jru at compendium.pdf

18
Jose Rizal University Bachelor of Science in Accountancy MODULAR REVIEW AUDITING THEORY Professor George R. James, CPA, MBA Page 1 COMPREHENSIVE REVIEW QUESTIONS IN AUDITING THEORY 1. The word auditing comes from the Latin audire, which means: A. To see B. To detect C. To hear D. To test 2. Which of the following is an incorrect phrase? A. Auditing is a systematic process. B. Auditing objectively obtains and evaluates assurance. C. Auditing evaluates evidence regarding assertions. D. Auditing communicates results to interested users. 3. Representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur. A. Financial statement assertions C. Notes to the financial statements B. Audit evidence D. Disclosure requirements 4. Assertions used by the auditor fall are classified as assertions about: A. Classes of transactions and events for the period under audit. B. Account balances at period-end. C. Presentation and disclosure. D. All of the answers. 5. Financial statements need to be prepared in accordance with one, or a combination of: A. PFRS C. Other authoritative basis B. IFRS D. All of the answers. 6. This term is used to refer to the person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm. A. Users of financial statements C. Auditor B. Those charged with governance D. Management 7. The auditor communicates the results of his or her work through the medium of the: A. Audit engagement letter. C. Management letter. B. Audit report. D. Notes to the financial statements. 8. An auditor is associated with financial information when the auditor: A B C D attaches a report to that information. Yes No Yes No consents to the use of his/her name in a professional connection. No Yes Yes No 9. Which of the following types of audits is performed most frequently by CPAs on a fee basis and for more than one client? A. Internal audits. C. Compliance audits. B. Government audits. D. Financial statement audits. 10. Which of the following statements best describes operational audits? A. This type of audit is performed to determine whether an entity’s financial statements are fairly stated in conformity with generally accepted accounting principles. B. This type of audit involves a review of an organization’s procedures and methods for the purpose of evaluating efficiency and effectiveness of operations, and identifying areas for improvement. C. This type of audit is performed in order to determine the degree of adherence to specific procedures and rules set down by some higher authority. D. All of these statements describe operational audits. 11. Which of the following best describes the operational audit? A. It requires the constant review by internal auditors of the administrative controls as they relate to operations of the company. B. It concentrates on implementing financial and accounting control in a newly organized company. C. It attempts and is designed to verify the fair presentation of a company’s results of operations. D. It concentrates on seeking out aspects of operations in which waste would be reduced by the introduction of controls.

Upload: chris-tamin

Post on 07-Dec-2015

526 views

Category:

Documents


22 download

TRANSCRIPT

Page 1: JRU AT Compendium.pdf

Jose Rizal University

Bachelor of Science in Accountancy

MODULAR REVIEW – AUDITING THEORY Professor George R. James, CPA, MBA

Page 1

COMPREHENSIVE REVIEW QUESTIONS IN AUDITING THEORY

1. The word auditing comes from the Latin audire, which means: A. To see B. To detect C. To hear D. To test

2. Which of the following is an incorrect phrase? A. Auditing is a systematic process. B. Auditing objectively obtains and evaluates assurance. C. Auditing evaluates evidence regarding assertions. D. Auditing communicates results to interested users.

3. Representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur.

A. Financial statement assertions C. Notes to the financial statements B. Audit evidence D. Disclosure requirements

4. Assertions used by the auditor fall are classified as assertions about: A. Classes of transactions and events for the period under audit. B. Account balances at period-end. C. Presentation and disclosure. D. All of the answers.

5. Financial statements need to be prepared in accordance with one, or a combination of: A. PFRS C. Other authoritative basis B. IFRS D. All of the answers.

6. This term is used to refer to the person or persons conducting the audit, usually the engagement partner or other members of the engagement team, or, as applicable, the firm.

A. Users of financial statements C. Auditor B. Those charged with governance D. Management

7. The auditor communicates the results of his or her work through the medium of the: A. Audit engagement letter. C. Management letter. B. Audit report. D. Notes to the financial statements.

8. An auditor is associated with financial information when the auditor: A B C D attaches a report to that information. Yes No Yes No consents to the use of his/her name in a professional

connection. No Yes Yes No

9. Which of the following types of audits is performed most frequently by CPAs on a fee basis and for more than one client?

A. Internal audits. C. Compliance audits. B. Government audits. D. Financial statement audits.

10. Which of the following statements best describes operational audits? A. This type of audit is performed to determine whether an entity’s financial statements are

fairly stated in conformity with generally accepted accounting principles. B. This type of audit involves a review of an organization’s procedures and methods for the

purpose of evaluating efficiency and effectiveness of operations, and identifying areas for improvement.

C. This type of audit is performed in order to determine the degree of adherence to specific procedures and rules set down by some higher authority.

D. All of these statements describe operational audits.

11. Which of the following best describes the operational audit? A. It requires the constant review by internal auditors of the administrative controls as they

relate to operations of the company. B. It concentrates on implementing financial and accounting control in a newly organized

company. C. It attempts and is designed to verify the fair presentation of a company’s results of

operations. D. It concentrates on seeking out aspects of operations in which waste would be reduced by

the introduction of controls.

Page 2: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 2

Page 2

12. Which of the following types of audits are most similar? A. Operational audits and compliance audits. B. Independent financial statement audits and operational audits. C. Compliance audits and independent financial statement audits. D. Internal audits and independent financial statement audits.

13. This is an independent appraisal activity established within an entity as a service to the entity: A. External or independent auditing. C. Government auditing. B. Internal audit function. D. Compliance auditing.

14. Internal auditing relates to A. Audit which serves the needs of management. B. Audit which is performed by a professional practitioner as an independent contractor. C. Audit which is incidentally concerned with the detection and prevention of fraud. D. Audit wherein the auditor should be independent of management both in fact and in mental

attitude.

15. To operate effectively, an internal auditor must be independent of: A. The line functions of the organization. B. The entity. C. The employer-employee relationship which exists for other employees in the organization. D. All of these.

16. Which of the following statements best describes the relationship between an external auditor and an internal auditor?

A. An internal auditor is more likely to be concerned with internal accounting control; while an external auditor shall be more interested with operational auditing.

B. Although the internal auditor and external auditor have differences in the independence of their positions, they nevertheless serve similar types of interests.

C. Both the internal auditor and external auditor have the same degree of concern about financial status and results of operations.

D. The practitioners in the two fields use basically an identical approach; however, there are differences in the application of auditing techniques.

17. In government auditing, the three elements of expanded scope auditing are: A. Goal analysis, audit of operations, audit of systems. B. Financial and compliance, economy and efficiency, program results. C. Pre-audit, post-audit, internal audit. D. National government audit, local government audit, corporation audit.

