24

Setting- Up a
Public Accounting Practice

"Everyone can be great because everyone can serve." -Martin Luther King Jr. 

This chapter presents the practice of accountancy, with emphasis on the requisites and processes
of putting-up and maintaining a public accounting practice. 

LEARNING OBJECTIVES

At the end of this chapter, you should be able to:

1. Know the overall process of setting –up a public accounting practice.

2. Discuss the requirements of RA No. 9298 regarding the CPA Board Examinations.

3. Discuss the requirements of RA No. 9298 relating to registration and licensing for admission
into the practice of accountancy.

4. Explain the four sectors of accountancy practice, including the requirements for continuing
professional education and use of CPAs in the practice of accountancy.

5. Discuss the requisites in setting-up and maintenance of a public accounting firm.

6. Learn the various professional and regulatory bodies that may affect the practice of public
accountancy.
SETTING-UP A PUBLIC ACCOUNTING PRACTICE-AN OVERVIEW
(Learning Objective 1) 

The practice of accountancy in the Philippines, as well as the accounting education and CPA
examinations, is governed by Republic Act No. 9298 (a.k.a., the Philippine Accountancy Act of
2004), as implemented by the BOA under the supervision of PRC, which regulates the various
professions in the Philippines. 
The next exhibit shows the process of setting-up a public accounting practice.

Exhibit 24.1-Overview of Setting-Up a Public Accounting Practice 

Graduate with a degree in

Bachelor of Science in Accountancy

Successfully pass the CPA Board Examination

Registration and license to practice

Comply with
Obtain meaningful experience (minimum of three
continuing
years)
professional
development
Secure accreditation from BOA/PRC and, if necessary, (CPD)
including from BIR, SEC, BSP, IC, and CDA requirements

Render services in accordance with professional

standards, ethical, legal, and regulatory requirements

THE CPA BOARD EXAMINATIONS—THE ENTRY INTO THE PROFESSION

(Learning Objective 2) 
All applicants for registration for the practice of accountancy are required to undergo a licensure
examination to be given by the BOA in such places and dates as the PRC may designate. 

Qualifications of Applicants for Examinations 

Any person applying for examination shall establish the following requisites to the satisfaction of
the BOA that he/she:

a. is a Filipino citizen; 
b. is of good moral character; 

c. is a holder of the degree of Bachelor of Science in Accountancy (BSA) conferred by a school,

college, academy or institute duly recognized accredited by the CHED or other authorized
government offices;

d. has not been convicted of any criminal offense involving moral turpitude.

The following documents shall be submitted in support of the one requirements:

a. Certificate of Live Birth in Philippine Statistics Authority (PSA) Security Paper;

b. Marriage Contract in PSA Security Paper for married female applicants;

c. College diploma with indication therein of date of graduation and Special 

Order Number unless it is not required;

d. Baccalaureate Transcript of Records (TOR) with indication therein of date of 

graduation and Special Order Number unless it is not required;

e. National Bureau of Investigation (NBI) Clearance;

f. Other documents that the Board may require. 

Scope of Examination

Exhibit 24.2-CPA Board Examination Subjects

1. Financial Accounting and Reporting (FAR)
2. Advanced Financial Accounting and Reporting (AFAR)
3. Auditing (AUD)
4. Management Advisory Services (MAS)
5. Taxation (TAX)
6. Regulatory Framework for Business Transaction (RFBT)

The BOA, subject to PRC's approval, may revise or exclude any of the subjects and their syllabi,
and add new ones as the need arises. However, the change shall not be more often than every
three years. 
Rating in the Licensure Examination 

The following exhibit outlines the possible results of examination.

Exhibit 24.3—Results of Examination

“PASSED (P)” Two conditions: (1) a general average of 75% and (2) no grades lower
than 65% in any given subject.
“Conditioned (C)” A rating of 75% and above in at least a majority of subjects. The
remaining subjects (those below 75%) shall be taken within two years
from the preceding examination.
“Failed (F)” Failed to obtain at least a general average of 75% and a rating of at least
65%, including reexamination of conditioned examinees.

The next exhibit illustrates the possible outcomes of the examination.

Exhibit 24.4--Illustrative CPA Board Examination Results 

Case 1 Case 2 Case 3

1. Financial Accounting and Reporting 85% 85% 85%
2. Advanced Financial Accounting and Reporting 80% 80% 80%
3. Auditing 75% 75% 75%
4. Management Advisory Services 64% 64% 65%
5. Taxation 66% 66% 66%
6.Regulatory Framework for Business Transactions 70% 80% 80%
General Average 73% 75% 75%
Result “F” “C” “P”

In case 2 above, the subjects to be taken during the removal examination include “Management
Advisory Services” and “Taxation.".
 
Failing Candidates to Take Refresher Course 

There is no limit as to the number of times the CPA Board Examinations may be taken. However,
any candidate who fails in two complete 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 24 units of subjects given in the licensure examination. Such
refresher course is offered by an educational institution granting a degree of BSA or in a special
refresher course duly accredited by the BOA. The conditional and removal examinations are
counted as just one complete examination. 
Report of Ratings 

The BOA submits to PRC the ratings obtained by each candidate within 10 calendar days after the
examination, unless extended for just cause. Upon release of examination results, the PRC mails
the rating received by each examinee, or during their mass oath taking as new registered CPAs,
to the successful examinees. 

Oath 

All successful candidates in the examination shall be required to take an oath of profession
before any member of the BOA, any government official authorized by the PRC, or any person
authorized by law to administer oaths upon presentation proof of his/her qualification, prior to
entering upon the practice of profession. An oath shall also be required for CPAs admitted in the
practice of accountancy without examination under reciprocity. 

REGISTRATION AND LICENSURE FOR THE PRACTICE OF ACCOUNTANCY

(Learning Objective 3) 

The following exhibit provides the provisions of RA No. 9298 regarding registration and licensure
of successful examinees (or are admitted without examination under reciprocity) for entry into
the practice of profession.

Exhibit 24.5—Registration and Licensure Requirements

Issuance of The COR indicates that the person named therein is entitled to
Certificates of practice the profession with all its privileges and shall remain in full
Registration (COR) force and effect until withdrawn, suspended or revoked.

The COR bears the signature of the Chairperson of the PRC and the
Chairman and Members of the BOA, stamped with the official seal of
the PRC and of the BOA.
Issuance of A PIC (“The license”) bearing the registration number, date of
Professional issuance, expiry date, duly signed by the chairperson of the PRC, shall
Identification Card likewise be issued to every registrant, valid for three years and
(PIC) renewal thereafter.
Roster of CPAs A roster showing the names and place of business of all registered
CPAs, as maintained by the BOA but may be delegated to the
Philippines Institute of CPAs (PICPA) and posted to internet.
Indication of COR, The CPA shall be required to indicate the numbers of COR and PIC with
PIC and PTR Number its date of issuance and the duration of validity, including the
Professional Tax Receipt (PTR) Number, as obtained from
City/Municipal Treasurer where the CPA practices, on the documents
he/she signs, uses or issues in connection with the practice.
Refusal to Issue COR Any successful examinee, after due process, shall be refused issuance
 and PIC of COR and PIC:
a. Convicted by a court of competent jurisdiction of a criminal offense
involving moral turpitude or guilty of immoral and dishonorable
conduct or to any person of unsound mind.
b. Any person who has falsely sworn or misrepresented
himself/herself in his/her application for examination.

However, registration shall not be refused on conviction for a political

offense or for an offense which shall not disqualify a person from
practicing accountancy.
Suspension and The following are the grounds:
Revocation of COR a. Convicted by a court of competent jurisdiction of a criminal offense
and PIC and involving moral turpitude or guilty of immoral and dishonorable
Cancellation of conduct or to any person of unsound mind.
Special Permit by b. Any person who has falsely sworn or misrepresented
the BOA himself/herself in his/her application for examination.
c. Any unprofessional or unethical conduct, malpractice, violation of
any of the provisions of RA No. 9298, the CPAs Code of Ethics and the
technical and professional standards.

The suspension/revocation does not prejudice the prosecution of the

offending CPAs for criminal liabilities (under the Revised Penal Code)
and meted the penalties. RA No. 9298 provides penalties of a fine of
not less than fifty thousand pesos (50,000) or by imprisonment for a
period not exceeding two years or both.
Reinstatement of The BOA may, after two years from the date of revocation and upon
Revoked Certificates application and for reasons deemed proper and sufficient, and after
being convinced of applicant’s remorse and rehabilitation, reinstate
the validity of a revoked COR and in so doing, may, in its discretion,
exempt the application from taking another examination.
Replacement of Lost A new COR to replace lost, destroyed, or mutilated COR may be issued,
Certificates subject to the rules promulgated by the BOA and the PRC, upon
payment of the required fees.

Foreign Reciprocity 

A person who is not a citizen of the Philippines shall not be allowed to practice accountancy in
the Philippines unless he/she can prove, in the manner provided by the rules of court that, by
specific provision of law, the country of which he/she is a citizen, subject or national admits
citizens of the Philippines to the practice of the same profession without restriction.
 
A foreign applicant shall be allowed to practice accountancy in the Philippines, under the rule of
reciprocity, by requiring him to file an application and by submitting the following documents
that shall accompany the application:
a. The original or certified copy of any official documents issued by the Bureau 
of Immigration and Deportation allowing the applicant to enter and reside in the Philippines; 
b. Present his passport for examination and for photocopying of pertinent 
information about himself/herself; 

c. Original or authenticated copy of TOR or equivalent document of the course 

for licensure examination issued by the institution of higher learning where 
he/she studied, duly authorized or accredited by his/her country/state;

d. COR or its equivalent stating that the foreign applicant is duly registered or 
licensed CPA or its equivalent in his/her country/state; and

e. Other documents which may be required to be submitted by the BOA. 

Coverage of Temporary/Special Permits 

The BOA, subject to PRC's approval, may issue Special/temporary permit to:

a. A foreign CPA called for consultation or for a specific purpose which, in the judgment of the
BOA, is essential for the development of the country, his/her practice shall be limited only for
that particular work, and there is no Filipino 
CPA qualified for such consultation or specific purposes;

b. A foreign CPA engaged as professor, lecturer or critic in fields essential to 

accountancy education in the Philippines and his/her engagement is confined 
to teaching only; and

c. A foreign CPA who is an internationally recognized expert or with 

specialization in any branch of accountancy and his/her service is essential for the advancement
of accountancy in the Philippines. 

PRACTICE OF ACCOUNTANCY (Learning Objective 4)

Exhibit 24.6—Scope of Practice of Accountancy
Public * A person, be it his/her individual capacity, or as a partner or as a staff
Accountancy member in an accounting or auditing firm;
* A person skilled in the knowledge, science and practice of accounting,
and as a qualified person to render professional services as a CPA, or
offering or rendering, or both, to more than one client on a fee basis or
otherwise, various services.
Commerce and a. A person involved in decision making requiring professional knowledge in
Industry the science of accounting, as well as the accounting aspects of finance and
taxation; or
b. A person who represents his/her employer before government agencies
 on tax and other matters related to accounting; or
c. A person when such employment or position requires that the holder
thereof must be a certified public accountant.
P5,000,000/10,000,000 Rule

Any position in any company in the private sector which requires:

a. supervising the recording of financial transactions,
b. preparation of F/S,
c. coordinating with the external auditors for audit of F/S, and
d. other related functions.
Shall be occupied only by a duly registered CPA

The above provision shall apply to the business or company that has a paid-
up capital at least P5,000,000.00 and/or an annual revenue of at least
P10,000,000.00. This provision shall apply only to persons to be employed
after the effectivity of the Implementing Rules and Regulation (IRR) of RA
No. 9298 and shall not result to deprivation of the employment on
incumbents to the position.
Education/ A person, in an educational institution which involves teaching of
Academe accounting, auditing, management advisory services, accounting aspect of
finance, business law, taxation and other technically related subjects.

Members of the Integrated Bar of the Philippines may be allowed to teach

business law and taxation subjects.

The position of either the dean or the department chairman or its

equivalent that supervises the BSA program of an educational institution
must be occupied only by a duly registered CPA.
Government A person, (a) who holds, or is appointed to, a position in an accounting
professional group in government or in a government-owned and/or
controlled corporation, including those performing proprietary functions,
where decision making requires professional knowledge in the science of
accounting, or (b) where a civil service eligibility as a CPA is a prerequisite.

CPD Program 

CPD refers to the inculcation, assimilation and acquisition of knowledge, skills, proficiency, and
ethical and moral values, after the initial registration of a professional that raise and enhance the
professional's technical skills and competence. 

CPD Program Objectives 

the CPD program shall have these objectives: 

a. To provide and ensure the continuous education of a registered professional 
with the latest trends in the profession brought about by modernization 
scientific and technological advancements;

b. to raise and maintain the professional's capability for delivering professional

services; 

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

d. To make the professional globally competitive; and

e. To promote the general welfare of the public. 

The BOA, upon PRC's approval, shall create the PRC CPD Council which shall assist the BOA in
implementing its CPD program. The exhibit below shows the composition of PRC CPD Council.

Exhibit 24.7—Composition of PRC CPD Council

1 Chairperson Among the members of the BOA by the members themselves.
1st Member The president or, in his/her absence or incapacity, any officer chosen by the
Board of Directors of PICPA.
2nd Member The president or, in his/her absence or incapacity, any officer of organization
of deans or department heads of schools, colleges or universities offering
accountancy course. In the absence of such organization, the PRC
Chairperson shall appoint from at least three recommendees of well-known
academicians of the BOA.

The term of office of the chairperson of the PRC CPD Council shall be co-terminus with his/her
incumbency in the PRC. The first member shall have a term of office Co-terminus with his/her
incumbency as officer of the PICPA; the second member shall have a term of office co-terminus
with his/her incumbency as officer of the organization of deans or heads of departments. 

The PRC CPD Council shall, upon a majority vote, exercise powers and functions which shall
include but shall not be limited to the following.

a. Accept, evaluate and approve applications for accreditation of CPD providers. 

b. Accept, evaluate and approve applications for accreditation of CPD programs, activities or
sources as to their relevance to the profession and determine the number of CPD credit units to
be earned on the basis of the contents of the program, activity or source submitted by the CPD
providers. 

c. Accept, evaluate and approve applications for exemptions from CPD. 

requirements.
d. Monitor the implementation by the CPD providers of their programs. 
activities or sources.

e. Assess periodically and upgrade criteria for accreditation of CPD providers 

and CPD programs, activities or sources.

f. Perform such other related functions that may be incidental to 

implementation of the CPD programs or policies. 

