruction while still in public practice,
since this would cause a division of time and effort, resulting to impairment of the quality
of service provided to clients.
12. S1: A CPA in public practice should agree to provide only those services that the CPA in
public practice is competent to perform.
S2: Acceptance decisions need not be periodically reviewed for recurring client
engagements.
a. False, False
b. False, True
c. True, False
d. True, True
13. Which of the ff safeguards to eliminate or reduce threats to independence is provided by the
profession, legislation or regulation?
a. Policies and procedures that emphasize the assurance client’s commitment to fair
financial reporting
b. Rotation of senior personnel
c. Continuing education requirements
d. Internal policies and procedures to implement compliance with firm policies and
procedures as they relate to independence
14. The objective of the quality control policies to be adopted by an audit firm will ordinarily
incorporate all of the following except:
a. Professional requirements
b. Assignment
c. Risk assessment
d. Skills and Competence
15. Assuring consistent compliance with the elements of quality control policies and procedures
involves
a. Delegation
b. Monitoring
c. Assignment
d. Professional requirements
16. Independence of an auditor in relation to the enterprise may be impaired in the following
cases, except:
a. Engaged to render management advisor services to the enterprise
b. Having a loan to or from the enterprise or any officer, director or principal stockholder
thereof, with certain exceptions
c. Direct or material indirect financial interest in the enterprise
d. Connection with the enterprise as a promoter, underwriter, voting trustee, director, officer
or employee
17. When initiating either a formal or informal conflict resolution process, a CPA should consider
the ff, either individually or together with others, as part of the resolution process:
I.
Relevant facts
II.
Ethical issues involved
III.
Fundamental principles related to the matter in question
IV.
Established internal procedures
V.
Alternate courses of action
a. I,II,V
b. I,II,III,IV,V
c. I,II,III & IV
d. I, III, IV & V
18. When a CPA in business is pressured to be associated with misleading information or to
become associated with misleading information through the action of others, what kinds of
threats might arise?
a. Self-review and advocacy
b. Self-interest and intimidation
c. Familiarity and self-review
d. Self-interest and self- review
19. Which respect to the quality control element of skills and competence, what criterion would
not be considered in evaluating individual performance and expected proficiency?
a. Communicative skills
b. Analytical judgement abilities
c. Client relations
d. Relationship of personnel with relatives of clients
20. Which of the following statements best describe why the CPA professions has deemed it
essential to promulgate code of professional ethics and to establish a mechanism for enforcing
observation of the Code?
a. A pre-requisite to success is the establishment of an ethical code that primarily defines
the professional’s responsibility to clients and colleagues
b. A distinguishing mark of a profession is its acceptance of responsibility to the public
c. A requirement of most state laws calls for the profession to establish a code of ethics
d. A requirement of most state laws calls for the profession to establish a code of ethics
21. Sufficient direction, supervision and review of work at all levels to provide reasonable
assurance that the work performed meets appropriate standards of quality relates to
a. Skills and competence
b. Delegation
c. Professional requirements
d. Assignment
22. A firm of independent auditors must establish and follow quality control policies and
procedures because these standards
a. Give reasonable assurance that the firm as a whole will conform with professional
standards
b. Are required by the SEC for auditors of all firms
c. Are necessary to meet increasing requirements of auditor’s liability insurers
d. Include formal filing of records of such policies and procedures
23. The ff. Procedures are considered fundamental except:
a. Independence
b. Integrity
c. Objectivity
d. Confidentiality
24. Which of the ff quality control procedures do not relate to skills and competence?
a. Professional development
b. Hiring
c. Direction
d. Advancement
25. 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 reliability of the client
b. Minimize the likelihood of association with clients whose management lacks integrity
c. Satisfy the CPA firm;s duty to the public concerning the acceptance of new clients
d. Anticipate before performing any field work whether an unqualified opinion can be
expressed
26. In connection with the element of assignment, a CPA firm’s system of quality control should
ordinarily establish procedures that
a. Encourage personnel to use authoritative sources on complex or unusual matter
b. Provide adequate supervision at all levels, considering the training, ability and
experience of the personnel assigned
c. Require preparation of time budgets for audits to determine manpower requirements and
to schedule the audit work
d. Establish qualifications deemed necessary for various levels of responsibility within the
firm
27. A CPA in business should maintain information for which he/she is responsible in a manner
that:
a. Describes clearly the true nature if business transactions, assets or liabilities
b. Classifies and record information in a timely and proper manner
c. All of these
d. Represents the facts accurately and completely in all material respects
28. In which of the ff situations would a CPA be in violation of the rules of professional ethics in
determining professional fees?