18. An audit designed to determine the extent to which the desired results of an activity established by the legislative or other authorizing body are being achieved.

A. Economy audit. C. Program results audit. B. Efficiency audit. D. Financial-related audit.

19. A government auditor evaluates a disbursement to determine if it is necessary, excessive or extravagant in accordance with existing rules and regulations. What kind of audit is he conducting?

A B C D Compliance audit Yes No Yes No Economy audit No Yes Yes No

20. A structured representation of historical financial information, including related notes, intended to communicate an entity’s economic resources or obligations at a point in time or the changes therein for a period of time in accordance with a financial reporting framework.

A. Annual report C. Accounting records B. Engagement documentation D. Financial statements

21. The objective of an audit of financial statements is to enable the auditor to express an opinion whether:

A. the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework.

B. the company is financially viable and profitable. C. there is any fraud committed on part of management and employees. D. illegal acts were committed in the conduct of the company’s operations.

22. The primary objective of the ordinary examination of financial statements by a CPA is the expression of an opinion on

A. The conformity of the statements with the books of accounts. B. The competence of management in accounting matters which is implied by whether the

opinion is qualified or not.

Page 3: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 3

Page 3

C. The fairness with which the financial statements present financial position, performance and changes in financial position.

D. The conformity of the financial statements with generally accepted auditing standards applied on a basis consistent with that of the preceding year.

23. The phrase used to express the auditor’s opinion is: A. “absence of material and pervasive misstatements in the financial statements” B. “present fairly, in all material respects” C. “provide reasonable, but not absolute assurance” D. “nothing has come to my attention which causes me to believe that the financial statements

are materially misstated”

24. This term describes the role of person(s) or organization(s) with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity.

A. Governance C. Control environment B. Audit committee D. Management

25. Comprises officers and others who also perform senior managerial functions, and includes directors and the audit committee only in those instances when they perform such functions.

A. Top rank personnel C. Board of directors B. Those charged with governance D. Management

26. The person(s) with executive responsibility for the conduct of the entity’s operations. A. Those charged with governance C. Audit committee B. Management D. Chief executive officer

27. Which of the following parties is responsible for an entity’s financial statements? A. Entity management. B. The external audit team. C. The partner who signs the audit report. D. The Philippine Securities and Exchange Commission.

28. The best statement of the responsibility of the auditor with respect to audited financial statements is:

A. The auditor’s responsibility on fair presentation of financial statements is limited only up to the date of the audit report.

B. The auditor’s responsibility is confined to his expression of opinion about the audited financial statements.

C. The responsibility over the financial statements rests with the management and the auditor assumes responsibility with respect to the notes of financial statements.

D. The auditor is responsible only to his qualified opinion but not for any other type of opinion.

29. When an auditor expresses on opinion on financial statements, his responsibilities extend to: A. The underlying wisdom of his client’s management decisions. B. Whether the results of his client’s operating decisions are fairly presented in the financial

statements. C. Active participation in the implementation of the advice given to his client. D. An ongoing responsibility for his client’s solvency.

30. Which of the following statements best refers to fraud? A. A difference between the amount, classification, presentation, or disclosure 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.

B. An unintentional misstatement in financial statements, including the omission of an amount or disclosure

C. An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.

D. Other information that is unrelated to matters appearing in the audited financial statements that is incorrectly stated or presented.

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

32. The general principles for conducting financial statement audits include the following, except: A. Compliance with the Code of Ethics for CPAs. B. Compliance with Philippine Standards on Auditing. C. Planning and performing the audit with an attitude of professional skepticism. D. Reporting on internal control weaknesses noted in the course of performing the audit.

Page 4: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 4

Page 4

33. Philippine Standards on Auditing (PSAs) should be looked upon 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.

34. Which of the following phrases best describe professional skepticism? A. The application of relevant training, knowledge and experience, within the context provided

by auditing, accounting and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the audit engagement

B. An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of evidence.

C. The conduct of an audit following the premise that management is biased and will do everything under their power, ethical or otherwise, to manipulate financial statements in their favor.

D. All of these phrases properly describe professional skepticism.

35. Because an examination in accordance with PSAs is influenced by the possibility of material errors, the auditor should conduct the examination with an attitude of:

A. Professional responsiveness. C. Objective judgment. B. Conservative advocacy. D. Professional skepticism.

36. In the context of a financial statement audit, reasonable assurance means A. Gathering of all available corroborating evidence for the auditor to conclude that there are

no material misstatements in the financial statements, taken as a whole. B. Gathering of the audit evidence necessary for the auditor to conclude that there are no

material misstatements in the financial statements, taken as a whole. C. Gathering of the audit evidence necessary for the auditor to conclude that the financial

statements, taken as a whole, are free from any misstatements D. Gathering of the audit evidence necessary for the auditor to conclude that the financial

statements are free of material unintentional misstatements.

37. If it is probable that the judgment of a reasonable person would have been changed or influenced by the omission or misstatement of information, then that information is:

A. Significant B. Insignificant C. Material D. Relevant

38. This provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful.

A. Materiality B. Audit risk C. Internal control D. Reliability

39. This term refers to the possibility of harm or loss or danger. It can also refer to a factor, thing, or element or course involving uncertain danger; or a hazard.

A. Materiality B. Jeopardy C. Damocles concept D. Risk

40. The risk that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated:

A. Audit risk B. Inherent risk C. Control risk D. Detection risk

41. The risk that the financial statements are materially misstated prior to audit A. Audit risk C. Fraud risk factors B. Risk of material misstatement D. Materiality

42. Which of the following statements describes detection risk? A. The susceptibility of an account balance or class of transactions to misstatement that could

be material, individually or when aggregated with misstatements in other balances of classes, before consideration of any related controls.

B. The risk that an auditor’s substantive procedures will not detect a misstatement that exists in an account balance or class of transactions that could be material, individually or when aggregated with misstatements in other balances or classes.

C. The risk that a misstatement that could occur in an account balance or class of transactions and that could be material individually or in the aggregate, will not be prevented or detected and corrected on a timely basis by the company’s internal control.

D. The risk that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated

43. Identify the concept: “A client’s financial statements may be materially false and/or misleading.” A. Business risk. B. Information risk. C. Client risk. D. Risk assessment.

44. The underlying conditions that create demand for users for reliable financial information do not include (the):

A. Transactions that are numerous and complex. B. Expression of an opinion on the fairness of the financial statements. C. Users separated from accounting records by distance and time. D. Financial decisions that are important to investors and users.

Page 5: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 5

Page 5

45. Which of the following methods is most commonly used to reduce information risk? A. Allow users to verify information. B. Users share information risk with management. C. Have the financial statements audited. D. Allow all users to prepare the statements.