Sources of CPD Credit Units 

The following exhibit outlines the common sources of CPD credit units.

Exhibit 24.8—Common Sources of CPD Credit Units 

Activities or Resources No. of Credit Units (CU)

Seminars/Workshops:
a. Participant Approved CU For program
b. Resource Speaker 3 CU/Hour
c. Panelist/Reactor 2 CU/Hour
d. Facilitator/Moderator 1 CU/Hour
e. CPD Monitor Twice approved CU for program
f. In-service training or OJT Maximum of 20 CU for a 12-month period or a
fraction thereof
g. Facilitator/Moderator 1 CU/Hour
Academic track (valid within 5 years after completion):
a. Master’s Degree 60 CU upon completion
b. Doctoral Degree 60 CU + 30 CU upon completion
c. Bachelor of laws 30 CU upon completion + 30 CU after passing the
BAR exams
d. Professional certifications (CMA, 10 CU per certification
CFA, etc.)
e. Foreign Language certifications 10 CU per foreign language
f. Professional chair 15 CU per year
Self-directed and/or lifelong learning (maximum of 40% of the required CPD units for a
compliance period)
Other activities recommended by CPD Council, BOA, PRC

CPD Requirements Accumulation and Sanctions 

The total CPD credit units shall be 120 credit units for three years, provided that minimum of 20
credit units shall be earned in each year and minimum of 40 credit units relate to required
Competency Areas from accredited CPD providers (i.e., 30 credit units from "Technical
Competence" area, 5 credit units from "Professional Skills" area, and 5 credit units from
"Professional Values. Ethics and Attitudes" area), while the remaining CPD units are flexible. Any
excess credit units in one year may be carried over to the succeeding years within the three-year
period. Excess credit units earned shall not be carried over to the next three-year period except
credit units earned for doctoral and master's degrees or specialty trainings. 

Unless exempted (such as those employed overseas, medical reasons, natural calamity,
financially handicapped or unemployed per PRC Memorandum Circular No. 7, series of 2017),
registered CPAs who have not completed the CPD requirements shall not be allowed to renew
their professional licenses. Those who failed to renew their professional licenses for a period of
five continuous years from initial registration, or from last renewal date shall be declared
delinquent and shall, after due notice, through the website and publication in the newsletters of
PICPA or any newspaper of general circulation, be dropped from the roster of CPAs. 

Seal and Use of Seal 

All registered CPAs shall obtain and use a seal of a design prescribed by the BOA. The auditor's
reports shall be stamped with said seal, indicating therein his/her current Professional Tax
Receipt (PTA) number, date place of payment when filed with government authorities or when
used professionally. 

The seal of a CPA shall be circular in form with a smaller circle within and in the upper portion of
the space between the circles shall be engraved the name of the individual CPA firm, or
partnership, the lower portion thereof shall be engraved the CPA Registration Number of the
individual CPA, proprietor of the firm and the signing partner of the partnership and in the
middle of the smaller circle shall be engraved the letters "CPA." The next exhibit depicts the
design of such seal. 

Exhibit 24.9-Seal of CPAS 

Name
 CPA

Registration

Affixing the CPA's seal and signature is an indication of compliance by the CPA of the requisite
accounting and auditing standards and rules. 

PRACTICE OF PUBLIC ACCOUNTANCY (Learning Objective 5) 

Limitation of the Practice of Public Accountancy 

Single practitioners and partners of partnership, including the staff members. organized for the
practice of public accountancy shall be registered CPAs and have obtained a Certificate of
Accreditation after acquiring a minimum of three-years meaningful experience in any of the
areas of public practice including taxation from the PRC and the BOA. 

The registration shall be valid for a period of three years and may be renewed every three years.
For individual professionals, the reckoning date shall be the date of birth of the individual, while
for firms and partnerships, the reckoning date shall be the month of their SEC registration date. 

Form and Name of Organization

Exhibit 24.10—Organizational Form and Name of Practice 

Form Basis of Registration Sample Practice Name
Individual Registered name with the Juan de la Cruz
BOA and the PRC
Firm Registered name with the Juan de la Cruz and
Department of Trade and Associates
Industry (DTI)
Partnership Registered name per Articles Cruz, Isidro, Martin and
of Partnership and Company
certificates of registration
issued by the Securities and
Exchange Commission (SEC)

As can be inferred above, CPAs may only practice public accountancy under sole proprietorship
and partnership forms of business organizations. Under RA No. 9298, partnerships engaged in
the practice of public accountancy may be carried on in the form of a general partnership (GP) or
a limited liability partnership (LLP) organized in accordance with Philippines laws. The SEC shall
not register any corporation organized for the practice of public accountancy. 
In addition, a CPA shall practice only under an individual, firm, or partnership name allowed in
accordance with Philippine laws and shall not include any 
fictitious name, indicates specialization, or misleading as to the type of organization.

A partner surviving the death or withdrawal of all the other partners in a Partnership may
continue to practice under the Partnership name for a period of not more than two years after
becoming a sole proprietor to inform the general public in the change of the organizational type;
otherwise, the partnership name may already be misleading as to its type. This means that on or
before reaching the end of the two-year period, the resulting sole proprietor if he/she continues
to practice as a sole proprietor, shall change the old Partnership name to an Individual CPA or
Firm name. 

Meaningful Experience 

A meaningful experience may be earned in any of the four accountancy sectors; however, it shall
be certified under oath by the employer where such meaningful experience was obtained.

Exhibit 24.11—Meaningful Experience

Commerce and Significant involvement in general accounting, budgeting, tax
Industry administration, internal auditing, liaison with external auditors,
representing his/her employer before government agencies on tax and
matters related to accounting or any other related functions.
Academe / Teaching for at least three (3) trimesters or two (2) semesters subjects
Education in either financial accounting, business law and tax, auditing problems,
auditing theory, financial management and management services. The
accumulated teaching experience on these subjects shall not be less
than three (3) school years.
Government Significant involvement in general accounting, budgeting, tax
administration, internal auditing liaison with the Commission on Audit
or any other related functions.
Public Practice At least one year as audit assistant and at least two years as auditor in
charge of audit engagement covering full audit functions of significant
clients.

Ownership of Working Papers 

All working papers, schedules, and memoranda made by a CPA and his staff in the course of an
examination, including those prepared and submitted by the client, incident to or in the course of
an examination, by such CPA, except reports submitted by a CPA to a client shall be treated
confidential and privileged remain the property of such CPA in the absence of a written
agreement between the CPA and the client, to the contrary, unless such documents are re 
produced through subpoena issued by any court, tribunal, or government regulatory or
administrative body in accordance with Philippine laws. 
Rules and Regulations on Advertising 

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

a. advertising can lead to undue competition between and among practitioners, 

and thus may cause a decline in the quality of service;

b. advertising would encourage a more commercial approach within the 

profession thus reducing clients' trust in CPAs and also increasing the 
likelihood of CPAs neglecting their ethical duties;

c. the cost of advertising would outweigh any savings which might result from 
competition, and it would be borne ultimately by clients; and

d. small or new practitioners would be unlikely to have the financial resources to 
match the advertising of larger or more established practices.
 
Additionally, the rationale behind the prohibition of certain kinds of advertising or
advertisements is to lend dignity to the profession which, unlike ordinary services and
merchandise, should not be peddled in the market place through touting and self-laudatory
means. 

Due to the expansion of the services provided by the professional accountants and the inclusion
of a provision in the Code of Ethics (see Chapter 23) allowing advertising to the extent that this
provides the public with necessary information about the practitioners and the services they
offer to their clients, the BOA deems it necessary to adopt rules and regulations (under BOA
Rules and Regulations 126-2008) covering advertising so as to protect the public interest. Such
rules shall define the parameters within which advertising and promotion may be considered
ethical and hence, permissible. 

Generally, advertising and publicity in any medium are now acceptable provided:
a. It has as its objective the notification to the public or such sectors of the public as are
concerned, of matters of fact (e.g., name, address. contact numbers, services offered) in a
manner that is not false, misleading or deceptive;
b. It is in good taste;
c. It is professionally dignified; and d. It avoids frequent repetition of, and any undue prominence
being given to the name of the firm or professional accountant in public practice. 
The following however shall not be allowed:
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. Publishing and comparing fees with other CPAs or CPA firms or comparing those services with
those provided by another firm or CPA practitioner
e. Giving too much emphasis on competitive differences
f. Using words or phrases which are hard to define and even more difficult to substantiate
objectively
g. Publishing services in billboard (e.g., tarpaulin, streamers, etc.) advertisements 

The next exhibit provides examples of circumstances in which publicity and advertisement that
may be acceptable.

Exhibit 24.12—Specific Rules on Advertising

International The use of the name of an international accounting firm
Affiliation affiliation/correspondence other than a notation that it is a
“member/correspondent firm of that foreign firm” shall not be allowed so
as to imply that the foreign firm is practicing in the Philippines.
Identity of Client No firm or CPA practitioners shall identify the name of a client or items of
a client’s business in advertising, public relations, or marketing material
produced to promote his practice provided that the client gives its written
consent.
Expired No firm or CPA practitioner shall use the term “Accredited” or any similar
Accreditation words or phrases to convey the same meaning if the claimed
accreditation (BOA, SEC, BSP, IC, or CDA) has expired.
Written Approval All advertisements must have prior review and approval in writing by the
of Advertisement Risk Management Partner and Managing Partner or their equivalents.
Awards Appointment or other activity of a professional accountant in matter of
national or local importance, or the award of any distinction to a
professional accountant, should receive publicity and that membership of
the professional body should be mentioned, provided not intended
personal professional advantage.
Professional A professional accountant may inform interested parties through any
Accountants medium that a partnership or salaried employment of an accountancy
Seeking nature is being sought. The professional accountant should not, however,
Employment or publicize for subcontract work in a manner which could be interpreted as
Professional seeking to procure professional business.
Business
Directories A professional accountant may be listed in a directory. Entries may
include name, address, telephone number, professional description,
services offered and any other information necessary to make contact
with the person or organization to which the entry relates.
Books, Articles, Professional accountants may state their name and professional
Interviews, qualifications and give the name of their organization but shall not give
Lectures, Radio any information as to the services that firm provides. What professional
and Television accountants write or say, however, should not be promotional of
Appearances themselves or their firm but should be an objective professional view of
the topic under consideration.
Training Courses, A professional accountant may invite clients, staff or other professional
Seminars, etc. accountants to attend training courses or seminars conducted for the
assistance of staff. Other persons should not be invited to attend such
training courses or seminars except in response to an unsolicited request.

Booklets and Booklets and other documents bearing the name of a professional
Documents accountant and giving technical information for the assistance of staff or
Containing clients may be issued to such persons, other professional accountants, or
Technical other interested parties.
Information
Staff Recruitment Genuine vacancies for staff may be communicated to the public through
any medium in which comparable staff vacancies normally appear. The
fact that a job specification necessarily gives some detail as to one or
more of the services provided to clients by the professional accountant in
public practice is acceptable but it should not contain any promotional
element. There should not be any suggestion that the services offered are
superior to those offered by other professional accountants in public
practice as a consequence of size, associations, or for any other reason.
Publicity on A professional accountant in public practice may publicize on behalf of
Behalf of Clients clients, primarily, for staff provided it is directed towards the objective to
be achieved for the client.
Brochures and A professional accountant in public practice may issue to clients or, in
Firm Directories response to an unsolicited request, to a non-client:
a. A factual and objectively worded of the services provided; and
b. A directory setting out names of partners, office addresses and names
and address of associated firms and correspondents.

Stationery and Stationery and nameplates should be of an acceptable professional

Nameplates standard and comply with the requirements of the law. The designation
of any services provided by the practice as being specialist nature should
not be permitted.
Announcements Appropriate newspapers or magazines may be used to inform the public
of the establishment of a new practice, of changes in the composition of a
partnership of professional accountants in public practice, or of any
alteration in the address of a practice. Such announcements should be
limited to a bare statement of facts and consideration given to the
appropriateness of the area of distribution of the newspaper or magazine
and number of insertions.
Inclusion of the In this case, the professional accountant in public practice should take
Name of the steps to ensure that the context in which the report is published is not
Professional such as might result in the public being misled as to the nature and
Accountant in meaning of the report, but the client must be advised that permission
 Public Practice in should first be obtained before publication of the document.
a Document
issued by a client This does not preclude the inclusion of the name of a professional
accountant in public practice in the annual report of a client.
Anniversaries Press and other media releases may be undertaken only to commemorate
anniversaries by informing the public of achievements or
accomplishments in contributing towards nation building and in
international understanding, goodwill, or relationship or enhancing the
image or standards of the accounting profession that do not violate the
rules on advertising and solicitation and factual matters without detailed
listing of services and should be done only every five years.
Websites A website in the internet in such suitable length and style which may also
include announcements, press releases publications and such other
necessary and factual information like firm’s name, partner’s principals’
name and brief description of their educational attainment, brief listing of
services, postal address, telephone, fax, and e-mail addresses.

Death or Disability of an Individual CPA and Dissolution or Liquidation of a Firm or Partnership

of CPAS 

The death or disability of an individual CPA and/or the dissolution and liquidation of a firm or
partnership of CPAs shall be reported to the BOA not later than 30 days from the date of such
death, dissolution, or liquidation. The report shall be made in the form of an affidavit (in the case
of an Individual CPA or a Firm), or by furnishing the BOA with a certified copy of the dissolution
or liquidation papers filed with the SEC in the case of a Partnership. Failure to notify the board
shall result in penalties. 

PROFESSIONAL AND REGULATORY BODIES (Learning Objective 6)

Exhibit 24.13—Overview of Professional and Regulatory Bodies 

Regulatory
Bodies
 PRC
BIR SEC

BOA
BSP IC

CDA Others

FRSC AASC QRC ETC PRC CPD

PICPA

Professional
Organization

ACPAPP nACPAE ACPACI GACPA

The Professional Regulatory Board of Accountancy (PRBOA) 

Composition 
The next exhibit provides an overview on the process of appointment of the members and
chairman of the BOA.