a. A fee based in appropriate rates per hour or per day if the time of each person engaged
in performing professional services
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, where the appropriate rate is based on the
fundamental premise that the organization and conduct of the CPA and the services
provided to clients are well planned, controlled and managed
d. A fee that is based on 10% of the client’s adjusted net income for the current year
29. The original code is applicable to professional services performed in the Phils. On or after
a. January 1, 2004
b. December 31, 2009
c. June 30, 2008
d. December 31, 2008
30. A CPA in public practice should not pay or receive a referral fee or commission unless the
CPA has established:
a. That explicit approval to pay or receive commissions has been obtained from the SEC
b. Another company as recipient, whose name does not include the name of the CPA in
public practice
c. Internal controls designed to scientifically compute the referral fee or commission
d. Safeguards to eliminate or reduce threats to fundamental principles to an acceptable
level
31. Circumstances that threaten the ability of a professional accountant in business to perform
duties with the appropriate degree of professional competence and due care include the
following except:
a. Incomplete, restricted or otherwise inadequate information for performing the duties
properly
b. Inadequate resources for the proper performance of the duties
c. Sufficient experience, training and/or education
d. Insufficient time for properly performing or completing the relevant duties
32. Ethical conflict resolution:
a. Always involves a professional accountant as violating party
b. May either be formal or informal
c. Results to withdrawal from the specified engagement
d. Requires arbitration by an independent 3rd party
33.which of the ff are elements of a CPA firm’s quality control that should be considered in
establishing its quality control policies and procedures?
A.Skills and competence
B.Monitoring
C.Professional Requirements
a. AC
b. AB
c. BC
d. ABC
34. Which of the following quality control objective would be least important to the auditor?
a.
b.
c.
d.
Hiring personnel
Review and supervision
Determination of audit fee
Professional advancement
35. Certain safeguards may increase the likelihood of identifying or deterring unethical behavior.
Such safeguards which may be created by the accounting profession, legislation, regulation, or
an employing organization, include but are not restricted to:
I.
II.
a.
b.
c.
d.
Effective, well publicized complaints systems operated by the employing organization,
the profession or a regulator, which enable colleagues, employers and members of the
public to draw attention to unprofessional or unethical behavior.
An explicitly stated duty to report breaches of ethical requirements.
II only
Neither I nor II
I and II
I only
36. If CPA cannot implement appropriate safeguards, the professional accountant should do the
ff, except:
a.
b.
c.
d.
Issue an adverse opinion on the subject matter of the engagement
Decline the specific professional service involved
Discontinue the specific professional service involved
Resign from the client or the employing organization, as necessary
37. The nature and significance of threats may differ depending on whether they arise in relation
to the provision of services to a client. In which of the ff types of clients would the code provide
the strictest set of requirements regarding independence?
a.
b.
c.
d.
A financial statement audit client.
A non-financial statement audit assurance client
A non-assurance client
A non-client
38. The ff steps are part of the conceptual framework approach. Set the steps in proper order.
I. Address threats which are other than clearly insignificant through the application of
safeguards.
II. Evaluate the significance of threats to compliance with fundamental principles.
III. Identify threats to compliance with the fundamental principles.
a. III, II, I
b. I, II, III
c. II, III, I
d. III, I, II
39. The code of ethics would be violated if a CPA accepted a fee for services and the fee was
a.
b.
c.
d.