46. Which of the following best describes the reason why independent auditors report on financial statements?

A. A management fraud may exist and it is more likely to be detected by independent auditors. B. A poorly designed internal control structure may be in existence. C. A misstatement of account balances may exist and is generally corrected as the result of the

independent auditor’s work. D. Different interests may exist between the company preparing the statements and the

persons using the statements.

47. The phrase in our opinion in the auditor’s report is intended to inform users that auditors: A. Guarantee fair presentation of the financial statements. B. Act as insurers of the accuracy of the statements. C. Certify the material presented in the statements by management. D. Base their conclusions about the statements on professional judgment.

48. An audit has inherent limitations that affect the auditor’s ability to detect material misstatements. Which of the following is not among the factors that result to these inherent limitations?

A. Use of testing. B. Inherent limitations of accounting and internal control system. C. Evidence that is basically persuasive rather than conclusive. D. Going concern problem of the assurance client.

49. Which of the following statements does not properly describe a limitation of an audit? A. Many audit conclusions are made on the basis of examining a sample of evidence. B. Some evidence supporting peso representations in the FS must be obtained by oral or

written representation of management. C. Fatigue can cause auditors to overlook pertinent evidence. D. Many financial statement assertions cannot be audited.

50. The expertise that distinguishes audits from accountants is in the: A. Ability to interpret generally accepted accounting principles. B. Requirement to possess education beyond the Bachelor’s degree. C. Accumulation and interpretation of evidence. D. Ability to interpret Philippine Financial Reporting Standards.

51. The auditor’s satisfaction as to the reliability of an assertion being made by one party for use by another is called:

A. Assurance B. Reliance factor C. Precision D. Materiality

52. An engagement in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria

A. Assurance engagement C. Audit engagement B. Attestation engagement D. Management consulting engagement

53. This document defines the elements and objectives of an assurance engagement, but does not, by itself, establish standards or provide procedural requirements for the performance of assurance engagements.

A. PSRS B. PREPS C. PSAE D. PFAE

54. Which of the following is NOT an element of an assurance engagement? A. Sufficient appropriate evidence C. A subject matter B. Appropriate professional fees D. A written assurance report

55. The person, persons or class of persons for whom the practitioner prepares the assurance report. A. General public B. Responsible party C. Audit committee D. Intended users

56. According to the IAASB Glossary of terms, this refers to a professional accountant in public practice.

A. Auditor B. Practitioner C. Public accountant D. Professional

57. A professional accountant in public practice may refer to: A B C D A professional accountant, irrespective of functional

classification (for example, audit, tax or consulting) in a firm that provides professional services. Yes No Yes No

A firm of CPAs in public practice. No Yes Yes No

Page 6: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 6

Page 6

58. 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.

A. General public B. Responsible party C. Audit committee D. Intended users

59. Which of the following forms may the subject matter of an assurance engagement take? I. Financial performance or conditions II. Non-financial performance or conditions III. Physical characteristics IV. Systems and processes V. Behavior

A. I and II B. I, II and III C. I, III and IV D. I, II, III, IV, V

60. The outcome of the evaluation or measurement of a subject matter. A. Audit report C. Subject analysis B. Subject matter information D. Criteria

61. In this assurance engagement, the evaluation or measurement of the subject matter is performed by the responsible party, and the subject matter information is in the form of an assertion by the responsible party that is made available to the intended users.

A. Audit of financial statements C. Assertion based engagements B. Direct reporting engagements D. None of the answers

62. In this assurance engagement, 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.

A. Audit of financial statements C. Assertion based engagements B. Direct reporting engagements D. None of the answers

63. These are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure.

A. Assertions B. Milestones C. Criteria D. PFRS

64. Which of the following statements is incorrect? A. Criteria can be formal or less formal. B. There can be different criteria for the same subject matter. C. Suitable criteria are required for reasonably consistent evaluation or measurement of a

subject matter D. Professional judgment is always inferior as compared to the requirements of suitable criteria.

65. Which of the following is more difficult to evaluate objectively? A. Efficiency and effectiveness of operations. B. Compliance with government regulations. C. Presentation of financial statements in accordance with GAAP. D. All the three above are equally difficult.

66. The following characteristics are considered necessary if criteria is to be deemed as suitable for an assurance engagement. Which of the following phrases best describes understandability?

A. Allows suitable criteria to contribute to conclusions that assist decision-making by the intended users

B. Relevant factors that could affect the conclusions in the context of the engagement circumstances are not omitted

C. Allows reasonably consistent evaluation or measurement of the subject matter including, where relevant, presentation and disclosure, when used in similar circumstances by similarly qualified practitioners

D. Contributes to conclusions that are free from bias E. Contributes to conclusions that are clear, comprehensive, and not subject to significantly

different interpretations

67. The financial reporting framework adopted by management and, where appropriate, those charged with governance in the preparation of the financial statements that is acceptable in view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.

A. Generally accepted auditing standards B. Financial reporting standards C. Applicable financial reporting framework D. Philippine standards in auditing

Page 7: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 7

Page 7

68. In an assurance engagement, this refers to the information obtained by the practitioner in arriving at the conclusions on which the conclusion is based.

A. Criteria B. Evidence C. Assertions D. PSAs

69. An audit is an assurance engagement. Evidence in an audit engagement comprises: A B C D Accounting records and source documents Yes No Yes No Corroborating information from other sources No Yes Yes No

70. The measure of the quality of audit evidence; that is, its relevance and its reliability in providing support for the conclusions on which the auditor’s opinion is based.

A. Sufficiency B. Adequacy C. Appropriateness D. Scope

71. The measure of the quantity of audit evidence and its relevance to a particular assertion and its reliability.

A. Sufficiency B. Adequacy C. Appropriateness D. Scope

72. This refers to the audit procedures deemed necessary in the circumstances to achieve the objective of the audit.

A. Scope of an audit B. Audit program C. Engagement area D. Sectorization

73. The record of work performed, results obtained, and conclusions the practitioner reached in an assurance engagement.

A. Work program C. Data integrity sheet B. Engagement documentation D. Audit documentation

74. In performing an assurance engagement, a professional accountant typically: A. Supplies litigation support services. B. Authenticates documentation. C. Expresses a conclusion about an assertion. D. Provides management consulting advice.

75. Generally, the conclusion expressed in an assurance engagement may provide the following levels of assurance:

A B C D Limited level of assurance Yes No Yes Yes Reasonable level of assurance Yes Yes Yes No Absolute level of assurance No Yes Yes No

76. According to level of assurance provided, there are two types of assurance engagements: reasonable assurance engagements and limited assurance engagements. Which of the following best describes limited assurance engagements?

A. The objective of this assurance engagement is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner’s conclusion.

B. The objective of this assurance engagement is a reduction 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. Both a and b apply to limited assurance engagements. D. None of the answers apply to limited assurance engagements.