Exhibit 24.14-Appointment and Composition of the BOA PICPA

President of
PRC the Philippines BOA

PICPA
Submits five Ranks three
nominees for recommendees Appoints
Appointment --11 chairman
Chairman
per position, per position members
members --66 members
Members
within 60 days and
and (with 11 vice
(with vice
prior to expiry chairman of
If PICPA fails to Chairman of chairman)
of the term of BOA chairman)
submit, BOA
incumbent
submits three
nominees

The chairman shall preside in all meetings of the BOA and in the event of a vacancy in the office
of the chairman, the vice-chairman shall assume such duties and responsibilities until such time
as a chairman is appointed. 

The four (4) sectors in the practice of accountancy shall as much as possible equitably
represented in the Board. 

Qualifications of Members 

A member of the BOA shall, at the time of his/her appointment, possess the following
qualifications:

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

b. Must be a duly registered CPA with at least ten (10) years of work experience 
in any scope of practice of accountancy.
c. Must be of good moral character and must not have been convicted of crimes 
involving moral turpitude;
d. Must not have any pecuniary interest, directly or indirectly, in any school, college, university or
institution conferring an academic degree necessary for admission to the practice of accountancy
or where review classes in preparation for the licensure examination are being offered or
conducted, nor shall he/she be a member of the faculty or administration thereof at the 
time of his/her appointment to the BOA;

e. Must not be a Director or Officer of the PICPA at the time of his appointment; 

Term of Office 

The Chairman and members of the BOA shall hold office for a term of three years. Any vacancy
occurring within the term of a member shall be filled up for the unexpired portion of the term
only. No person who has served two successive complete terms as chairman or member shall be
eligible for reappointment until the lapse of one year. This is typically known as "cooling off”
period aimed as a mechanism to provide a period in which any irregularities may be uncovered.
Appointment to fill up an unexpired term is not to be considered as a complete term. No person
shall serve in the Board for more than 12 years. 

Compensation and Allowances 

The chairman and members of the BOA shall receive compensation allowances comparable to
existing regulatory boards under the PRC as provided 
Fin the General Appropriations Act (GAA). 

Powers and Functions 

The BOA shall act as a collegial body and shall exercise the following specific powers, functions
and responsibilities:

a. To prescribe and adopt the rules and regulations;

b. To supervise the registration, licensure and practice of accountancy;

c. To administer oaths in connection with the administration of this Act;

d. To issue, suspend, revoke, or reinstate the COR;

e. To adopt an official seal of the Board;

f. To prescribe and/or adopt a Code of Ethics for the practice of accountancy;

g. To monitor the conditions affecting the practice of accountancy and adopt such measures,
including promulgation of accounting and auditing standards, rules and regulations and best
practices as may be deemed proper for the enhancement and maintenance of high professional,
ethical, accounting and auditing standards;

h. To conduct an oversight into the quality of audits of F/S through a review of the quality control
measures instituted by auditors in order to ensure compliance with the accounting and auditing
standards and practices;

i. To investigate violations of this act and the rules and regulations promulgated 
hereunder and for this purpose, to issue summons, subpoena and subpoena ad testificandum
and subpoena duces tecum to violators or witness thereof and compel their attendance to such
investigation or hearings and the production of documents in connection therewith;

j. The BOA may, motu propio in its discretion, make such investigations as it deems necessary to
determine whether any person has violated any provisions of this law, any accounting or auditing
standard or rules duly promulgated by the Board as part of the rules governing the practice of 
accountancy;

k. To issue a cease or desist order to any person, association, partnership or corporation engaged
in violation of any provision of RA No. 9298, any accounting or auditing standards or rules duly
promulgated by the BOA;

l. To punish for contempt of the Board, both direct and indirect, in accordance with the pertinent
provisions of and penalties prescribed by the Rules of Court;

m. To prepare, adopt, issue or amend the syllabi of the subjects for examinations  in consultation
with the academe, determine and prepare questions for the licensure examination which shall
strictly be within the scope of the syllabi of the subjects for examinations as well as administer,
correct and release the results of the licensure examinations. The BOA may, upon prior approval
by the PRC, engage the services of expert test writers, who shall propose test questions for the
CPA Licensure Examinations;

n. To ensure, in coordination with the Commission on Higher Education (CHED) or other

authorized government offices, that all higher educational instruction and offering of
accountancy, including accounting review and/or CPE providers offering accounting seminars,
comply with the policies standards and requirements of the course prescribed by CHED;

o. To exercise such other powers as may be provided by law. 

The policies, resolution, rules, and regulations, issued or promulgated by the BOA shall be subject
to review and approval of the PRC. However, the BOA'S decisions, resolutions or orders rendered
in administrative cases shall be subject to review only if on appeal. 

Administrative Supervision of the Board, Custodian of its Records, Secretariat and Support
Services 
The BOA shall be under the administrative supervision of the PRC. All records of the BOA,
including applications for examination, examination questions, answer sheets, and other records
and documents pertaining to the CPA licensure examinations, and administrative and other
investigative cases conducted by the BOA shall be under the custody of the PRC. The PRC shall
designate the Secretary of the BOA and shall provide the secretariat and other support services
to implement the provisions of this RA No. 9298. 

Grounds for Suspension or Removal of Members of the Board 

The President of the Philippines, upon the recommendation of the PRC, after giving the
concerned member an opportunity to defend himself in a proper administrative investigation to
be conducted by the PRC, may suspend or remove any member on the following grounds:

a. Neglect of duty or incompetence;

b. Violation or tolerance of any violation of RA No. 9298 and its IRR or the Code 
of Ethics and the technical and professional standards of practice for CPAS:

c. Final judgment of crimes involving moral turpitude; and

d. Manipulation or rigging of the CPA's licensure examination results, disclosure 

of secret and confidential information in the examination questions prior to the conduct of the
said examination or tampering of grades. 
Annual Report 

The BOA shall, at the close of each calendar year, submit an annual report to the through the PRC
giving a detailed account of its President of the Philippines through the PRC proceedings and
accomplishments during the year and making recommendations for the adoption of measures
that will upgrade and improve the conditions affecting the practice of accountancy in the
Philippines. 

Accounting and Auditing Standard Setting Council 

The PRC upon the recommendation of the BOA in coordination with the PICPA created an
accounting standard setting body known as the Financial Reporting Standards Council (FRSC) and
an auditing standard setting body known as the Auditing and Assurance Standards Council (AASC)
to assist the BOA in carrying out its powers and functions. 

The FRSC shall be composed of 15 members with a Chairman, who had been or presently a
senior accounting practitioner in any of the scope of accounting practice and 14 representatives.
The AASC shall be composed of 15 members with a Chairman, who had been or presently a
senior practitioner in public accountancy and 14 representatives.
Exhibit 24.15--Composition of FRSC and AASC 
 FRSC AASC
Board of Accountancy 1 1
Securities and Exchange Commission 1 1
Bangko Sentral ng Pilipinas 1 1
Bureau of Internal Revenue 1
A major organization composed of preparers and users of 1
financial statements
An association or organization of CPAs in active public practice of 1
accountancy
Commission on Audit 1 1
PICPA
Public Practice 2 6
Commerce and Industry 2 1
Academe/Education 2 1
Government 2 1
Total 14 14

The PICPA shall equitably distribute the representation of the Public Practice sector in the AASC
among the big, medium and small practitioners. The Chairman and the members of the FRSC and
AASC shall have a term of three-years renewable for another term. 

Education Technical Council (ETC) 

The PRC upon the recommendation of the BOA shall create an ETC to assist the Board in carrying
out its powers and functions to further assist the BOA in the attainment of the objective of
continuously upgrading the accountancy education in the Philippines to make the Filipino CPAs
globally competitive. 

The ETC shall be composed of seven members with a Chairman, who had been on presently a
senior accounting practitioner in the academe/education and six representatives from the
following:

Exhibit 24.16—Composition of ETC Board of Accountancy Accredited National Professional

Board of Accountancy 1
Accredited National Professional Organization of CPAs
Public Practice 1
Commerce and Industry 1
Academe/Education 2
Government 1
Total 6
The APO shall equitably distribute the representation of the Academe/Education sector among
the private and public schools offering the degree of Bachelor of Science in Accountancy. The
Chairman and the members of the ETC shall have a term of three-years renewable for another
term. The ETC shall have the following functions:

a. Determine a minimum standard curriculum for the study of accountancy to be 

implemented in all schools offering accountancy as an undergraduate degree;

b. Establish teaching standards, including the qualifications of members of the 

faculty of schools and colleges of accountancy;

c. Monitor the progress of the program on the study of accountancy undertaking measures for
the attainment of a high quality of accountancy education in the country; and

d. Evaluate periodically the performance of educational institutions offering 

accountancy education. 

The ETC shall render a report of its findings and recommendations on the foregoing activities to
the BOA. The BOA shall review such report and if found to be meritorious, it shall forward 
it shall forward the same to the PRC which shall make proper representation with the CHED for
its appropriate consideration. 

Quality Review Committee (QRC) 

The BOA shall require as a condition to registration or any renewal thereof for the Individual
CPAs, Firms or Partnerships of CPAs to undergo quality review in such manner as the Board may
specify, provided, however, that any such requirement shall include reasonable provisions for
compliance by a registrant showing that he/she/it has undergone a satisfactory quality review
performed for other purposes which is substantially equivalent to quality review and shall be
made applicable to all Individual CPAs, Firms or Partnerships. 

There is hereby created a QRC to conduct an oversight into the quality of audit of financial
statements through a review of the quality control measures instituted by Individual CPAs, Firms
or Partnerships in order to ensure compliance with accounting and auditing standards and
practices. 

The QRC shall be composed of seven (7) members with a chairman, who had been or presently a
senior practitioner in public accountancy and six (6) representatives from the following:

Exhibit 24.17-Composition of QRC

Board of Accountancy 1
Accredited National Professional Organization of CPAs
Public Practice 2
Commerce and Industry 1
 Academe/Education 1
Government 1
Total 6

The Chairman and members of the QRC shall be appointed by the Commission upon the
recommendation of the BOA in coordination with the PICPA. The QRC shall make an annual
review of the composition of the council and may recommend to the BOA and the Commission a
more suitable representation thereto as it may deem fit. The Chairman and the members of the
QRC shall have a term of three-years renewable for another term. 

The QRC shall have the following functions: 

a. Conduct quality review on applicants for registration to practice public 

accountancy and render a report which shall be attached to the application 
for registration;

b. Recommend to the BOA the revocation of the Certificate of Registration and 

the professional identification card of practitioners. 

Securities and Exchange Commission (SEC) 

The financial reporting and auditing requirements of SEC are set out in its Securities Regulation
Code (SRC) Rule 68, as amended. The following exhibit outlines the parts and coverage of the
said rule.

Exhibit 24.18-SRC Rule 68: Parts and Coverage  

Part I-General Applicable to the form and content of financial statements to be filed
Reporting with SEC by corporations which meet the following:
Requirements a. Stock corporations with paid-up capital stock of P50,000 or more;
b. Non-stock corporations with total assets of P500,000 or more, or with
gross annual receipts of P100,000 or more;
c. Foreign corporations:
• Branches of stock corporations-P1,000,000 or more of assigned capital;
• Branches of non-stock corporations-P1,000,000 or more of total assets;
and
• Regional Operating Headquarters (ROHQ)-P1,000,000 or more of total
revenue.
Part II- Additional requirements on the financial statements of following:
Additional a. Corporations which filed registration statements for purposes of
Requirements issuing securities to the public; or
for Issuers of b. Corporations which meet the following criteria:
Securities to the • Issuer which has sold a class of their securities to the public;
Public • Issuer with a class of securities listed for trading on an Exchange; and
• Issuer with assets of at least P50,000,000 and has two hundred (200) or
more holders each holding at least one hundred (100) shares of a class of
its equity securities.

Statement of Management's Responsibility (SMR) 

Under SRC Rule 68. the F/S are the primary responsibility of the management, as reviewed and
approved by the board of directors, before submitted to the stockholders. FIS to be filed with SEC
are accompanied by the SMR which is signed by the following: 
• Chairman of the Board; 
• Chief Executive Officer; and 
• Chief Finance Officer.
In case of branch office or ROHQ of a foreign corporation, the local manager. 

The following exhibit shows the said SMR.

Exhibit 24.19-Statement of Management's Responsibility 
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS 

The management of (name of reporting company) is responsible for the preparation and fair
presentation of the financial statements for the year(s) ended (date), in accordance with the
prescribed financial reporting framework indicated therein. This responsibility includes
designing and implementing internal controls relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due
to fraud or error, selecting and applying appropriate accounting policies, and making
accounting estimates that are reasonable in the circumstances. 

The Board of Directors or Trustees reviews and approves the financial statements and
submits the same to the stockholders or members. 

(name of auditing firm), the independent auditor, appointed by the stockholders has
examined the financial statements of the company in accordance with Philippine Standards
on Auditing, and in its report to the stockholders or members, has expressed its opinion on
the fairness of presentation upon completion of such examination(s). 

Signature_____________________________
Printed Name of the Chairman of the Board_______________________

Signature_____________________________
Printed Name of the Chief Executive Officer_______________________

Signature_____________________________
Printed Name of the Chief Financial Officer________________________

Signed this ___________ Day of _______________

 
The SMR should be bear a date the same with the approval and authorization of issuance of the
F/S. The failure of any of the prescribed signatories to sign the SMR constitutes a material
deficiency. 

Qualifications and Reports of Independent Auditors 

The FIS shall be accompanied by an independent auditor's report duly registered with the
BOA/PRC. Independent auditors of the following regulated entities shall be accredited with the
SEC (valid for 3 years) and classified into the following:

a. Group A-Issuer of securities and public companies;

b. Group B-Brokers/dealer/investments houses, etc.; 

c. Group C-Financing/Lending/Transfer Agents; and
d. Group D-Other regulated companies. 

The accreditation under Group A shall be considered a general accreditation which shall allow
the independent auditor to also audit companies under Groups B, C, and D. Independent
auditors with Group B accreditation can likewise audit companies under Groups C and D.
Accordingly, Group C accredited independent auditors are allowed to audit Group D companies.
 
