Audit Theory - Quizzer
Audit Theory - Quizzer
Audit Theory - Quizzer
a. 6 5 BOA,
b. 7 5 PRC
c. 7 3 PICPA
d. 6 3 APO
Answer: d
2. The PICPA shall submit its nominations with supporting documentation
a. Within 60 days prior to the expiry of the term of an incumbent member or chair-
man
b. Within 90 days prior to the expiry of the term of an incumbent member or chair-
man
c. Not later than 60 days prior to the expiry of the term of an incumbent member or
chairman
d. Not later than 90 days prior to the expiry of the term of an incumbent member or
chairman
Answer: c
3. Which of the following statements about the composition of the Board of Accountancy
is incorrect?
a. The four sectors in the practice of accountancy shall as much as possible be equi-
tably represented in the Board.
d. d. The Board shall elect a vice- chairman from among its members to serve for a
term of three years.
Answer: d
4. The following statements relate to the term of office of the chairman and the members
of the Board of Accountancy (BOA).
I. No person who has served two (2) successive complete terms shall be eligible for
reappointment until the lapse of one (1) year
II. Appointment to fill up an unexpired term is not to be considered a complete term
III. A person may serve in the Board of Accountancy for eight consecutive years.
IV. A person may serve in the Board for more than 12 years.
a. He/ She must have at least 10 years of experience in the practice of accountancy
d. Violating RA9298.
Answer: a
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7. The standard setting body created by the PRC to promulgate accounting standards that
will be generally accepted in the Philippines is known as
b. Academe d. Government
Answer: c
10. Which of the following is not represented in the FRSC?
a. ACPAPP
b. FINER
c. Commission on Audit
d. Securities and Exchange Commission
Answer: a
11. The term of office of each member of AASC and FRSC is
a. 2 years, renewable c. 3 years, non renewable
b. 4 years, non renewable d. 3 years, renewable
Answer: d
12. Which of the following statements about Accounting Standard Setting Council is
correct?
a. The accounting standard setting body is known as Accounting Standards Council
(ASC).
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a. Commission on Audit
d. Board of Accountancy
Answer: b
15. The following statements relate to the RA9298. Which statement is true?
a. Within two years, subject to certain conditions, the Board of Accountancy may
order the reinstatement of a CPA whose certificate of registration has been re-
voked.
b. The Professional Regulation Commission has the authority to remove any mem-
ber of the Board of Accountancy for negligence, incompetence, or any other just
cause.
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Answer: d
16. The following are the qualifications of applicants for CPA Examinations; except
I. Must be a natural born Filipino citizen
II. Must be a BS Accountancy degree holder
III. Must be of good moral character
IV. Must be at least 21 years old
a. I only b. II and TV c. IV only d. I and IV
Answer: d
17. Which of the following statements is correct?
a. Any candidate who fails in two (2) complete CPA board examinations will no
longer be allowed to take another set of examination.
b. Any candidate who fails in two (2) complete CPA board examinations shall be
disqualified from taking another set of examinations unless he/she submits evi-
dence to the satisfaction of the Board that he/she enrolled in and completed at
least 21 units of subjects given in the licensure examination.
c. The examination in which the candidate was conditioned and the removal exami-
nation on the subject in which he/she failed shall be counted as one complete ex-
aminations.
d. The refresher course should be completed within two (2) years from the preced-
ing examination.
Answer: c
18. The Board of Accountancy shall submit to the PRC the ratings obtained by each can-
didate within days after the examination, unless extended for just cause.
a. 10 b. 5 c. 2 d. 3
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Answer: a
19. Which of the following shall be issued to a candidate who passes the CPA licensure
examination?
Answer: c
20. The Board of Accountancy may issue certificate of registration and professional iden-
tification card to any successful examinee:
a. Of unsound mind
b. Convicted by a court of political offense.
c. Guilty of immoral or dishonorable conduct.
d. Who has falsely represented himself/ herself in his /her application for , examina-
tion.
Answer: b
21. The following statements relate to roster of CPAs. Identify the incorrect statement.
a. A roster showing the names and place of business of all registered CPAs shall be
prepared and updated by the Board.
b. Copies of the roster shall be made available to any party as may be deemed neces-
sary.
c. The Board, upon approval of the Commission, may delegate the preparation of
this roster to the APO.
d. The publication of the roster in the official gazette or in any major newspaper of
public circulation shall be deemed compliance with the requirement of RA 9298.
Answer: d
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22. Any person who shall violate any of the provisions of the Accountancy Act or any of
its implementing rules and regulations promulgated by the Board of Accountancy subject
to the approval of the PRC, shall upon conviction , be punished by
a. Lethal injection
b. A fame of not more than P50,000
c. An imprisonment for a period not exceeding two years
d. Both b and c.
Answer: c
23. PRC- CPE Council differs from AASC and FRSC in that
d. PRC-CPE Council members are co-terminus with the President of the Philippines.
Answer: c
24. Which of the following statements is correct about the PRC-CPE Council?
Answer: b
25. Which statement is correct regarding CPF, requirements for renewal of professional
license?
a. The total CPE credit units required for CPAs shall be sixty (60) units for three (3)
years, provided that a minimum of twenty (20) credit units shall be earned in each
year.
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Answer: d
26. Unless otherwise exempted, registered CPAs in the practice of accountancy who have
not completed the CPE requirements shall
Answer: a
28. Who is not permitted by RA 9298 to practice public accountancy?
a. A general partnership.
b. A limited liability partnership.
c. A sole proprietorship.
d. A corporation, whose stockholders are all CPAs.