77. Absolute assurance is generally not attainable as a result of such factors as: A B C D The use of selective testing Yes Yes Yes No The inherent limitations of internal control Yes Yes Yes Yes Much of the evidence available to the

practitioner is persuasive rather than conclusive

Yes

Yes

No

Yes

The use of judgment in gathering and evaluating evidence and forming conclusions based on that evidence

No

Yes

No

No

78. This is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated.

A. Audit risk C. Detection risk B. Assurance engagement risk D. Practitioner’s risk

79. When a CPA 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(n):

A. Limited level of assurance. C. Reasonable level of assurance. B. Absolute assurance. D. No assurance.

Page 8: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 8

Page 8

80. When a CPA has obtained sufficient appropriate evidence to conclude that the subject matter is plausible in the circumstances, he/she can provide a(n):

A. Limited level of assurance. C. Reasonable level of assurance. B. Absolute assurance. D. No assurance.

81. Select the statement that exemplifies positive assurance: 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. “We do not express an opinion on the financial statements.” D. All of the statements illustrate negative assurance.

82. The three commonly-sought types of assurance services are: A. Audits, review, and compilations. B. Audits, compilations, and other assurance services. C. Reviews, compilations and other assurance service. D. Audits, reviews and other assurance services.

83. This assurance engagement provides reasonable assurance that the financial statements are free of material misstatement:

A. Financial statements audit. C. Compilation of financial information. B. Review of historical financial statements. D. Agreed-upon procedures engagement.

84. An independent audit aids in the communication of economic data because the audit A. confirms the accuracy of management’s financial representations. B. lends credibility to the financial statements. C. guarantees that financial data are fairly presented. D. assures the readers of financial statements that any fraudulent activity has been corrected.

85. This assurance engagement provides a limited level of assurance about the client’s historical financial statements:

A. Financial statements audit. C. Forecasts and projections. B. Review of historical financial statements. D. Agreed-upon procedures engagement.

86. The objective of this assurance engagement is to enable the auditor 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 auditor’s attention that causes the auditor to believe that the financial statements are not prepared, in all material respects, in accordance with an identified financial reporting framework.

A. Compilation engagement C. Review engagement B. Comfort provision engagement D. Valuation services

87. Which of the following is an objective of a review engagement? A. Expressing a positive opinion that the financial information is presented in conformity with

generally accepted accounting principles. B. Expressing a limited assurance to users who have agreed as to procedures that will be

performed by the CPA. C. Reporting whether material modifications should be made to such financial statements to

make them conform with generally accepted accounting principles. D. Reporting that the financial statements, in all material respects, fairly present the financial

position and operating results of the client.

88. Which of the following procedures ordinarily performed during an audit are also performed in a review engagement?

A. Assessment of accounting and internal control systems. B. Tests of controls. C. Tests of records and responses to inquiries. D. Inquiry and analytical procedures.

89. Procedures in a review engagement consist primarily of inquiry and analytical procedures. Regarding review procedures, which of the following statements is incorrect?

A. The auditor should apply the same materiality considerations as would be applied if an audit opinion on the financial statements were given.

B. The judgment as to what is material is made by reference to the information on which the auditor is reporting and the needs of those relying on that information, not to the level of assurance provided.

C. There is a greater risk that misstatements will not be detected in an audit than in a review. D. The auditor should apply judgment in determining the specific nature, timing and extent of

review procedures.

Page 9: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 9

Page 9

90. Which of the following best describes risk assessment services? A. An engagement which provides assurance about whether financial and non-financial

information being reported from the entity’s performance measurement system is reliable. B. An engagement which involves the evaluation of the quality of health care, medical services

and looks into the health care delivery system. C. An engagement which identifies a set of risks that affect the client organization. It involves

the study of the link between risks and the organization’s vision, mission, objectives and strategies and the development of new and relevant measures.

D. None of the answers.

91. A practitioner is associated with the subject matter when: A B C D the practitioner reports on information about

that subject matter Yes Yes No No

the practitioner consents to the use of the practitioner’s name in a professional connection with that subject matter. Yes No Yes No

92. When a practitioner is inappropriately associated with financial information, the following remedies are available, except:

A. Require the other party (i.e., management) to cease associating the CPA with the subject matter.

B. Informing any known third party users of the inappropriate use of the practitioner’s name C. Seek legal advice D. All of the above are available remedies.

93. Aside from assurance services, a CPA firm also performs non-assurance services, such as management advisory services. The primary purpose for performing MAS is to:

A. Prepare the CPA firm for the changing needs and requirements of the business community. B. Establish the CPA firm as a consultant, which will enable the CPA firm to ensure future

viability and growth. C. Provide advice and technical assistance that will enable a client to conduct its business more

effectively. D. Enable staff members of the CPA firm to acquire the necessary continuing education in all

areas of business.

94. Not all engagements performed by practitioners are assurance engagements. Which of the following are considered as non-assurance engagements?

A. Agreed-upon procedures and compilation engagements. B. Preparation of tax returns where no conclusion is expressed C. Consulting or advisory engagements D. All of the answers are non-assurance engagements.

95. Which of the following statements is incorrect? A. Unlike consulting services, assurance services report on the quality of information. B. Audit engagements encompass assurance engagements. C. Not all engagements performed by professional accountants are assurance engagements. D. Non-assurance engagements include agreed-upon procedures, compilation of financial or

other information, preparation of tax returns where no conclusion is expressed, tax consulting and advisory engagements.

96. Assurance services are three-party contracts involving services that improve the quality of information, while consulting services:

A. Are three-party contracts involving services that recommend uses for information. B. Are two-party contracts involving services that recommend uses for information. C. Are two-party services that require the use of accounting rather than auditing expertise. D. Are three-party services that require knowledge of the analytical approach and process.

97. This engagement involves the application of accounting expertise, as opposed to auditing expertise, in collecting, classifying and summarizing financial information:

A. Compilation. C. Tax consulting. B. Agreed-upon procedures engagement. D. Management consulting.

98. According to Philippine Standards on Related Services, the procedures employed in doing compilation are:

A. Designed to enable the accountant to express a limited assurance. B. Designed to enable the accountant to express a negative assurance. C. Not designed to enable the accountant to express any form of assurance. D. Less extensive than review procedures but more extensive than agreed-upon procedures.

Page 10: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 10

Page 10

99. In this non-assurance engagement, the party engaging the CPA determines the procedures to be performed (In some situations, the intended user determines the procedures to be performed). At the end of the engagement, the CPA provides a report of factual findings as a result of undertaking these procedures. What type of engagement has been described?