The independent auditor shall disclose (and document management's explanation and/or
corrective action after discussion with the audit committee or board of directors) the following
findings to the SEC: 

• Any material findings involving fraud or error; 

• Total losses or potential losses of at least ten percent (10%) of the 

consolidated total assets; 

• Consolidated assets, on a going concern basis, are no longer adequate to 

cover the total claims; and 

• Material internal control weaknesses. 

Bureau of Internal Revenue (BIR) Accreditation 

Under the BIR Rules and Regulations (see BIR RR Nos. 11-2006, 4-2010, and 14 2010), only those
tax practitioners who have been issued certificate of accreditation or ID card shall be allowed to
represent a taxpayer or transact business with BIR in representation of a taxpayer. 

Bangko Sentral ng Pilipinas (BSP) Accreditation 

BSP accreditation (see BSP Circular Nos. 410-2003 and 660-2009) is applicable to banks and non-
bank financial intermediaries regulated by BSP. 

Insurance Commission (IC) Accreditation 

IC accreditation (see IC Circular Letter No. 29-2009) is required for entities under supervision of
the IC such as insurance/reinsurance companies, mutual benefit associations,
insurance/reinsurance brokers, general agents, trusts for charitable uses and other insurance
companies in the Philippines. 

Cooperative Development Authority (CDA) Accreditation 

CDA accreditation (see Memorandum Circular 03-2009) is a requisite for client cooperatives
registered with the Cooperative Development Authority. 
PICPA—The Accredited Professional Organization (APO) 
All registered CPAs whose names appear in the roster of CPA shall be united and integrated
through their membership in a one and only registered and accredited national professional
organization of registered and licensed CPAs, which shall be registered with the SEC as a non-
profit corporation and recognized by the BOA, subject to the approval by the PRC. 

Membership in the integrated organization shall not be a bar to membership in 

any other association of CPAs. 

The PICPA shall renew its Certificate of Accreditation once every three years (3) years after the
date of the Resolution granting the petition for re-accreditation and the issuance of the said
certificate upon submission of the requirements, a report on significant achievements as a
corporate body in attaining the objectives of the organization, in the enhancement of the welfare
of its members and the stature/prestige of the profession to be signed by Board
Directors/Trustee.
 
 CHAPTER PRACTICE QUESTIONS

PART I-TRUE OR FALSE 

1. A person who is not a citizen of the Philippines shall not be allowed practice accountancy in
the Philippines unless allowed by BOA/PRC under the rule of reciprocity. 

2. A meaningful experience shall be considered as satisfactorily earned in PUDIC Practice if a CPA

served at least one year as audit assistant and at least two years as auditor in charge of the audit
engagement covering full audit functions of significant clients. 

3. All registered CPAs are united and integrated through their membership in a  one and only
registered and accredited national professional organization that is the PICPA. 

4. The Board of Accountancy is responsible for the preparation of the contents 

of the CPA Licensure Examination. 

5. The Board of Accountancy is responsible for investigating violations of RA 

9298. 

6. A member of the Board of Accountancy should not be connected to any 

accounting firm. 

7. A member of the Board of Accountancy should not be connected to any CPA Review school or
university offering courses leading to admission for the CPA Board Examinations, whether
directly or indirectly. 

8. The Professional Regulation Commission may remove from the Board any 
member whose certificate to practice has been removed or suspended. 

9. The AASC shall be composed of 14 members plus a chairman. 

10. The chairman and members of the AASC shall have a non-renewable term of 3 years. 

PART IL-MULTIPLE CHOICE 

Setting-Up a Public Accounting Practice- An Overview

1. The objectives of the Philippine Accountancy Act of 2004 are the following, 
except:
a. Standardization and regulation of accounting education.
b. Integration of accountancy profession
c. Examination for registration of certified public accountants.
d. Supervision, control and regulation of the practice of accountancy. 
2. The primary duty to enforce the provisions of RA 9298 and its IRR rests with 
a. The PRC
b. The PRC and BOA
c. The BOA
d. The AASC 

The CPA Board Examinations-The Entry into the Profession

3. Which of the following is not a requisite in applying for the CPA licensure 
examinations?
a. Natural-born citizen of the Philippines.
b. Good moral character.
c. Holder of the degree of Bachelor of Science in Accountancy.
d. Has not been convicted of any criminal offense involving moral turpitude. 

4. The following documents shall be submitted by applicants for the CPA 

licensure examination, except
a. NBI Clearance
b. Birth Certificate in Philippine Statistics Authority (PSA) security paper
c. Transcript of records and college diploma
d. Marriage contract in PSA security paper for married male applicants 

5. The Board, subject to the approval of the Commission, 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 every
a. 2 years
b. 4 years
c. 3 years
d. 5 years 
6. The following statements relate to CPA examination ratings. Which 
statement is incorrect?
a. To pass the examination, candidates should obtain a general weighted 
average of 75% and above, with no rating in any subject less than 65%.
b. Candidates who obtain a rating of 75% and above in at least tour sur shall receive a conditional
credit for the subjects passed.
c. Conditioned candidates shall take an examination in the remaining subject(s) within three
years from the preceding examination.
d. Candidates who fail in two (2) complete CPA examinations may be allowed to take
examinations a third time provided he or she will comply with Sec. 18 of RA 9298. 

7. Any candidate who fails in two (2) complete Certified Public Accountant Board Examinations
shall be disqualified from taking another set of examinations unless he/she submits evidence to
the satisfaction of the Board that he/she enrolled in and completed at least of ____ subject given
in the licensure examination.
a. 12 units
b. 24 units
c. 21 units
d. 60 units 

Registration and Licensure for the Practice of Accountancy

8. The Certificate of Registration issued to successful examinees 
a. Is renewable every three years
b. Is renewable every five years
c. Shall bear the signature of the PRC Chairperson
d. Shall remain in full force and effect until withdrawn, suspended or revoked. 

9. A CPA certificate is evidence of 

a. Independence as a professional.
b. Basic competence at the time of certification.
c. Membership in the accredited association.
d. Completion of continuing professional education program 

10. According to Section 20 of RA 9298, a Professional Identification Card bearing the registration
number, date of issuance, expiry date, duly signed by the chairperson of the PRC, shall liker 
of the PRC. shall likewise be issued to every registrant renewable every
a. One (1) year
b. Three (3) years 
C. Two (2) years
d. Five (5) years 

11. The BOA shall refuse the registration of any person who successfully passed 
the CPA examinations if, except
a. Convicted by a court of competent jurisdiction of a criminal offense & involving moral
turpitude
b. Having an unsound mind
c. Guilty of immoral and dishonorable conduct
d. Conviction for a political offense or for an offense which shall not disqualify a person from
practicing accountancy. 

12. A CPA whose certificate have been revoked may be reinstated if he has acted 
in exemplary manner and has not committed any illegal, immoral or dishonorable conduct for a
period not less than
a. One year
b. Two years
c. Five years
d. The period depends on the seriousness of his offense 
13. Special/temporary permit may be issued by the Board of Accountancy subject to the approval
of PRC and payment of the fees the latter has prescribed and charged thereof to the following
persons
a. A foreign CPA called for consultation or for a specific purpose which, in the judgment of BOA is
essential for the development of the country
b. A foreign CPA engaged as professor, lecturer or critic in fields essential to the accountancy
education in the Philippines and his/her engagement is confined to teaching only.
c. A foreign CPA who is an internationally recognized expert or with specialization in any branch
of accountancy and his/her service is essential for the advancement of accountancy in the
Philippines.
d. All of the above 

14. According to the Philippine Accountancy Act of 2004 (RA 9298), any person 
who shall violate RA 9298 or any of its implementing rules and regulations as promulgated by the
Board of Accountancy subject to the approval of the PRC, shall, upon conviction, be punished by
a fine
a. not less than fifty thousand pesos (P50,000), or by imprisonment for a 
period not exceeding three (3) years, or both
b. not less than one hundred thousand pesos (P100.000), or by imprisonment for a period not
exceeding two (2) years, or both
c. not less than fifty thousand pesos (P50,000), or by imprisonment for a period not exceeding
two (2) years, or both 
d. not less than one hundred fifty thousand pesos (P150,000), imprisonment for a period not
exceeding three (3) years, or both 

Practice of Accountancy
15. Practice of Public Accountancy shall constitute in a person: 
a. When involved in decision making requiring professional knowledge in the science of
accounting, as well as the accounting aspects of finance and taxation or when he/she represents
his/her employer before government agencies on tax and other matters relating to accounting. b.
When he/she is appointed in an accounting professional group government or in a government-
owned and/or controlled corporation, including those performing proprietary functions, where
decision-making requires professional knowledge in the science of accounting
c. When he or she is involved in teaching of accounting, auditing, management advisory services,
accounting aspect of finance, business law, taxation and other technically related subjects.
d. When a person is skilled in the knowledge, science and practice of accounting and as a
qualified person to render professional services as a СРА 

16. Any position in any business or company in the private sector which requires 
supervising the recording of financial transactions, preparation of financial statements,
coordinating with the external auditors for the audit of such financial statements and other
related functions shall be occupied only by a duly registered CPA. Provided
I. That the business or company where the above position exists has a paid up capital of at least
P5,000,000 and/or annual revenue of at least P10,000,000
II. The above provision shall apply only to persons to be employed after the  effectivity of the
implementing Rules and Regulations of RA 9298
III. The above provision shall not result to deprivation of the employment of 
incumbents to the position
a. I, II and III
b. Il and III
c. I and II
d. I and III 

17. Which of the following statements concerning the practice of accountancy in 
the academe/education is incorrect?
a. The position of either the of either the Dean or the Department Chairman or its equivalent
that supervises the Bachelor of Science in Accountancy program of an educational institution
must be occupied only by registered CPA. 
b. The position of either the Dean or the Department Chairman or its equivalent that supervises
the Bachelor of Science in Accountancy program of an educational institution is deemed to be in
the practice of accountancy in the academe/education.
c. Members of the Integrated Bar of the Philippines are prohibited from teaching business law
and taxation subjects.
d. Members of the Integrated Bar of the Philippines may be also allowed to  teach business law
and taxation subjects. 

18. How many credit units per hour is (are) earned by a CPA who serves as a resource speaker at
a CPD seminar?
a. 1 CU per hour
b. 3 CU per hour
c. 5 CU per hour
d. 2 CU per hour 

19. A CPA must earn at least 120 credit units for 3 years, with a minimum of 20 credit units
earned per year. Excess credit units shall not be carried over to the next three-year period
except:
a. credit units earned for servicing as a professorial chair
b. credit units earned for authoring an article of national significance
c. credit units earned for an invention of significance of the profession
d. credit units earned for doctoral or masteral degrees or specialty trainings 

20. The PRC CPD Council shall assist the BOA in implementing its CPD program. 
Which of the following statements is incorrect concerning the Council's composition?
a. The PRC CPD Council shall be composed of a chairperson and two (2) members.
b. The chairperson shall be chosen from among the members of the BOA by the PRC.
c. The first member shall be the President or, in his/her absence or incapacity, any officer chosen
by the Board of Directors of PICPA.
d. The second member shall be the President or, in his/her absence or incapacity, any officer of
the organization of Deans or Department Heads of schools, colleges or universities offering the
degree requiring licensure examination. 

21. The letters "CPA” shall be engraved in what part of the CPA's seal? 
a. Upper portion of the space between the bigger and smaller circle
b. lower portion of the space between the bigger and smaller circle. 
c. Left and right portion of the space between the bigger and smaller circle and in the middle of
the smaller circle.
d. Middle of the smaller circle. 

22. Affixing the CPA's seal and signature is an indication of CPA's 

a. Compliance with the requisite accounting and auditing standards are rules
b. Independence with respect to the entity being audited.
c. Basic competence at the time of signing the document.
d. Collection of the audit fees from the client. 

Practice of Public Accountancy

23. Who is not permitted by law to practice public accountancy? 
a. A corporation whose stockholders are all CPAS
b. A partnership of CPAS
c. A solo practitioner
d. A partnership of CPAs, with some non-CPA staff 

24. Which of the following statements concerning the use of firm or partnership 
name is incorrect?
a. In the case of an individual CPA, he/she shall do business under his/her registered name with
the BOA and the PRC and as printed in his/her CPA certificate.
b. In the case of a firm, it shall do business under its duly registered and  authorized firm name
appearing in the registration documents issued by the Department of Trade and Industry (DTI)
and other government offices and such firm name shall include the real name of the sole
proprietor as printed in his/her CPA certificate.
c. In the case of a registered partnership, it shall do business under its name as indicated in its
current Articles of Partnership and Certificate of Registration issued by the Securities and
Exchange Commission (SEC).
d. A CPA shall practice only under an individual, firm, or partnership name in  accordance with
Philippine laws and shall not include any fictitious name or is misleading as to the type of the
organization but may indicate specialization. 

25. Which of the following is required for a partnership for public accountancy practice?
a. At least one of the partners must be a CPA.
b. All partners must be PICPA members.
c. All partners must be CPAs.
d. Firm name must contain names of partners only. 

26. Under the IRR of RA 9298. if a partner in a two-member partnership dies, the surviving
partner may continue to practice as an individual under the existing firm title which includes the
deceased partner's name
a. For a period of time not to exceed five years. '
b. For a period of time not to exceed two years.
c. Indefinitely.
d. Until the partnership payout to the deceased partner's estate is terminated. 

27. Below are names of four CPA firms and pertinent facts relating to them. 
Unless otherwise indicated, the individuals named are CPAs and partners, and there are no other
partners. Which firm name and related facts indicate a violation of RA 9298 and its IRR?
a. Dee, Lim and Sy, CPAS (Dee died about five years ago; Lim and Sy are continuing the firm).
b. Cruz and Reyes, CPAs (The name of V. Valdes, CPA, a third partner, is 
omitted from the firm name).
c. Gomez and Castro, CPAs (Gomez died about three years ago; Castro is continuing the firm as a
sole proprietorship).
d. P. Reyes and Co., CPAs (The firm has ten other partners who are all CPAs). 

28. The death or disability of an individual CPA and/or the dissolution and 
liquidation of a firm or partnership of CPAs shall be reported to the BOA not later than ____ days
from the date of such death, dissolution or liquidation.
a. 15
b. 60
c. 30
d. 90 

29. Which of the following statements concerning ownership of working papers is incorrect?
a. All working papers made by a CPA and his/her staff in the course of an examination remain the
property of such CPA in the absence of any agreement (written or oral) between the CPA and the
client to the contrary.
b. Working papers include schedules and memoranda prepared and submitted by the client of
the CPA.
c. All working papers, except reports submitted by a CPA to his/her client shall be treated
confidential and privileged.
d. Working papers shall be treated confidential and privileged and remain the property of the
CPA unless such documents are required to be produced through subpoena issued by any court,
tribunal, or government regulatory or administrative body. 