Fixed by public authority
Based on the results of judicial proceedings in a tax matter
Payable after a specifies finding was attained in a review of financial statements
Based on a price quotation submitted in competitive bidding
40. Intimidation threat could be created under the ff circumstances except
a. A professional accountant being informed by a partner of the firm that he would not be
promoted unless he agrees with an audit client’s inappropriate accounting treatment
b. A firm entering into a contingent fee arrangement relating to an assurance engagement
c. A firm being pressured to reduce inappropriately the extent of work performed in order to
reduce fees
d. A firm being threatened with litigation by client
41. Which of the following quality control procedures relate to skills and competence?
a.
b.
c.
d.
Evaluating performance of personnel and advising personnel of their progress
Provide procedures for planning audits
Provide for approval of the scheduling and staffing of the audit by the auditor
Designating individuals as specialists to serve as authoritative sources
42. In case of differences of opinion among members of a team:
a. Documentation will be made regarding the unresolved matter, and the auditor will
withdraw from the engagement altogether
b. An increase in the audit fee will be requested due to the extension of the time required to
complete the engagement
c. The report shall not be issued until the matter is resolved
d. The engagement partner shall issue a disclaimer of opinion due to a scope limitation
43. The nature and extent of a CPA firm’s quality control policies and procedures depend on: A.
CPA firm size B. Nature of CPA firm’s practice C. Cost-Benefit Consideration
a.
b.
c.
d.
ABC
AC
BC
AB
44. Contingent fees are widely used for certain types of non-assurance engagements. They
may, however, give rise to threats to compliance with the fundamental principles especially the
principle of:
a.
b.
c.
d.
Objectivity
Professional behavior
Confidentiality
Professional competence and due care
45. S1: Professional accountants refer to persons who are registered in the PRC as the CPAs
and who hold valid certificates issued by the BOA, whether they be in any sector of practice of
accountancy.
S2: The Code of Ethics for Professional Accountants in the Phils is mandatory for all CPAs.
a.
b.
c.
d.
False, True
True, False
True, True
False, False
46. In pursuing the firm’s quality control objectives with respect to assigning personnel to
engagements, the auditor may use policies and procedures such as
a. Requiring auditing personnel to have current accounting and auditing literature available
for research and reference purposes throughout the engagement
b. Requiring timely identification of the staffing requirements of specific engagements so
that enough qualified personnel can be made available
c. Designating senior qualified personnel to provide advice on accounting or auditing
questions throughout the engagement
d. Establishing at entry levels a policy for recruiting that includes minimum standards of
academic preparation and accomplishments
47. A CPA in business or an immediate or close family member may be offered an inducement
or pressured to offer inducements. Inducements may take various forms, including:
a.
b.
c.
d.
Preferential treatment
Gifts and hospitality
Inappropriate appeals to friendship and loyalty
Any of these
48. A client seeking a second opinion does not permit the CPA to communicate with the existing
accountant. In such cases, the CPA should:
a. Issue a disclaimer of opinion due to a significant client-imposed scope limitation
b. Consider whether to issue a qualified opinion or 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 opinion sought
d. Communicate the client’s refusal directly to the existing accountant
49. A CPA firm’s quality control procedures pertaining to the acceptance of a prospective audit
client would most likely include
a. Inquiry of 3rd parties, such as the prospective client’s bankers and attorneys, about
information regarding the prospective client and its management
b. Consideration of whether sufficient competent evidential matter may be obtained to
afford a reasonable basis for an opinion
c. Consideration of whether the internal control structure is sufficiently effective to permit a
reduction in the required substantive tests
d. Inquiry of management as to whether disagreements between the predecessor auditor
and the prospective client were resolved satisfactorily
50. Which of the ff is least likely considered a quality control procedure used to satisfy control
policy on consultation?
a. Specifies the extent of documentation to be provided for the result of consultation in
those areas and specialized situations where consultation is required
b. Identifies area and specialized situations where consultation is required and encourage
personnel to consult with or in use authoritative sources on other complex matters
c. Assigns an appropriate person or persons to be responsible for assigning personnel to
audits
d. Designates individual as specialists to serve as authoritative sources and define their
authority in consultative situations