A. Compilation. C. Tax consulting. B. Agreed-upon procedures engagement. D. Management consulting.

100. Which of the following is correct regarding agreed-upon procedures engagement? A. An auditor is engaged to carry out those procedures of an accounting nature to which the

auditor and the entity and any appropriate third parties have agreed and to report on the factual findings.

B. The recipients of the report must form their own conclusions from the report of the auditor. C. The report is available to the general public. D. A high but not absolute level of assurance is provided in an agreed-upon procedures

engagement.

101. Which of the following is correct of the report based on agreed-upon-procedures? A. The report is restricted to those parties who have agreed to the procedures to be performed. B. The CPA provides the recipients of the report limited assurance as to reasonableness of the

assertion(s) presented in the financial information. C. The report states that the auditor has not recognized any basis that requires a revision of

the financial statements. D. The report should state that the procedures performed are limited to analytical procedures

and inquiry.

102. This tax service includes the preparation of tax returns for individuals, corporations, estates and trusts, and other entities:

A. Tax evasion. C. Tax shelter. B. Tax planning. D. Tax compliance.

103. This tax service includes the determination of the tax consequences of planned or potential transactions, followed by making suggestions on the most desirable course of action (to legally minimize the tax liability while achieving the client’s objectives):

A. Tax evasion. C. Tax shelter. B. Tax planning. D. Tax compliance.

104. This refers to those persons who hold a valid certificate issued by the Board of Accountancy, whether they be in public practice, industry, commerce, the public sector, or education.

A. Professional accountant C. Senior accounting practitioner B. Professional accountant in public practice D. Audit associate

105. The standards of the accountancy profession are heavily determined by the public interest. Public interest is defined as:

A. A distinguishing mark of a profession is acceptance of its responsibility to the public. B. The accountancy profession’s public consists of clients, credit grantors, governments,

employers, employees, investors, the business and financial community, and others who rely on the objectivity and integrity of professional accountants.

C. The collective well-being of the community of people and institutions the professional accountant serves.

D. The standards of the accountancy profession are heavily determined by the public interest.

106. Regulation of the accounting profession include: A. Public Regulation as provided for in the Philippine Accountancy Act of 2004. B. Regulation within the profession, through the implementation of the Code of Ethics. C. Regulation within the firm, through the implementation of a system of quality control. D. All of the answers.

107. This document contains the norms and principles governing the practice of the accountancy profession in the highest standards of ethical conduct:

A. Code of Ethics for CPAs in the Philippines C. IRR to RA9298 B. Republic Act No. 9298 D. PSA 220 on Quality Control

108. The Philippine Accountancy Act of 2004 – shall provide for and govern: 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. All of the answers.

Page 11: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 11

Page 11

109. Which organization(s) has the primary duty of effectively enforcing the provisions of RA 9298? I. Professional Regulatory Board of Accountancy II. Department of Justice III. Professional Regulation Commission IV. Philippine Institute of Certified Public Accountants

A. I and II B. II and III C. I, III and IV D. I and III

110. Fill in the table below to summarize pointers on the Board of Accountancy:

Composition

Nominations

1 complete term

Maximum term

Vice Chairman (term)

2 consecutive complete terms

111. The following are qualifications of the members of the Board of Accountancy, except: A. Natural-born citizen and resident of the Philippines. B. Duly registered CPA with at least 5 years of work experience in any scope of practice of

accountancy. C. Good moral character, not convicted of crimes involving moral turpitude. D. No direct, or indirect pecuniary interest in any school, college, university or institution

conferring the B.S. Accountancy degree or providing CPA Review classes.

112. The Accredited National Professional Organization (APO) shall submit its nominations for the Board of Accountancy (with complete documentation) to the Commission

A. Not later than sixty (60) days prior to the expiry of the term of an incumbent chairman or member.

B. On the date of expiry of the term of an incumbent chairman or member. C. After the 60th day from the expiry of the term of an incumbent chairman or member. D. Upon request by the Commission for the submission of nominations.

113. The following are among the powers and functions of the Board of Accountancy, except: A. To prescribe and adopt the rules and regulations necessary for implementing RA9298. B. To prescribe and/or adopt a Code of Ethics for the practice of accountancy. C. To ensure, in coordination with the DECS that all higher educational instruction and offering

of accountancy comply with prescribed policies, standards and requirements of the course. D. To conduct an oversight into the quality of audits of financial statements.

114. Which of the following statements is correct? A. The chairman and members of the Board shall receive compensation and allowances

comparable to that being received by the Chairman and the members of the existing regulatory boards under the PRC as provided for in the General Appropriations Act.

B. No person shall serve in the Board for more than nine years. C. The BOA Chairman has the sole power to administer oaths in connection with the

administration of the Accountancy Law. D. The Board shall be under the administrative supervision of the PICPA.

115. The following are grounds for suspension or removal of members of the Board of Accountancy, except:

A. Neglect of duty or incompetence. B. Violation or tolerance of any violation of RA9298 and its IRR, or the Code of Ethics and

technical and professional standards of practice for CPAs. C. Pending case on a crime involving moral turpitude. D. Manipulation or rigging of the CPA licensure examination results.

116. Who is the person that has the authority to suspend or remove a member of the BOA, on valid grounds and after due process?

A. The President of the Republic of the Philippines B. The Chairman of the Professional Regulatory Board of Accountancy, unless he is the one

who is under investigation C. The Commissioner of the Professional Regulation Commission D. None of them.

117. This organization administers, implements and enforces the regulatory policies of the Philippine Government with respect to the regulation and licensing of the various profession under its jurisdiction, one of which is accountancy.

A. BOA B. PICPA C. COA D. PRC

Page 12: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 12

Page 12

118. Identify the organization being described by each of the following statements:

_____ This is the government agency that regulates the registration and operations of corporations, partnerships, and other forms of associations in the Philippines

_____ This organization aims to raise revenues for the government through the effective and efficient collection of taxes, provide quality service to taxpayers, and enforce tax laws in an impartial and uniform manner.

_____ Its mandate is to regulate and supervise the insurance industry for the promotion of the national interest.

_____ The primary objective of this agency is to maintain price stability conducive to a balanced and sustainable economic growth.

119. As used in Republic Act No. 9298, this term refers to the area of practice of accountancy: A. Line B. Section C. Segment D. Sector

120. A person is deemed to be in practice of the accounting profession in commerce and industry when he/she:

A. Holds, or is appointed to a position in an accounting professional group in government or in a government-owned and/or controlled corporation, where decision-making requires professional knowledge in the science of accounting.

B. Is involved in decision-making requiring professional knowledge in the science of accounting, as well as the accounting aspects of finance and taxation, or is employed in a position that requires a CPA.

C. Is in an educational institution which involves teaching of accounting, auditing, management advisory services, accounting aspect of finance, business law, taxation, and other technically-related subjects.