 30. In accordance with BOA Resolution No. 126, the following advertising and publicity shall not
be allowed, except:
 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 me parties.
d. Not giving too much emphasis on competitive differences 

31. The following statements relate to BOA Resolution No. 126 on rules and regulation on
advertising and publicity. Which is incorrect?
a. The use of the name of an international accounting firm affiliation/correspondence other
than a notation that it is a "member/correspondent firm of that foreign firm” shall not be
allowed so as to imply that the foreign firm is practicing in the Philippines.
b. No firm or CPA practitioner shall identify the name of a client or items of a client's business
in advertising, public relations or marketing material produced to promote his practice
provided that the client gives its written consent.
c. No firm or CPA practitioner shall use the term "Accredited” or any similar words or phrases
calculated to convey the same meaning if the claimed accreditation (BOA, SEC, BSP or IC)
has expired.
d. All advertisements must have prior review and approval in writing or oral by the Risk
Management Partner and Managing Partner or their equivalents. 

32. The following statements relate to BOA Resolution No. 126 on rules and regulation on
advertising and publicity. Which is incorrect?
a. The award of any distinction to a professional accountant, should receive publicity as long
as not used for personal professional advantage.
b. A professional accountant may inform interested parties through any medium that
partnership or salaried employment of an accountancy nature is being sought as long as not
interpreted as seeking to procure professional business.
c. A professional accountant may write a letter or make a direct approach to another
professional accountant when seeking employment or professional business.
d. A professional accountant may not be listed in a directory. 

33. The following statements relate to BOA Resolution No. 126 on rules and regulation on
advertising and publicity. Which is incorrect?
a. When a client proposes to publish a report by a professional accountant in public practice
dealing with the client's existing business affairs, steps should be taken to ensure that the
context in which the report is published is not such as might result in the public being
misled as to the nature and meaning of the report and advise the client that permission
should first be obtained before publication of the document.
b. A professional accountant's press and other media releases undertaken only to
commemorate their anniversaries in public practice by informing the public of their
achievements or accomplishments in contributing towards nation building and in
international understanding, goodwill, or relationship or enhancing the image of the
accounting profession.
c. A professional accountant's press and other media releases or announcements or
newspaper supplements, or other similar publications, or other commemorative media
 should be done only every ten (10) years of celebration.
d. A professional accountant may develop and maintain a website in the Internet to include
factual information about the practice.

Professional and Regulatory Bodies

34. The following statements relate to the Board of Accountancy and its composition. Which
statement is incorrect?
a. The Board consists of a Chairman and six members
b. The Chairman and members are appointed by PRC upon recommendation of APO
c. The Board shall elect a vice-chairman from among its members.
d. The four (4) sectors in the practice of accountancy shall as much as possible be equitably
represented in the Board 

35. The APO shall submit its nominations with complete documentation to the Commission not
later than _____ prior to the expiry of the term of an incumbent chairman or member.
a. 30 days
b. 90 days
c. 60 days
d. 120 days 

36. Which of the following is incorrect regarding the qualifications of members of the Board of
Accountancy?
a. Must be a natural-born citizen and resident of the Philippines
b. Must be a duly registered Certified Public Accountant with at least fifteen (15) years of
work experience in any scope of practice of accountancy
c. Must be of good moral character and must not have been convicted of crimes involving
moral turpitude
d. Must not have any pecuniary interest, directly or indirectly, in any school, college,
university where review classes in preparation for the licensure examination are being
offered or conducted 

37. Which of the following statements is incorrect according to Section 7 of the Philippine

Accountancy Act of 2004 (RA 9298)?
a. The Chairman and the members of the Professional Regulatory Board of Accountancy
(PRBOA) shall hold office for a term of three (3) years.
b. No person who has served two (2) successive terms shall be eligible for reappointment
until the lapse of one (1) year.
c. Any vacancy occurring within the term of a member shall be filled up for the unexpired
portion of the term only.
d. Appointment to fill up an unexpired term is considered as a complete term. 

38. No person shall serve the Professional Regulatory Board of Accountancy more than 
a. 3 years
 b. 9 years
c. 6 years
12 years 

39. The Board shall exercise the following specific powers, functions and responsibilities: 
a. b. c. d.
To supervise the registration, licensure and practice of Yes Yes Yes Yes
accountancy 
To issue, suspend, revoke, or reinstate the certificate of Yes No Yes Yes
registration for the practice of accountancy
To monitor the conditions affecting the practice of Yes Yes No Yes
accountancy 
To conduct an oversight into the quality of audits of Yes No Yes No
financial statements 

No To ensure that all HEIs including review centers Yes Yes No Yes
comply with the requirements of CHED or other
authorized government offices 

40. The following were created to assist the BOA in carrying out its powers and functions, except
a. Auditing and Assurance Standards Council
b. Financial Reporting Standards Council
c. Education Technical Council
d. Accredited National Professional Organization of CPAS 

41. The creation of FRSC and AASC is intended to assist the BOA in carrying out its function to
a. To monitor the conditions affecting the practice of accountancy and adopt such measures,
rules and regulations and best practices as may be deemed proper for the enhancement
and maintenance of high professional, ethical, accounting and auditing standards.
b. To supervise the registration, licensure and practice of accountancy in the Philippines.
c. To prescribe and adopt the rules and regulations necessary for carrying out the provisions
of RA 9298.
d. To prepare, adopt, issue or amend the syllabi of the subjects for examinations. 

42. A body that is created to assist the BOA in the attainment of the objective of continuously
upgrading the accountancy education in the Philippines to make the Filipino CPAs globally
competitive
a. PICPA
b. Education Technical Council (ETC)
c. Quality Assurance Review Department (QARD)
d. Auditing and Assurance Standards Council (AASC) 

43. Applications for examination, examination questions, answer sheets, and other records and
 documents pertaining to the CPA licensure examinations shall be under the custody of the
a. PRC
b. PICPA
с. ВОА
d. National Library 

44. The following statements relate to certain provisions under RA No. 9298 about the Board of
Accountancy. Which is incorrect?
a. The Board shall be under the administrative supervision of the Securities and Exchange
Commission (SEC).
b. The PRC shall designate the Secretary of the Board and shall provide the secretariat and
other support services to implement the provisions of RA  No. 9298.
c. The Board shall, at the close of each calendar year, submit an annual report to the
President of the Philippines through the PRC about proceedings and accomplishments.
d. None of the above 

45. Which of the following is not a ground for suspension or removal of members of BOA?
a. Neglect of duty or incompetence
b. Intolerance of any violation of RA 9298
c. Final judgment of crimes, involving moral turpitude
d. Rigging of the certified public accountants licensure examination result

46. Which of the following is not represented in the Auditing and Assurance Standards Council?
a. BOA
b. FINEX
c. PICPA
d. SEC 

47. Which statement is incorrect regarding AASC? 

a. The AASC shall be composed of 14 members plus a chairman
b. The chairman and members of the AASC shall be appointed by PRC upon the
recommendation of BOA
c. The chairman and members of the AASC shall have a non-renewable term of 3 years
d. The chairman should have been or presently a senior practitioner in public accountancy 

48. The following statements relate to the accreditation requirements of independent auditors of
regulated entities under Securities and Exchange Commission (SEC) Securities Regulations
Code (SRC) Rule 68, as amended. Which is incorrect?
a. Independent auditors of regulated entities are categorized into: Groups A, B, C and D.
b. The independent auditors and auditing firms (if applicable) of Companies under Groups A
and B shall be both accredited by the commission.
c. For companies under Group C, the accreditation of auditing firm shall be sufficient. Hence,
an individual independent auditor need not be accredited by the Commission.
d. Accreditation under Group A shall be considered a general accreditation which shall allow
 the independent auditor to audit companies under Groups B, C and D, and so on, but not
the other way around. 

49. Rule 68 of the Securities Regulation Code (SRC) prescribes the requirements applicable to the
form and content of financial statements to be filed by stock corporations except those
whose paid-up capital is less than
a. P 50,000
b. P400,000
c. P250,000
d. P500,000 

50. The Statement of Management's Responsibility to accompany the financial statements to be

filed with the SEC shall be signed by the
I. Chairman of the Board of Directors
II. Chief Executive Officer 
III. Chief Financial Officer
a. I only
b. I and II only
c. II and Ill only
d. I, II and III 
Appendix 5.A-Contents of Overall Audit Strategy (PSA 300)
1. Characteristics that Define the scope of Engagement
• The applicable financial reporting framework.
• Industry-specific reporting requirements.
• The expected audit coverage, including the number and locations of components.
• The nature of the control relationships between a parent and its components.
• The extent to which components are audited by other auditors. 
• The nature of business segments to be audited, including need for specialized knowledge. 
• The reporting currency to be used, including any need for currency translation
• The need for a statutory audit of standalone F/S in addition to consolidation purposes. 
• The availability of the work of internal auditors and extent of auditor's potential reliance. 
• The entity's use of service organizations and how the auditor may obtain
evidence concerning the design or operation of controls performed by them. 
• The expected use of audit evidence obtained in previous audits, for example,
audit evidence
related to risk assessment procedures and tests of controls. 
• The effect of information technology on the audit procedures, including the availability of
data and the expected use of computer-assisted audit techniques. 
• The coordination of the expected coverage and timing of the audit with any reviews of
interim financial information and the effect on the audit of such reviews. 
• The availability of client personnel and data. 

2. Reporting Objectives, Timing of the Audit, and Nature of Communications 

• The entity's timetable for reporting, such as at interim and final stages. 
• The organization of meetings with management and TCWG to discuss the nature, timing
and
extent of the audit work.
• The discussion with management and TCWG regarding the expected type and timing of
reports to be issued and other communications, both written and oral, including the
auditor's report, management letters and communications to TCWG
• The discussion with management regarding the expected communications on the status of
audit work throughout the engagement.
• Communication with auditors of components regarding the expected types and timing of
reports to be issued and other communications.
• The expected nature and timing of communications among team members, including the
nature and timing of team meetings and timing of the review of work performed.
• Whether there are any other expected communications with third parties, including any
statutory or contractual reporting responsibilities arising from the audit. 

3. Significant Factors 
• The determination of materiality and material accounts and disclosures.
• Preliminary identification of areas where there may be a higher ROMM.
• The impact of the assessed risk of material misstatement at the overall financial statement
level on direction, supervision and review. The manner in which the auditor emphasizes to
engagement team members the need to maintain a questioning mind and to exercise
professional skepticism in gathering and evaluating audit evidence.
• Results of previous audits that involved evaluating the operating effectiveness of internal
control, including the nature of identified deficiencies and action taken to address them.
The discussion of matters that may affect the audit with firm personnel responsible for
performing other services to the entity.
• Evidence of management's commitment to the design, implementation and maintenance
of
sound internal control, including evidence of appropriate documentation of such internal
control.
• Volume of transactions, which may determine whether it is more efficient for the auditor
to
rely on internal control.
• Importance attached to internal control throughout the entity to the successful operation
of
the business.
• Significant business developments affecting the entity, including changes in information
technology and business processes, changes in key management, and acquisitions,
mergers
and divestments.
• Significant industry developments such as changes in industry regulations and new
reporting
requirements.
• Significant changes in the financial reporting framework, such as changes in accounting
standards.
• Other significant relevant developments, such as changes in the legal environment
affecting
the entity. 

4. Results of Preliminary Engagement Activities and Knowledge Gained on Other

 Engagements
The auditor incorporates the results of preliminary engagement activities when planning the
audit such as: 
• regarding the acceptance and continuance of the audit engagement; 
• communicating with the predecessor auditor, in case of initial audit engagements;
• evaluation of compliance with ethical requirements, including independence; and
• establishment of an understanding of the terms of the engagement. 

5. Nature, Timing and Extent of Necessary Resources 

• The selection of the engagement team (including the engagement quality control
 reviewer)
and the assignment of audit work to the team members.
• Engagement budgeting, including considering the appropriate amount of time to set aside
for areas where there may be higher risks of material misstatement. 

Exhibit 12.A-Circumstances that may Indicate the possibility of Fraud

Discrepancies in the accounting records, including: 

• Transactions that are not recorded in a complete or timely manner or are improperly
recorded as to amount, accounting period, classification, or entity policy.
• Unsupported or unauthorized balances or transactions.
• Last-minute adjustments that significantly affect financial results.
• Evidence of employees' access to systems and records inconsistent with that necessary to
perform their authorized duties.
• Tips or complaints to the auditor about alleged fraud. 

Conflicting or missing evidence, including: 

• Missing documents.
• Documents that appear to have been altered. 
• Unavailability of other than photocopied or electronically transmitted documents when
documents in original form are expected to exist.
• Significant unexplained items on reconciliations.
• Unusual balance sheet changes, or changes in trends or important financial statement
ratios
or relationships - for example receivables growing faster than revenues.
• Inconsistent, vague, or implausible responses from management or employees arising from
inquiries or analytical procedures. 
• Unusual discrepancies between the entity's records and confirmation replies. 
• Large numbers of credit entries and other adjustments made to accounts
receivable records.
• Unexplained or inadequately explained differences between the accounts receivable sub-
ledger and the control account, or between the customer statements and the accounts
receivable subledger.
• Missing or non-existent cancelled checks in circumstances where cancelled checks are
ordinarily returned to the entity with the bank statement.
• Missing inventory or physical assets of significant magnitude.
• Unavailable or missing electronic evidence, inconsistent with the entity's record retention
practices or policies.
• Fewer responses to confirmations than anticipated or a greater number of responses than
anticipated.
• Inability to produce evidence of key systems development and program change testing and
implementation activities for current-year system changes and deployments. 
 Problematic or unusual relationships between the auditor and management, including: 
• Denial of access to records, facilities, certain employees, customers, vendors, or others
from
whom audit evidence might be sought.
• Undue time pressures imposed by management to resolve complex or contentious issues. 
• Complaints by management about the conduct of the audit or management intimidation of
engagement team members, particularly in connection with the auditor's critical
assessment
of audit evidence or in the resolution of potential disagreements with management.