D. Holds out himself/herself as one skilled in the knowledge, science and practice of accounting, and as someone qualified to render professional services as a CPA.

121. The practice of accountancy includes the following except: A. Practice in public accountancy. B. Practice in education or the academe. C. Practice in the government. D. Practice in commerce and industry, when the CPA is appointed as marketing manager of the

enterprise.

122. The practice of accountancy includes the following except: A. Being appointed as the marketing manager of a business enterprise. B. Serving as audit examiner for the Commission on Audit. C. Working as the Dean of a College that grants a degree of BS Accountancy. D. Provision of assurance services to more than one client and on a fee basis.

123. All graduates with a Bachelor’s Degree major in Accounting shall be allowed to take the CPA Licensure Examination within _____________ from the effectivity of RA 9298 under the rules and regulations to be promulgated by the BOA subject to the approval by the PRC.

A. 1 year B. 2 years C. 3 years D. 4 years

124. According to the IRR, this council is tasked to assist the BOA in continuously upgrading accountancy education in the Philippines to make the Filipino CPAs globally competitive.

A. Quality Review Committee C. CPE Council B. Education Technical Council D. Commission on Higher Education

125. The Education Technical Council shall be composed of A. Six members. B. Seven members with a Chairman. C. Seven members with a Chairman and a vice-chairman. D. Eight members with a Chairman, a vice-chairman, and a secretary.

126. S1 To be qualified as having passed the licensure examination for accountants, a candidate must obtain a general average of seventy-five percent, with no grades lower than sixty-five percent in any given subject. S2 A candidate with conditional credits must take a removal examination within three years from the date of the preceding examination.

A. True, true B. True, false C. False, true D. False, false

Page 13: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 13

Page 13

127. The following are grounds for the refusal to issue a certificate of registration and professional identification card (select the exception):

A. Conviction of a criminal offense involving moral turpitude. B. Guilty of immoral or dishonorable conduct. C. Unsound mind. D. Conviction for a political offense.

128. Any candidate who fails in _____ complete CPA Board Examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the BOA that he/she enrolled in and completed at least _____ of subjects given in the licensure examination.

A. 3, 15 units per year for a total of 60 C. 2, 15 units per year for a total of 60 B. 2, 24 units D. 3, 24 units

129. The Board, subject to the approval of the PRC, may revise or exclude any of the subjects and their syllabi, and add new ones as the need arises, provided that the change shall not be more often than:

A. Every two years. C. Every four years. B. Every three years. D. Every five years.

130. A certificate under seal, bearing a registration number, issued to an individual, by the PRC, upon recommendation by the Board of Accountancy, 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 examinations.

a. Certificate of registration. c. Certificate of identification. b. Certificate of accreditation. d. Certificate of quality review.

131. A professional identification card has a validity of: A. 1 year B. 2 years C. 3 years D. 4 years

132. S1 The Philippine Institute of Certified Public Accountants is registered with the Securities and Exchange Commission as a non-profit corporation and recognized by the Board of Accountancy, subject to the approval by the Professional Regulation Commission. S2 Membership in the PICPA shall be a bar to membership in any other association of certified public accountants.

A. True, true B. True, false C. False, true D. False, false

133. Unless there is a valid reason to have additional representation, the PICPA shall have how many national directors?

A. 12 B. 14 C. 15 D. 20

134. The PICPA national directors shall be apportioned according to four geographic sectors based on the ratio of latest available number of members in good standing from those areas. Which of the following is NOT a geographic sector?

A. Luzon B. NCR C. Mindanao D. CAR

135. A PICPA director can only represent a sector in a region if he/she has been a member in good standing in such sector in the region for at least ___ years at the time of his/her nomination:

A. Two years B. Three years C. Four years D. Five years

136. PICPA shall renew its certificate of accreditation once: A. Annually B. Every 3 years C. Every 4 years D. Every 5 years

137. The PICPA certificate of accreditation shall be cancelled or suspended by the PRC upon the recommendation by the BOA after due hearing under any of the following grounds or causes, except:

A. It has ceased to possess any of the qualifications for accreditation. B. It no longer serves the best interest of CPAs. C. Two years have passed and it has not yet enlisted into active membership the majority of

CPAs in the practice of accountancy. D. It has committed acts inimical to its members and to the profession.

138. Sectoral organizations have been established to promote the interests of groups of professional accountants. Which of the following is the sectoral organization for CPAs in Public Practice?

a. GACPA. b. ACPAPP. c. ACPACI. d. ACPAE.

Page 14: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 14

Page 14

139. The CPE programs shall have these objectives: A B C D To raise and maintain the professional’s capability for

delivering professional services

Yes

Yes

No

Yes

To attain and maintain the highest standards and quality in the practice of his profession.

Yes

Yes

Yes

No

To make the profession globally competitive. Yes No Yes No

140. The total CPE credit units for registered CPAs shall be: A. Sixty (60) credit units for three years, provided that a minimum of fifteen (15) credit units

shall be earned in each year. B. Forty-five (45) credit units for three years, provided that a minimum of fifteen (15) credit

units shall be earned in each year. C. Sixty (60) credit units for three years, provided that a minimum of twenty (20) credit units

shall be earned in each year. D. Minimum of fifteen (15) credit units earned in each year.

141. Monitoring the compliance with CPE requirements is done by the PRC CPE Council. The PRC CPE Council shall be composed of:

A. A chairperson and three members B. A chairperson, vice-chairperson and two members C. A chairperson and two members D. A chairperson, vice-chairperson and three members

142. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of:

a. 50 years old b. 60 years old c. 65 years old d. 70 years old

143. S1 A registered professional who is working abroad shall be temporarily exempted from compliance with CPE requirements during his/her stay abroad, provided that he/she has been out of the country for at least one year immediately prior to the date of renewal. S2 Those who failed to renew professional licenses for a period of three (3) continuous years from initial recognition, or from last renewal, shall be declared delinquent.

A. True, true B. True, false C. False, true D. False, false

144. S1 A BSA graduate is allowed to practice public accountancy under his or her own name immediately upon passing the CPA Board Exams. S2 The certificate of accreditation to practice public accountancy is granted only once and remains in effect until withdrawn, suspended, or revoked in accordance with R.A. No. 9298.

A. True, true B. True, false C. False, true D. False, false

145. Regarding practice of accountancy, which of the following certificates is issued to a successful passer of the CPA Board Exams first, a certificate of registration or a certificate of accreditation?

A. Certificate of registration. C. Both are issued at the same time. B. Certificate of accreditation. D. Neither are issued to CPAs.