• Unusual delays by the entity in providing requested information.

• Unwillingness to facilitate auditor access to key electronic files for testing through the use
of
computer-assisted audit techniques.
• Denial of access to key IT operations staff and facilities, including security, operations, and
systems development personnel.
• An unwillingness to add or revise disclosures in the financial statements to make them
complete and more understandable. 
• An unwillingness to address identified weaknesses in internal control on a timely basis. 

Others: 
• Unwillingness by management to permit the auditor to meet privately with those charged
with
governance.
• Accounting policies that appear to be at variance with industry norms.
• Frequent changes in accounting estimates that do not appear to result from changed
circumstances.
• Tolerance of violations of the entity's Code of Conduct. 

Appendix 12. B---Examples of Fraud Risk Factors Risk Factors

Relating to Misstatements Arising from Fraudulent Financial Reporting

a. Incentives/Pressures

Financial stability or profitability is threatened by economic, industry, or entity operating

conditions, such as (or as indicated by): 
• High degree of competition or market saturation, accompanied by declining margins. 
• High vulnerability to rapid changes, such as changes in technology, product obsolescence,
or
interest rates.
• Significant declines in customer demand and increasing business failures in either industry
or
overall economy.
• Operating losses making the threat of bankruptcy, foreclosure, or hostile
takeover imminent.
• Recurring negative cash flows from operations or an inability to generate cash flows from
operations while reporting earnings and earnings growth. 
• Rapid growth or unusual profitability especially compared to that of other companies in
the
same industry. 
• New accounting, statutory, or regulatory requirements. 

Excessive pressure exists for management to meet the requirements or expectations of third
parties due to the following: 
• Profitability or trend level expectations of investment analysts, institutional investors,
significant creditors, or other external parties (particularly expectations that are unduly
aggressive or unrealistic), including expectations created by management in, for example,
overly optimistic press releases or annual report messages.
• Need to obtain additional debt or equity financing to stay competitive including  financing
of
major research and development or capital expenditures. 
• Marginal ability to meet exchange listing requirements or debt repayment or other debt
covenant requirements. 
• Perceived or real adverse effects of reporting poor financial results on significant pending
transactions, such as business combinations or contract awards.

Information available indicates that the personal financial situation of management or those
charged with governance is threatened by the entity's financial performance arising from the
following: 
• Significant financial interests in the entity. 
• Significant portions of their compensation (for example, bonuses, stock options, and earn-
out arrangements) being contingent upon achieving aggressive targets for stock price,
operating results, financial position, or cash flow.
• Personal guarantees of debts of the entity. 

There is excessive pressure on management or operating personnel to meet financial targets

established by those charged with governance, including sales or profitability incentive
goals. 
b. Opportunities 

The nature of the industry or the entity's operations provides opportunities to engage in
fraudulent financial reporting that can arise from the following: 
• Significant related-party transactions not in the ordinary course of business or with related
entities not audited or audited by another firm.
• A strong financial presence or ability to dominate a certain industry sector that allows the
entity to dictate terms or conditions to suppliers or customers that may result in
inappropriate or non-arm's-length transactions.
• Assets, liabilities, revenues, or expenses based on significant estimates that involve
subjective judgments or uncertainties that are difficult to corroborate.
• Significant, unusual, or highly complex transactions, especially those close to period end
that
pose difficult "substance over form” questions.
• Significant operations located or conducted across international borders in jurisdictions
where differing business environments and cultures exist. Use of business intermediaries
for
which there appears to be no clear business justification.
• Significant bank accounts or subsidiary or branch operations in tax-haven jurisdictions for
which there appears to be no clear business justification. 

The monitoring of management is not effective as a result of the following: 

• Domination of management by a single person or small group (in a non-owner managed
business) without compensating controls. 
• Oversight by those charged with governance over the financial reporting process
and internal control is not effective. 

There is a complex or unstable organizational structure, as evidenced by the following: 

• Difficulty in determining the organization or individuals that have controlling interest in the
entity.
• Overly complex organizational structure involving unusual legal entities or managerial lines
of authority.
• High turnover of senior management, legal counsel, or those charged with governance. 

Internal control components are deficient as a result of the following:

• Inadequate monitoring of controls, including automated controls and controls over interim
financial reporting (where external reporting is required). 
• High turnover rates, or employment of accounting, internal audit, or
information technology
staff that are not effective.
• Accounting and information systems that are not effective, including situations involving
material weaknesses in internal control. 
c. Attitudes/Rationalizations 
• Communication, implementation, support, or enforcement of the entity's values or ethical
standards by management, or the communication of inappropriate values or ethical
standards, that are not effective.
• Nonfinancial management's excessive participation in or preoccupation with the
selection of accounting policies or the determination of significant estimates.
• Known history of violations of securities laws or other laws and regulations, or claims
against the entity, its senior management, or those charged with governance alleging
fraud
or violations of laws and regulations.
• Excessive interest by management in maintaining or increasing the entity’s stock price or
earnings trend.
• The practice by management of committing to analysts, creditors, and other third parties
to achieve aggressive or unrealistic forecasts.
• Management failing to correct known material weaknesses in internal control on a timely
basis.
• An interest by management in employing inappropriate means to minimize reported
earnings for tax-motivated reasons. 
• Low morale among senior management. 
• The owner-manager makes no distinction between personal and business 
transactions. 
• Dispute between shareholders in a closely held entity. 
• Recurring attempts by management to justify marginal or inappropriate accounting on
the basis of materiality.
• The relationship between management and the current or predecessor auditor is strained,
as exhibited by the following:
 Frequent disputes with the current or predecessor auditor on accounting, auditing,
or reporting matters.
 Unreasonable demands on the auditor, such as unrealistic time constraints
regarding 
 the completion of the audit or the issuance of the auditor's report.
 Restrictions on the auditor that inappropriately limit access to people or
information or the ability to communicate effectively with those charged with
governance.
 Domineering management behavior in dealing with the auditor, especially involving
attempts to influence the scope of the auditor's work or the selection or
continuance of personnel assigned to or consulted on the audit engagement. 

Risk Factors Arising From Misstatements Arising From Misappropriation of Assets

a. Incentives/Pressures

Personal financial obligations may create pressure on management or employees with access
to cash or other assets susceptible to theft to misappropriate those assets
Adverse relationships between the entity and employees with access to cash or other assets
susceptible to theft may motivate those employees to misappropriate those assets. For
example, adverse relationships may be created by the following: 
• Known or anticipated future employee layoffs.
• Recent or anticipated changes to employee compensation or benefit plans.
• Promotions, compensation, or other rewards inconsistent with expectations.

b. Opportunities 

Certain characteristics or circumstances may increase the susceptibility of assets to

misappropriation. For example, opportunities to misappropriate assets increase when there
are the following:
• Large amounts of cash on hand or processed.
• Inventory items that are small in size, of high value, or in high demand.
• Easily convertible assets, such as bearer bonds, diamonds, or computer chips.
• Fixed assets which are small in size, marketable, or lacking observable identification of
ownership.

Inadequate internal control over assets may increase the susceptibility of misappropriation
of those assets. For example, misappropriation of assets may occur because there is the
following: 
• Inadequate segregation of duties or independent checks. 
• Inadequate oversight of senior management expenditures, such as travel and other
reimbursements.
• Inadequate management oversight of employees responsible for assets, for example,
inadequate supervision or monitoring of remote locations. 
• Inadequate job applicant screening of employees with access to assets.
• Inadequate record keeping with respect to assets. 
• Inadequate system of authorization and approval of transactions (for example, in
purchasing).
• Inadequate physical safeguards over cash, investments, inventory, or fixed assets.
• Lack of complete and timely reconciliations of assets.
• Lack of timely and appropriate documentation of transactions, for example, credits for
merchandise returns. 
• Lack of mandatory vacations for employees performing key control functions. 
• Inadequate management understanding of information technology, which enables
information technology employees to perpetrate a misappropriation. 
• Inadequate access controls over automated records, including controls over and review of
computer systems event logs. 

c. Attitudes/Rationalizations

• Disregard for the need for monitoring or reducing risks related to misappropriations of
 assets.
• Disregard for internal control over misappropriation of assets by overriding existing
controls or by failing to correct known internal control deficiencies.
• Behavior indicating displeasure or dissatisfaction with the entity or its treatment of the
employee.
• Changes in behavior or lifestyle that may indicate assets have been misappropriated.
• Tolerance of petty theft. 

Risk factors reflective of an attitude that permits rationalization of the fraudulent action may
not be susceptible to observation by the auditor. Nevertheless, the auditor may become
aware of the existence of such information. Although the fraud risk factors described above
cover a broad range of situations that may be faced by auditors, they are only examples and
other risk factors may exist. 

Appendix 12.C-Indications of NOCLAR (PAS 250) 

• Investigations by regulatory organizations and government departments or payment of
fines
or penalties.
• Payments for unspecified services or loans to consultants, related parties, employees or
government employees. 
• Sales commissions or agent's fees that appear excessive in relation to those ordinarily
paid by
the entity or in its industry or to the services actually received. 
• Purchasing at prices significantly above or below market price. 
• Unusual payments in cash, purchases in the form of cashiers' cheques payable to bearer
or
transfers to numbered bank accounts. 
• Unusual transactions with companies registered in tax havens. 
• Payments for goods or services made other than to the country from which the goods or
services originated. 
• Payments without proper exchange control documentation. 
• Existence of an information system which fails, whether by design or by accident, to
provide
an adequate audit trail or sufficient evidence.
• Unauthorized transactions or improperly recorded transactions. 
• Adverse media comment. 
Exhibit 15.A--Events or Conditions that may Cast Significant Doubts About the Entity's Ability to
Continue as a Going Concern
Financial Indicators 
• Net liability or net current liability position. 
• Fixed-term borrowings approaching maturity without realistic prospects of renewal or
repayment, or excessive reliance on short-term borrowings to finance long-term assets.
• Indications of withdrawal of financial support by creditors.
• Negative operating cash flows indicated by historical or prospective financial statements.
• Adverse key financial ratios.
• Substantial operating losses, or significant deterioration in the value of assets used to
generate cash flows.
• Substantial operating losses, or significant deterioration in the value of assets used to
generate cash flows.
• Arrears or discontinuance of dividends.
• Inability to pay creditors on due dates.
• Inability to comply with the terms of loan agreements.
• Change from credit to cash-on-delivery transactions with suppliers.
• Inability to obtain financing for essential new-product development or other essential
investments. 
Operating Indicators 
• Management's intentions to liquidate the entity or to cease operations. 
• Loss of key management without replacement. 
• Loss of a major market, key customer(s), franchise, license, or principal supplier(s). 
• Labor difficulties. Shortages of important supplies. Emergence of a highly successful
 competitor. 
Other Indicators 
• Non-compliance with capital or other statutory requirements.
• Pending legal or regulatory proceedings against the entity that may, if successful, result in
claims that the entity is unlikely to be able to satisfy.
• Changes in law or regulation or government policy expected to adversely affect the entity.
• Uninsured or underinsured catastrophes. 

Exhibit 16.A-Examples of Subsequent Events (PAS 10)

Adjusting Events (Type 1) 
a. The settlement after the reporting period of a court case that confirms that the entity had
a
present obligation at the end of the reporting period.
b. The receipt of information after the reporting period indicating that an asset was  impaired
at
the end of the reporting period, or that the amount of a previously recognized impairment
loss
for that asset needs to be adjusted (e.g., bankruptcy of a customer, sale of inventories at a
lower
price).
c. The determination after the reporting period of the cost of assets purchased, or
the proceeds
from assets sold, before the end of the reporting period.
d. The determination after the reporting period of amount of profit-sharing or
bonus payments,
if the entity had a present legal or constructive obligation at the end of  reporting period to
make
such payments as a result of events before that date.
e. The discovery of fraud or errors that show that the F/S are incorrect.
Non-Adjusting Events (Type 2)
a. A major business combination after the reporting period.
b. Announcing a plan to discontinue an operation.
 c. Major purchases of assets, classification of assets as held for sale in accordance with  PERS
5,
other disposals of assets, or government expropriation of assets.
d. The destruction of a major production plant by a fire after the reporting period.
e. Announcing, or commencing the implementation of, a major restructuring.
f. Major ordinary share and potential ordinary share transactions after reporting period.
g. Abnormally large changes after reporting period in asset prices or forex.
h. Changes in tax rates or tax laws enacted or announced after the reporting period that  have
a
significant effect on current and deferred tax assets and liabilities.
i. Entering into significant commitments or contingent liabilities, for example, by issuing
significant guarantees.
j. Commencing major litigation arising solely out of events that occurred after the reporting
period. 

Appendix 17.A-Specific Matters to Communicate with TCW

• PSQC 1, Quality Control for Firms that Perform Audits and Reviews of Financial 
Statements, and Other Assurance and Related Services Engagements - paragraph 30(a)
• PSA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements
–
paragraphs 21, 38(0)) and 40-42
• PSA 250, Consideration of Laws and Regulations in an Audit of Financial Statements –
paragraphs 14, 19 and 22-24
• PSA 265, Communicating Deficiencies in Internal Control to Those Charged with
Governance
and Management - paragraph 9
• PSA 450, Evaluation of Misstatements Identified during the Audit - paragraphs 12-13
• PSA 505, External Confirmations - paragraph 9
• PSA 510, Initial Audit Engagements-Opening Balances - paragraph 7
• PSA 550, Related Parties – paragraph 27
• PSA 560, Subsequent Events - paragraphs 7(b)-(c), 10(a), 13(b), 14(a) and 17
• PSA 570 (Revised), Going Concern - paragraph 25
• PSA 600, Special Considerations-Audits of Group Financial Statements (Including the Work
of
Component Auditors) - paragraph 49
• PSA 610 (Revised), Using the work of Internal Auditors - paragraph 18; ISA 610 (Revised
 2013),
Using the work of Internal Auditors - paragraphs 20 and 31
• PSA 700 (Revised), Forming an Opinion and Reporting on Financial Statements - paragraph
45 • PSA 701, Communicating Key Audit Matters in the Independent Auditor's Report –
paragraph
17
• PSA 705 (Revised), Modifications to the Opinion in the Independent Auditor's Report –
paragraphs 12, 14, 23 and 30
• PSA 706 (Revised), Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Independent Auditor's Report - paragraph 12
• PSA 710. Comparative Information-Corresponding Figures and Comparative Financial
Statements - paragraph 18
• PSA 720, The Auditor's Responsibilities Relating to Other Information in Documents
Containing Audited Financial Statements - paragraphs 10, 13 and 16 . 

Appendix 17.B-Examples of Other Information

Amounts
• Items in a summary of key financial results, such as net income, earnings per share,
dividends,
sales and other operating revenues, and purchases and other operating expenses.
• Selected operating data, such as income from continuing operations by male operating
area,
or sales by geographical segment or product line.
• Special items, such as asset dispositions, litigation provisions, asset impairments, tax
adjustments, environmental remediation provisions, and restructuring and reorganization
expenses.
• Liquidity and capital resource information, such as cash, cash equivalents and marketable
securities; dividends; and debt, capital lease and minority interest obligations.
• Capital expenditures by segment or division.
• Amounts involved in, and related financial effects of, off-balance sheet arrangements.
• Amounts involved in guarantees, contractual obligations, legal or environmental claims,
and
other contingencies.
 • Financial measures or ratios, such as gross margin, return on average capital employed,
return on average shareholders' equity, current ratio, interest coverage ratio and debt ratio.
Some of these may be directly reconcilable to the financial statements.
Other Items 
• Explanations of critical accounting estimates and related assumptions. 
• Identification of related parties and descriptions of transactions with them.
• Articulation of the entity's policies or approach to manage commodity, foreign exchange or
interest rate risks, such as through the use of derivative financial instruments
• Descriptions of the nature of off-balance sheet arrangements.
• Descriptions of guarantees, indemnifications, contractual obligations, litigation or
environmental liability cases, and other contingencies, including management's qualitative
assessments of the entity's related exposures.
• Descriptions of changes in legal or regulatory requirements, such as new tax or
environmental
regulations, that have materially impacted the entity's operations or fiscal position, or will
have a material impact on the entity's future financial prospects.
• Management's qualitative assessments of the impacts of new accounting standards that
have
come or will come into effect, on the entity's financials.
• General descriptions of the business environment and outlook.
• Overview of strategy.
• Descriptions of trends in market prices of key commodities or raw materials.
• Contrasts of supply, demand and regulatory circumstances between geographic regions.
• Explanations of specific factors influencing the entity's profitability in specific segments. 

Exhibit 22.A-List of AASC Issued Standards

PHILIPPINE STANDARDS ON QUALITY CONTROL (PSQCs) 
• PSQC 1, Quality Control for Firms that perform Audits and Reviews of Financial Statements,
and Other Assurance and Related Services Engagements
AUDITS OF HISTORICAL FINANCIAL INFORMATION
200-299 General Principles and Responsibilities 
• PSA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with PSA 
• PSA 210, Agreeing the Terms of Audit Engagements.
• PSA 220, Quality Control for an Audit of Financial Statements 
• PSA 230, Audit Documentation
• PSA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements
• PSA 250, Consideration of Laws and Regulations in an Audit of F/S
• PSA 260, Communication with those Charged with Governance
• PSA 265, Communicating Deficiencies in Internal Control to Those Charged
with Governance
and Management
300-499 Risk Assessment and Response to Assessed Risks 
• PSA 300, Planning an Audit of Financial Statements 
• PSA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment 
• PSA 320, Materiality in Planning and Performing an Audit 
• PSA 330, The Auditor's Responses to Assessed Risks 
• PSA 402, Audit Considerations Relating to an Entity Using a Service Organization 
• PSA 450, Evaluation of Misstatements Identified during the Audit,
500-599 Audit Evidence 
• PSA 500, Audit Evidence 
• PSA 501, Audit Evidence-specific Considerations for Selected Items
• PSA 505, External Confirmations 
• PSA 510, Initial Audit Engagements-Opening Balances 
• PSA 520. Analytical Procedures 
• PSA 530, Audit Sampling
• PSA 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and
Related Disclosures
• PSA 550, Related Parties
• PSA 560, Subsequent Events
• PSA 570, Going Concern 
• PSA 580, Written Representations
600-699 Using the work of Others 
• PSA 600, Special Considerations-Audits of Group Financial Statements (Including the Work
of
Component Auditors) 
• PSA 610, Using the Work of Internal Auditors 
• PSA 620, Using the Work of an Auditor's Expert
700-799 Audit Conclusions and Reporting 
• PSA 700, Forming an Opinion and Reporting on Financial Statements 
• PSA 701. Communicating Key Audit Matters in the Independent Auditor’s Report
• PSA 705, Modifications to the Opinion in the Independent Auditor's Report
• PSA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent
Auditor's Report
• PSA 710. Comparative Information Corresponding Figures and Comparative manner
Statements
• PSA 720. The Auditor's Responsibilities Relating to Other Information in
Document Containing
Audited Financial Statements
800-899 Specialized Areas 
 • PSA 800, Special Considerations-Audits of Financial Statements Prepared in Accordance with
Special Purpose Frameworks
• PSA 805, Special Considerations-Audits of Single FSs and Specific Elements, Accounts or
Items
of a FS 
• PSA 810, Engagements to Report on Summary Financial Statements
REVIEWS OF HISTORICAL FINANCIAL INFORMATION
2000-2699 Philippine Standards on Review Engagements (PSREs)
• PSRE 2400 Engagements to Review Historical Financial Statements 
• PSRE 2410 Review of Interim Financial Information Performed by the Independent  Auditor
of
the Entity
ASSURANCE ENGAGEMENTS OTHER THAN AUDITS OR REVIEWS OF HISTORICAL FINANCIAL
INFORMATION
3000-3699 Philippine Standards on Assurance Engagements (PSAES) 
• PSAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial
Information
• PSAE 3400 The Examination of Prospective Financial Information 
• PSAE 3402 Assurance Reports on Controls at a Service Organization 
• PSAE 3410 Assurance Engagements on Greenhouse Gas Statements 
• PSAE 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus
RELATED SERVICES
4000-4699 Philippine Standards on Related Services (PSRSs)
• PSRS 4400 Engagements to Perform Agreed-Upon Procedures Regarding
Financial Information 
• PSRS 4410 Compilation Engagements

References
1. International Auditing and Assurance Standards Board (IAASB) Handbook of International
Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements,
2017 edition, as adopted and made Philippine Standards by Auditing and Assurance
Standards Council (AASC).

2. International Ethics Standards Board Handbook of the Code of Ethics for Professional

Accountants, as adopted in the Philippines by Board of Accountancy (BOA) and Professional
 Regulation Commission (PRC) through Philippine Institute of Certified Public Accountants
(PICPA), as member of International Federation of Accountants (IFAC). 

3. Philippine Accountancy Act of 2004 (Republic Act No. 9298) and its Implementing Rules and
Regulations (IRR). 

4. Board of Accountancy (BOA)/Professional Regulation Commission (PRC), Securities and

Exchange Commission (SEC), Bureau of Internal Revenue (BIR), Bangko Sentral ng Pilipinas
(BSP), Insurance Commission (IC), and Cooperative Development Authority (CDA) various
rules, regulations, circulars, and resolutions. 

5. Philippine Financial Reporting Standards (PFRS) issued by Financial Reporting Standards

Council (FRSC). 

6. Auditing: A Risk-Based Approach to Conducting a Quality Audit, 9th Edition by Karla M.

Johnstone, Audrey A. Gramling, and Larry E. Rittenberg

7. Principles of Auditing: An Introduction to International Standards on Auditing, 2nd Edition by

Rick Hayes, Roger Dassen, Arnold Schilder, and Philip Wallage

8. Principles of Auditing and Other Assurance Services, 17th Edition by O. Ray Whittington and
Pany Kurt

9. Auditing and Assurance Services, 14th Edition by Alvin A. Arens, Randal J. Elder, and Mark S.
Beasley

10. Wiley CPAexcel® Exam Review Study Guide: Auditing and Attestation by O. Ray Whittington 

Auditing: A Risk-Based Approach

Part 1-Theory
2019 Issue-1st Edition
Leomar R. Cabarles Reynaldo R. Ocampo
Rommel M. Valdez

Note: Limited rights granted by the Copyright owners. Not to be shared with non-purchasers of this book.
 Answer Keys
CHAPTER 1 | The Practitioner's Engagements

Part I—True or False 

1. T 2. T 3. T 4. F 5. T 6. F 7. F 8. F 9. F 10. F

Part II—Multiple Choice

1. B 2. C 3. B 4. B 5. C 6. B 7. A 8. C 9. B 10 D
.
11 D 12. B 13 A 14 A 15 D 16. A 17 C 18 D 19. C 20 D
. . . . . . .

CHAPTER 2 | Auditing: An Overview 

Part I—True or False 

1. T 2. T 3. T 4. F 5. F 6. F 7. F 8. T 9. T 10. F

Part II—Multiple Choice

1. C 2. B 3. A 4. B 5. C 6. D 7. C 8. A 9. C 10 D
.
11. D 12. A 13. B 14 D 15 D 16 B 17 A 18 D 19 D 20 A
. . . . . . .
21. A 22. C 23. A 24 D 25 A 26 A 27 C 28 C 29 C 30 A
. . . . . . .
31. C 32. C 33. D 34 D 35 B 36 D 37 C 38 A 39 C 40 C
. . . . . . .

CHAPTER 3 | Audit Evidence and Documentation: The Framework

Part I—True or False

1. F 2. F 3. T 4. F 5. T 6. T 7. F 8. T 9. F 10. T

Part II—Multiple Choice 

1. B 2. D 3. D 4. B 5. C 6. A 7. A 8. B 9. B 10. C
 11 D 12. B 13. A 14. A 15. C 16. B 17. D 18 A 19 C 20. B
. . .
21 D 22. C 23. A 24. C 25. B 26. D 27. A 28 A 29 C 30. C
. . .
31 A 32. A 33. C 34. B 35. C 36. D 37. D 38 B 39 C 40. A
. . .
41 A 42. C 43. D 44 C 45. C 46. D 47. D 48 D 49 C 50. D
. . .
51 D 52. A 53. B 54. A 55. A
.

CHAPTER 4 | Performing Preliminary Engagement Activities

Part—True or False 
1. F 2. T 3. F 4. F 5. F 6. T 7. F 8. F 9. F 10. T

Part II-Multiple Choice

1. A 2. D 3. B 4. B 5. B 6. B 7. D 8. D 9. D 10. D
11 C 12. B 13. A 14. B 15. A 16. D 17. A 18. A 19 B 20. D
. .
21 C 22. D 23. A 24. D 25. C
.

CHAPTER 5 | Planning an Audit

Part I—True or False

1. F 2. F 3. T 4. T 5. F 6. T 7. T 8. T 9. T 10 T
.

Part II—Multiple Choice 

1. A 2. D 3. D 4. D 5. B 6. D 7. D 8. C 9. D 10. C
11 D 12. C 13. B 14. D 15. D 16 D 17 D 18 D 19 B 20. D
. . . . .
21 B 22. B 23. A 24. D 25. D 26 C 27 C 28 C 29 D 30. A
. . . . .

CHAPTER 6 | Determining Materiality

Part I—True or False

 1. T 2. F 3. T 4. T 5. F 6. T 7. F 8. F 9. F 10. T

Part II—Multiple Choice

1. D 2. B 3. A 4. A 5. D 6. C 7. A 8. D 9. D 10 B
.
11 C 12 A 13 C 14 D 15 A 16 C 17 D 18 D 19 B 20 B
. . . . . . . . . .

CHAPTER 7 | Understanding the Entity and Its Environment

Part I—True or False

1. T 2. F 3. F 4. F 5. F 6. F 7. T 8. T 9. F 10 T
.

Part II—Multiple Choice

1. D 2. C 3. D 4. C 5. A 6. D 7. C 8. D 9. C 10. A
11 D 12. A 13. C 14. A 15. A 16. B 17 A 18 B 19. A 20. D
. . .
21 D 22. D 23. A 24. A 25. D
.

CHAPTER 8 | Understanding the Entity's Internal Control

Part I—True or False

1. T 2. T 3. F 4. T 5. T 6. F 7. T 8. T 9. T 10 T
.

Part II—Multiple Choice

1. D 2. A 3. D 4. B 5. A 6. C 7. D 8. D 9. C 10 D
.
11 D 12 D 13 B 14 B 15 C 16 B 17 D 18 D 19 B 20 B
. . . . . . . . . .
21 D 22 C 23 C 24 D 25 A 26 D 27 C 28 A 29 D 30 B
. . . . . . . . . .
31 B 32 D 33 A 34 C 35 C 36 B 37 C 38 D 39 C 40 A
. . . . . . . . . .
41 B 42 B 43 A 44 A 45 B 46 B 47 D 48 C 49 A 50 D
. . . . . . . . .
51 B 52 D 53 B 54 A 55 A 56 C 57 B 58 D 59 D 60 B
. . . . . . . . . .
CHAPTER 9 | Identifying and Assessing Risks of Material Misstatement

Part 1—True or False 

1. T 2. F 3. F 4. T 5. T 6. T 7. F 8. T 9. F 10. T

Part II—Multiple Choice 

1. A 2. B 3. D 4. D 5. B 6. A 7. B 8. A 9. D 10 B
.
11 D 12 A 13 D 14 B 15 B 16 A 17 C 18 A 19 C 20 C
. . . . . . . . . .
21 A 22 C 23 C 24 D 25 C
. . . . .

CHAPTER 10 Responding to Assessed Risks

Part I—True or False 

1. T 2. F 3. T 4. F 5. F 6. T 7. T 8. T 9. T 10. F

Part II-Multiple Choice 

1. B 2. D 3. D 4. C 5. B 6. D 7. A 8. C 9. B 10 C
.
11 D 12 D 13 C 14 B 15 B 16 A 17 D 18 C 19 B 20 B
. . . . . . . . . .
21 D 22 C 23 B 24 D 25 D 26 D 27 B 28 C 29 A 30 D
. . . . . . . . . .
31 D 32 D 33 D 34 B 35 B 36 C 37 C 38 D 39 B 40 B
. . . . . . . . . .
41 A 42 C 43 C 44 B 45 B 46 C 47 C 48 B 49 C 50 B
. . . . . . . . .
51 D 52 D 53 C 54 B 55 D
. . . . .