146. Which of the following statements is incorrect? A. Single practitioners and partnerships for the practice of public accountancy shall be

registered certified public accountants in the Philippines. B. A certificate of accreditation shall be issued to certified public accountants in public practice

only upon showing, that such registrant has acquired a maximum of three (3) years meaningful experience in any of the areas of public practice including taxation

C. Meaningful experience, as mentioned by RA 9298 are explained in detail under Section 28A of the Implementing Rules and Regulations.

D. The SEC shall not register any corporation organized for the practice of public accountancy.

147. Individual CPAs, Firms or Partnerships of CPAs, including partners and staff members thereof shall register with the Board of Accountancy and the Professional Regulation Commission. If the application for registration of James and Sison, CPAs, was approved on July 19, 2010, it shall file for renewal on or before:

A. July 19, 2013. C. September 30, 2013. B. September 30, 2012. D. December 31, 2012.

148. The following are regarded as CPA services in public practice if offered or rendered on a fee basis and to more than one client:

A B C D Preparation and signing of audit reports. Yes Yes Yes Yes Professional assistance on accounting procedures. Yes No No Yes Representation of clients before governmental agencies

on tax and other matters related to accounting

Yes

Yes

No

No

Page 15: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 15

Page 15

149. CPAs may practice public accountancy under the following forms of organization, except: A. Sole proprietorships C. Limited liability partnerships B. General partnerships D. Corporations

150. The names under which a CPA practices the profession must: A. Not be misleading as to the form of

organization. C. Indicate any specialization.

B. Contain more than three names. D. Include one fictitious name.

151. A(n) _____________________ shall do business under their respective duly registered and authorized firm name appearing in the registration documents issued by the Department of Trade and Industry or any other proper government office.

A. Individual CPA C. Partnership of CPAs. B. Firm. D. Corporation of CPAs.

152. Below are the names of three CPA firms and pertinent facts relative to each firm. Unless otherwise indicated, the individuals named are CPAs and partners, and there are no other partners. Which of these indicates a violation of the IRR of RA9298?

A. A, B and C, CPAs (A died seven years ago; B and C are continuing the firm). B. G and H, CPAs (G died 3 years ago, and H is continuing the firm as a sole proprietor). C. D and E, CPAs (the name of F, a third active partner is omitted from the firm name). D. K and L, CPAs (K died 3 years ago, L was admitted into the partnership two months after K’s

death. There are seven other active partners, all of whom have their names omitted from the firm name).

153. Indicate whether the following functions would be performed by: P – Partner; M – Manager; S – Senior Associate; or A – Associate

I. Signs the audit report. P II. Assumes overall responsibility for the audit. P III. Performs detailed audit procedures. A IV. Prepares the audit program and performs more complex audit procedures S V. Tasked with liaison work between partners and other team members M

154. This is the traditional service provided by CPA firms.

A. Compilation. B. Audits. C. Reviews. D. Tax services.

155. A CPA firm usually offers non-audit services, such as management advisory services. Its primary purpose is to:

A. Furnish professional advice and assistance which will enable the client to improve operations.

B. Keep the CPA firm competitive with other firms. C. Establish the firm as a consultant, thus ensuring its future expansion and growth. D. Permit the firm’s staff members to acquire expertise in other areas of practice.

156. All licensed CPAs shall obtain and use a seal of a design prescribed by the A. Accounting Standards Council. C. Board of Accountancy. B. Philippine Institute of CPAs. D. Professional Regulation Commission.

157. 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 Certificate of Registration number. B. Professional Identification Card C. Professional tax receipt. D. All of these are required to be indicated.

158. The amount of audit fees depend largely on the: A. Size and capitalization of the company under audit. B. Amount of profit for the year. C. Availability of cash. D. Volume of audit work and degree of competence and responsibilities involved.

159. Under this method of billing a client, the external auditors charges on the basis of actual time spent by principals/partners, supervisors, seniors and juniors at predetermined rates agreed upon with the client

A. Per diem basis. C. Flat fee or flat sum basis. B. Retainer basis. D. Maximum fee basis.

160. Standard-setting bodies also affect the provision of services in public accounting.

Local International

Accounting standards

Auditing Standards

Page 16: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 16

Page 16

161. The Chairpersons of the FRSC and the AASC shall be appointed by: A. The President of the Republic of the Philippines. B. The Professional Regulatory Board of Accountancy. C. The Professional Regulation Commission. D. The Philippine Institute of Certified Public Accountants.

162. Subjects or citizens of foreign countries: A. May be allowed to practice accountancy in the Philippines, regardless of the provisions of

existing laws and international treaty obligations, including mutual recognition agreements entered into by the Philippine government with other countries.

B. Are not allowed to practice accountancy in the Philippines, unless they take, and pass, the certified public accountant licensure examination given by the Board of Accountancy

C. May be allowed to practice accountancy in the Philippines, subject to the provisions of existing laws and international treaty obligations, including mutual recognition agreements entered into by the Philippine government with other countries.

D. Are never allowed to practice accountancy in the Philippines because they will jeopardize the interests of Filipino certified public accountants.

163. RA9298 provides that temporary or special permits may be issued to Foreign CPAs in the following situations, except:

A. A foreign CPA was called for consultation which, in the judgment of the Board of Accountancy, is essential for the development of the Philippines. The permit restricts the foreign CPA’s practice to the particular consultation work being performed. No Filipino CPA was qualified for such consultation.

B. A foreign CPA was engaged to lecture on fields essential to accountancy education in the Philippines. The permit restricts the CPA to teaching only, and limited public practice provided such practice is conducted outside class hours.

C. A foreign CPA, an IFRS expert, is engaged for services deemed essential for the advancement of accountancy in the Philippines.

D. All of the above situations do not justify the issuance of a temporary or special permit.

164. Any advertising by professional accountants beyond their name, address, telephone number and membership in professional organizations has been traditionally considered unethical in the Accountancy Profession, due to the following reasons, except:

A. Advertising could lead to undue competition between and among practitioners, causing a decline in quality of service.

B. Advertising would encourage a more personal approach to clients. C. The cost of advertising would outweigh any savings that might result from competition. D. Small or new practitioners would be unlikely to have the financial resources to match the

advertising of larger or more established practices.

165. Which of the following is allowed under the revised rules on advertising? A. Self-laudatory statements B. Discrediting, disparaging, or attacking other firms or CPA practitioners C. Referring to, using or citing actual or purported testimonials by third parties D. None of these are allowed forms of advertising.