CHAPTER 11 | Determining the Extent of Testing

Part I—True or False

1. T 2. F 3. F 4. T 5. T 6. T 7. F 8. T 9. T 10. T

Part II—Multiple Choice

1. C 2. C 3. C 4. B 5. A 6. D 7. A 8. C 9. B 10 A
.
11 B 12 D 13 D 14 C 15 B 16 C 17 C 18 A 19 D 20 D
 . . . . . . . . . .
21 C 22 D 23 C 24 A 25 C 26 B 27 A 28 B 29 A 30 B
. . . . . . . . . .
31 C 32 A 33 D 34 B 35 B 36 B 37 A 38 A 39 C 40 A
. . . . . . . . . .
41 C 42 A 43 C 44 D 45 C 46 B 47 B 48 D 49 C 50 B
. . . . . . . . .
51 A 52 C 53 B 54 A 55 A 56 C 57 B 58 C 59 C 60 C
. . . . . . . . . .

CHAPTER 12 | Considering Fraud, Error, and Non-Compliance with Laws and Regulations
(NOCLAR) 

Part I—True or False 

1. F 2. F 3. F 4. T 5. T 6. T 7. F 8. T 9. T 10. T

Part II—Multiple Choice 

1. B 2. D 3. B 4. D 5. A 6. B 7. C 8. D 9. B 10 C
.
11 B 12 A 13 B 14 D 15 B 16 D 17 A 18 B 19 A 20 D
. . . . . . . . . .
21 C 22 D 23 D 24 A 25 B 26 D 27 C 28 D 29 A 30 D
. . . . . . . . . .
31 A 32 A 33 B 34 B 35 B 36 A 37 C 38 A 39 B 40 B
. . . . . . . . . .
41 A 42 D 43 D 44 D 45 B 46 B 47 A 48 D 49 A 50 C
. . . . . . . . .
51 C 52 C 53 C 54 B 55 B 56 A 57 D 58 A 59 C 60 D
. . . . . . . . . .
61 C 62 D 63 C 64 D 65 A 66 C 67 D 68 B 69 A 70 B
. . . . . . . . . .

CHAPTER 13 Considering Work of Other Practitioners

Part I—True or False

1. F 2. T 3. T 4. T 5. T 6. F 7. F 8. T 9. F 10. T

Part II—Multiple Choice 

1. D 2. A 3. B 4. B 5. B 6. D 7. A 8. B 9. B 10 C
.
11 D 12 D 13 B 14 C 15 A 16 D 17 B 18 D 19 D 20 D
. . . . . . . . . .
 21 C 22 D 23 A 24 D 25 B 26 D 27 B 28 B 29 C 30 C
. . . . . . . . . .
31 C 32 A 33 B 34 B 35 D 36 C 37 B 38 A 39 B 40 D
. . . . . . . . . .
41 C 42 D 43 B 44 D 45 A
. . . .

CHAPTER 14 | Considering Effect of Information Technology

Part I—True or False 

1. F 2. T 3. T 4. T 5. F 6. T 7. T 8. T 9. T 10. F

Part II—Multiple Choice 

1. B 2. C 3. C 4. C 5. D 6. C 7. B 8. C 9. D 10 B
.
11 D 12 D 13 C 14 B 15 D 16 C 17 D 18 C 19 D 20 B
. . . . . . . . . .
21 D 22 A 23 B 24 C 25 D 26 C 27 B 28 B 29 B 30 B
. . . . . . . . . .
31 D 32 C 33 D 34 D 35 C 36 C 37 C 38 A 39 C 40 B
. . . . . . . . . .
41 C 42 A 43 A 44 A 45 D 46 A 47 C 48 A 49 C 50 D
. . . . . . . . .
51 A 52 A 53 A 54 D 55 C 56 A 57 C 58 D 59 C 60 C
. . . . . . . . . .
61 A 62 B 63 A 64 C 65 B
. . . . .

CHAPTER 15 | Considering Certain Specific Financial Statement Items

Part I—True or False 

1. F 2. T 3. F 4. F 5. T 6. F 7. T 8. T 9. T 10. T

Part II—Multiple Choice 

1. D 2. D 3. C 4. D 5. D 6. C 7. A 8. D 9. D 10 A
.
11 C 12 C 13 C 14 C 15 B 16 D 17 A 18 A 19 D 20 C
. . . . . . . . . .
21 D 22 A 23 B 24 A 25 D 26 C 27 D 28 B 29 D 30 D
. . . . . . . . . .

CHAPTER 16 | Completing the Audit and Considering Post-Audit Responsibilities

Part I—True or False 
1 T 2 T 3 F 4 F 5 T 6 T 7 F 8 T 9 T 10 T
. . . . . . . . . .

Part II—Multiple Choice 

1. C 2. C 3. C 4. C 5. C 6. B 7. C 8. B 9. C 10 C
.
11 A 12 D 13 B 14 D 15 C 16 B 17 A 18 D 19 D 20 A
. . . . . . . . . .
21 D 22 A 23 A 24 C 25 C 26 A 27 B 28 D 29 C 30 C
. . . . . . . . . .
31 D 32 B 33 C 34 D 35 D
. . . . .

CHAPTER 17 | Forming the Auditor's Opinion and Report Contents

Part I—True or False 

1. F 2. T 3. T 4. T 5. F 6. T 7. T 8. T 9. F 10. T
11. F 12. F 13. F 14. F 15 T 16. F 17 F 18 T 19. T 20. F
. . .

Part II—Multiple Choice 

1. D 2. A 3. A 4. B 5. C 6. D 7. C 8. B 9. B 10 C
.
11 D 12 C 13 B 14 B 15 B 16 C 17 A 18 D 19 C 20 B
. . . . . . . . . .
21 C 22 C 23 D 24 B 25 B 26 A 27 D 28 D 29 B 30 C
. . . . . . . . . .
31 D 32 B 33 A 34 D 35 D 36 B 37 B 38 D 39 D 40 C
. . . . . . . . . .
41 D 42 A 43 D 44 C 45 A 46 C 47 D 48 C 49 D 50 A
. . . . . . . . .
51 D 52 C 53 D 54 D 55 D 56 A 57 A 58 A 59 D 60 C
. . . . . . . . . .
61 B 62 D 63 B 64 D 65 C
. . . . .

CHAPTER 18 | Performing and Reporting on Specialized Audit Engagements

Part I—True or False 

1. T 2. F 3. T 4. T 5. F 6. F 7 T 8. F 9 F 10. T
. .
Part II—Multiple Choice 
1. A 2. A 3. D 4. D 5. C 6. A 7. A 8. A 9. A 10. C

CHAPTER 19 Performing Review Engagements

Part I—True or False 

1. F 2. T 3. T 4. T 5. F 6. T 7. T 8. T 9. T 10. F

Part II—Multiple Choice 

1. C 2. B 3. B 4. D 5. B 6. B 7. A 8. C 9. B 10. C
11 D 12. A 13 D 14. D 15. A
. .

CHAPTER 20 | Performing Other Assurance Engagements 

Part I—True or False 
1. T 2. T 3. T 4. T 5. T 6. T 7. F 8. T 9. F 10. F

Part II—Multiple Choice 

1. B 2. D 3. D 4. B 5. C 6. C 7. B 8. D 9. A 10 D
.
11 A 12 B 13 D 14 A 15 A 16 D 17 A 18 D 19 B 20 B
. . . . . . . . . .

CHAPTER 21 Performing Related Services Engagements

Part I—True or False 

1. F 2. F 3. T 4. F 5. T 6. T 7. F 8. F 9. F 10. F

Part II—Multiple Choice 

1. A 2. C 3. C 4. A 5. C 6. D 7. C 8. D 9. B 10 A
.
11 B 12 B 13 D 14 B 15 B 16 D 17 A 18 A 19 C 20 A
. . . . . . . . . .

CHAPTER 22 | Professional Standards and Quality Control

Part I—True or False 

1. F 2. F 3. F 4. F 5. F 6. T 7. F 8 F 9. F 10. F
.
Part II—Multiple Choice 
1. D 2. B 3. B 4. A 5. B 6. B 7. A 8. C 9. D 10 B
.
11 C 12 A 13 D 14 D 15 C 16 B 17 A 18 A 19 D 20 B
. . . . . . . . . .
21 C 22 A 23 D 24 B 25 D 26 C 27 D 28 C 29 D 30 D
. . . . . . . . . .
31 C 32 D 33 A 34 D 35 B 36 C 37 D 38 B 39 C 40 D
. . . . . . . . . .
41 D 42 D 43 C 44 C 45 B 46 D 47 B 48 D 49 C 50 D
. . . . . . . . .
51 A 52 B 53 B 54 B 55 D
. . . . .

CHAPTER 23 | Code of Ethics for Professional Accountants

Part I—True or False 

1. F 2. T 3. T 4. T 5. F 6. T 7. T 8 T 9. T 10. T
.

Part II—Multiple Choice 

1. C 2. B 3. D 4. C 5. D 6. C 7. A 8. B 9. B 10 A
.
11 C 12 D 13 C 14 D 15 A 16 D 17 B 18 D 19 D 20 D
. . . . . . . . . .
21 D 22 C 23 D 24 A 25 D 26 B 27 D 28 C 29 D 30 A
. . . . . . . . . .
31 B 32 A 33 B 34 C 35 C 36 C 37 A 38 C 39 A 40 D
. . . . . . . . . .
41 D 42 D 43 A 44 A 45 D 46 A 47 A 48 A 49 B 50 C
. . . . . . . . .
51 C 52 C 53 A 54 A 55 D 56 C 57 C 58 C 59 B 60 B
. . . . . . . . . .
61 A 62 C 63 D 64 D 65 C 66 D 67 B 68 C 69 C 70 A
. . . . . . . . .
71 D 72 D 73 D 74 A 75 D
. . . . .
CHAPTER 24 | Setting-Up a Public Accounting Practice

Part I—True or False 

1. T 2. T 3. T 4. T 5. T 6. F 7. T 8. F 9. T 10. F

Part II—Multiple Choice 

1. B 2. B 3. A 4. D 5. C 6. C 7. B 8. D 9. B 10 B
.
11 D 12 B 13 D 14 C 15 D 16 A 17 C 18 B 19 D 20 B
. . . . . . . . . .
21 D 22 A 23 A 24 D 25 C 26 B 27 C 28 C 29 A 30 D
. . . . . . . . . .
31 D 32 D 33 C 34 B 35 C 36 B 37 D 38 D 39 A 40 D
. . . . . . . . . .
41 A 42 B 43 A 44 A 45 B 46 B 47 C 48 C 49 A 50 D
. . . . . . . . .
13. Transfer and Business Taxation 2019 Issue - 17th Edition (with TRAIN Law TRN-2019
Updates)
14. Hospitality Basic Accounting 2016 Issue - 2nd Edition (for BS Hotel  & Rest. HRA-2016
Mgt., Tourism, Travel Mgt.)
15. Investment Mathematics 2015 Issue - 4th Edition (using INV-2015
Accounting  approach)
16. Reviewer: Practical Accounting I (Based on IAS/IFRS) by ReSA P1-Reviewer, REV-P1
Prof. Conrado 0. Uberita
17. Accountancy Research: Theory and Practice by Dr. Rufo R. Mendoza (for RUFO
Accounting Thesis or Synthesis)
18. Quizzer in Law on Obligations & Contracts (with 855 Multiple-Choice QUIZ
questions)
19. IFRS for SMEs: International Financial Reporting Standards for Small  & IFRS-SME
Medium-sized Entities - Complete
20. Fundamentals of Accountancy, Business & Management I 2017 Issue - 1st ABM11-
Edition (for Senior HS), see PracSet, 9 2017
21. Fundamentals of Accountancy, Business & Management 2 2018 Issue - 1st ABM12-
Edition (for Senior HS), see PracSet, 2 2018
22. Oral Communication in Context 2018 Issue - 1st Edition (for SHS) by Dr. OCC-2018
Aclan,
Dr. Saban, Dr. Fameronag, Prof. Flores 
 UIOGD-AMDG 
Made
Prof. WIN Ballada, CPA, CBE, MBA
President, DomDane Publishers Easy
Email: winluballada@gmail.com
Smart: 0918-9084590 

Book Titles
(College, Book Nos. 1 to 19) Code
(Senior High School, Book Nos. 20 to 22):
1. Basic Financial Accounting and Reporting (Enhanced Basic Acct'g) 2018 BFAR-
Issue 2018 or
– 21st Edition (FAR or AE13 is the 1st Accounting subject for BS Accountancy, AE13
Mgt. Acct'o, Acct'g Infosystems & Internal Auditing) Your Trusted Book Since
1996
2. Kashato Shirts: Accounting Practice Set for a Merchandising Business (w/ KAO-PSet
Forms, FS Analysis)
3. Conceptual Framework & Accounting Standards 2018 Issue – 1st Edition  CFA-
2018
4. Accounting Fundamentals with FS Analysis 2019 Issue - 5th Edition (for BS ANA-2019
Business Ad., Entrep.) (Bridging)
5. Auditing: A Risk-Based Approach, Part 1 - Theory 2019 Issue - 1st Edition AUD-2019
by PRTC Reviewers Leomar Cabarles, Reynaldo Ocampo and Rommel Valdez
6. Introduction to Business & Management 2018 Issue - 1st Edition Dr. IBM-
Christopher Biore, et al. (Bridging) (Business Orientation: 2018
covers Management,
Marketing, Economics and Finance)
7. Good Governance & Social Responsibility 2017 Issue - 1st Edition by Biore, GOV-2017
Dr. Roberto Gonzales, Prof. Jose Lemuel Caparas, Dean Nilo Burgos and Prof.
WIN Ballada
8. Partnership and Corporation Accounting 2017 Issue - 20th Edition I PAR-
2017
9. Club Medica: Accounting Practice Set for a Service Business  CLU-PSet
10. Income Taxation 2019 Issue - 17th Edition (TRAIN Law Updated)  INC-2019
11. Law on Obligations & Contracts 2015 issue - 2nd Edition (with Introduction LAW-2015
to
Low, T/F & Multiple-Choice exercises)
12. Income and Business Taxation 2019 Issue - 5th Edition (3 units, for  BSBA TIP-2019
and
other majors) (with TRAIN Law Updates)