166. Before advertisements are disseminated, they must be subject to the review of: A. Those charged with governance of the clients of the CPA B. Managing partner and Quality Control partner of the firm C. Board of Accountancy and Professional Regulation Commission D. Risk Management partner and Managing partner of the firm

167. Which of the following cannot be mentioned by an author in publicizing a book in accounting? A. Name C. Membership in professional organization B. Qualifications D. Services that the author’s firm provides

168. A professional accountant may invite the following to attend training courses and seminars conducted for the assistance of staff (select the exception):

A. Clients C. Other professional accountants B. Staff of the firm D. Potential clients

169. May a CPA give a brochure to a non-client? A. No, because this is a violation of the revised rules on advertising B. Yes, since this is acceptable under the revised rules on advertising C. No, unless the non-client becomes a client within 10 days from receipt of the brochure D. Yes, if the non-client has made an unsolicited request

170. Regarding anniversaries, a firm may undertake press releases or other media releases to commemorate their anniversaries in public practice only every:

A. Year B. 3 years C. 4 years D. 5 years

Page 17: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 17

Page 17

171. Which of the following partner profile information may be posted in a firm’s website? A. Name B. Educational attainment and brief listing of services C. Postal address, telephone, fax and email-address D. All of these may be posted in a firm’s website

172. A study, appraisal, or review by the Board or its duly authorized representatives, of the quality of audit of financial statements through a review of the quality control measures instituted by an CPAs engaged in the practice of public accountancy to ascertain his/her/its compliance with prescribed professional, ethical and technical standards of public practice.

A. CPA review B. Quality review C. CPE Review D. Peer review

173. This committee is created to conduct an oversight into the quality of audits of financial statements through a review of the quality control measures instituted by Individual CPAs, Firms, or Partnerships.

A. Quality Review Council C. Quality Review Committee B. Quality Control Committee D. Engagement Quality Control Review

174. The Quality Review Committee (QRC) shall be composed of: A. Seven members with a chairman C. Five members with a chairman B. Six members with a chairman D. Four members with a chairman

175. The QRC shall have the following functions: A. Conduct quality control review on applicants for registration to practice public accountancy

and render a report on such quality review B. Revoke the certificate of registration and professional ID of an individual CPA, firm, or

partnership of CPAs who have not observed quality control measures. C. All of the answers D. None of the answers

(For numbers 176 and 177) ABC Company is a business in the private sector. The company has several administrative positions that require, among others: the supervision of the recording of financial transactions; preparation of financial statements; coordination with the external auditors for the audit of the financial statements; and other related functions.

176. These positions should be occupied by duly registered CPAs, if Burr Company has: Paid-up capital of at least Annual revenue of A. P 5,000,000. P10,000,000. B. P10,000,000. P10,000,000. C. P 5,000,000. P 5,000,000. D. P10,000,000. P 5,000,000.

177. Suppose that these positions are currently occupied by non-CPAs. Will the effectivity of the IRR displace the incumbents to these positions?

A. Yes, the non-CPAs will be terminated, provided equitable benefits are available for them, and the resulting vacancies will be filled in by CPAs.

B. No, the IRR specifically provides that the provision shall not result to the deprivation of the employment of incumbents to the position.

C. Yes, unless the non-CPAs are able to take and pass the CPA board examinations within two years from the effectivity of the implementing rules and regulations of RA 9298.

D. Cannot be determined without additional information.

178. Jude Isaac, CPA, is the dean of the College of Accountancy in the University of St. James. Related to this, which of the following statements is incorrect?

A. Jude is considered to be in the practice of his profession. B. The position of the dean or the department chair or its equivalent that supervises the

BS Accountancy program of an educational institution must be a duly registered CPA. C. Jude is not considered in the practice of his profession because he occupies an

administrative position.

D. Jude is practicing accountancy in the education sector (academe).

179. According to the IRR, the following can teach business law: CPAs Members of the IBP A. Yes Yes B. Yes No C. No Yes D. No No

Page 18: JRU AT Compendium.pdf

Jose Rizal University

Modular Review – Auditing Theory Page 18

Page 18

180. This act provides that only licensed professionals may teach licensure subjects, and provides for the triennial renewal of the Professional identification card:

A. RA No. 9298 C. IRR of RA 9298 B. PRC Modernization Act D. PD 1081

181. The policy for accreditation covers CPAs involved in teaching of accounting and related subjects in the:

A. Primary level only C. Secondary and tertiary levels only B. Primary and secondary levels only D. All levels, even graduate level

182. The following are the requirements for accreditation of Accounting Teachers (select the exception):

A. Possession of relevant Master’s Degree B. Completion of 12 units of relevant education subjects from CHED recognized schools C. A total of three years’ meaningful experience in actual accounting work D. Proof that the CPA has undergone continuing professional education, totaling 75 units

183. The accreditation granted for accounting teachers is valid for: A. One year C. Three years B. Two years D. Four years

184. The Constitution of the Philippines requires this Office to “keep the general accounts of the Government and for such period as may be provided by law, preserve the vouchers pertaining thereto.”

A. National Accounting Office C. Commission on Audit B. Ministry of Finance D. Accounting Units

185. The following are the duties of the Commission on Audit (COA), except: A. Define the scope of its audit and examination B. Promulgate accounting rules and regulations C. Keep the general accounts of the government D. Assume fiscal responsibility for the Government and its instrumentalities

186. Who appoints the members of the COA? A. The Commissioner of the Professional Regulation Commission B. The Chairman of the Professional Regulatory Board of Accountancy C. The President, with the concurrence of the Commission on Appointments D. The Chairman of the Auditing and Assurance Standards Council

187. Which of the following is a correct qualification of the Chairman and Two Commissioners of the COA?

A. A naturalized citizen of the Philippines B. At least 40 years of age upon appointment C. CPAs with no less than 5 years of auditing experience or members of the Philippine bar who

have been engaged in law practice for at least 5 years D. Must not have been candidates for any elective position preceding appointment

188. The following are grounds for the suspension or revocation of certificate of registration and professional identification card, EXCEPT:

A. Possession of an unsound mind B. Practice in more than one field of accountancy C. Conviction of a criminal offense involving moral turpitude D. Unprofessional or unethical conduct, malpractice, or violation of RA9298.

189. The punishment, upon conviction, for any person who has violated any of the provisions of the Accountancy Act of 2004, or any of its Implementing Rules and Regulations as promulgated by the Board of Accountancy:

A. A fine of not less than fifty thousand pesos (P50,000.00) and imprisonment for a period not exceeding two (2) years.

B. A fine of not less than fifty thousand pesos (P50,000.00) but not an imprisonment. C. No fine but an imprisonment for a period not exceeding two (2) years. D. A fine of not less than fifty thousand pesos (P50,000.00) or imprisonment for a period not

exceeding two (2) years, or both.

190. A CPA whose certificate has been revoked: A. Is required to take the CPA Board Licensure examinations before reinstatement B. May be reinstated by the BOA after the expiration of 2 years from the date of revocation C. Can no longer be reinstated as a Certified Public Accountant D. Has committed a crime involving moral turpitude