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Answer: d
29. According to 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 in-
cludes 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 pay-out to the deceased partner's estate is terminated.
Answer: d
30: A CPA shall not practice under a full name that includes or indicates the following,
except
a. Fictitious name
b. Specialization
c. Misleading as to the type of organization
d. Name(s) of past partner(s) in the firm name of the successor partnership.
Answer: d
31. Below are names of four CPA firms and pertinent facts relating to them. Unless oth-
erwise indicated, the individuals named are CPAs and partners and there are no other
partners. Which firm name and related facts indicate a violation of the Philippine Ac-
countancy Act of 2004?
a. Binhi, Binti and Bigti, CPAs (Bigti died about 5 years ago; Binhi and Binti are
continuing the firm.)
b. Tiu and Ramos, CPAs ( The name of R. Hermosilla, CPA, a third partner is omit-
ted from the firm name.)
c. Bitay and Bigo, CPAs (Bitay died about three years ago; Bigo is continuing the
firm as a sole practitioner.)
d. R. Hermosilla and Co., CPAs (R. Hermosa'a has ten other partners who are all
CPAs)
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Answer: c
32. CPAs, firms and partnerships of CPAs engaged in the practice of public accountancy
including partners and staff members thereof, shall register with the Commission and the
Board, such registration to be renewed every three years on or before
a. April 15 c. December 31
b. September 30 d. May 31
Answer: b
33. Which of the following is not one of the functions of the Board of Accountancy?
a. To supervise the registration, licensure and practice of accountancy in the Philip-
pines
b. To issue, suspend, revoke, or reinstate the certificate of registration for
the practice of the accountancy profession
c. To prescribe and/or adopt a code of ethics for the practice of accountancy
d. To adopt an official seal of the Commission.
Answer: d
34. 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.
Answer: d
35.Which of the following is not one of the functions of the Board of Accountancy as
specified in the RA 9298?
a. To look from time to time into the conditions affecting the practice of the ac-
countancy profession.
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Answer: b
36. 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.
Answer: b
37. A certificate of accreditation shall be issued to certified public accountants in public
practice only upon showing, in accordance with rules and regulations promulgated by the
Board and approved by the Commission, that such registrant has acquired how many
years of meaningful experience in any of the areas of public practice?
a. One b. Two c. Three d. Four
Answer: c
38 and 39 are based on the following information:
38. and Co. CPAs, was approved on April 30, 2016; the registration shall expire on
a. September 30, 2018. c. April 30, 2019.
b. September 30, 2019. d. December 31, 2018
Answer: d
39. Which of the following is one of the reasons for not issuing a certificate of registra-
tion to a successful examinee? The individual:
a. Is of unsold mind.
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Answer: a
40. A CPA whose certificate of registration has been revoked:
Answer: d
41. A Professional Identification Card bearing the registration number, date of issuance,
expiry date, duly signed by the chairperson of the Commission, shall be issued to every
registrant renewable every
a. Two years b. Three years c. Four years d. Five
years
Answer: b
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b. Precision d. Materiality
Answer: a
2. Which of the following is not included among the Auditing and Assurance Standards
Council (AASC) pronouncements?
a. Philippine Standards on Auditing
b. Philippine Standards on Review Engagements
c. Philippine Standards on Compilation Engagements
d. Philippine Standards on Related Services
Answer: c
3. According to AASC pronouncements, audit related services include:
a. Review c. Examination
b. Consultancy d. Compilation
Answer: d
4. Which of the following services is covered by AASC pronouncements?
a. Taxation c. Management Advisory
b. Consultancy d. Agreed-upon procedures
Answer: d
5. Which of the following services provides the highest level of assurance?
a. Audit c. Review
b. Agreed-upon procedures d. Compilation
Answer: a
6. When performing a review of financial statements, a CPA is required to
a. Apply analytical procedures and make inquiries from third by sending confirma-
tion letters.
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b. Assess the effectiveness of the client's accounting and internal control systems.
c. Obtain corroborative evidence to support management's responses to inquiries.
d. Obtain understanding of the client's business and industry.
Answer: d
7. Which of the following procedures is not included in a review engagement of .
a non-public entity? a. inquiries of management
b. inquiries regarding subsequent events
c. procedures designed to identify unusual fluctuations
d. studying and evaluating the client's internal control
Answer: d
8. The objective of an agreed upon-procedures engagement is for the auditor to:
a. Carry out procedures of an audit nature to which the auditor and the entity and
any appropriate third parties have agreed and to report on factual findings.
b. Carry out procedures of a review nature to which the auditor and the entity and
any appropriate third parties have agreed and to report on factual findings.
c. Carry out procedures of a review nature and to express limited assurance based on
those agreed procedures.
a. The CPA has expressed opinion on the financial statements taken as a whole.
b. The CPA takes full responsibility for the adequacy of the procedures to be per-
formed.
c. The CPA provides only a limited assurance about the reliability of the financial
statements.
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d. Less extensive than review procedures but more extensive than agreed-upon pro-
cedures
Answer: c
16. Which of the following is incorrect about a compilation engagement?
a. The CPA uses his auditing expertise to collect, classify and summarize financial
information.
b. The engagement ordinarily entails reducing detailed data to a manageable and un-
derstandable form.
held company but has not audited or reviewed the financial statements, the appropriate
form of report that must be issued must include
a. negative assurance c. disclaimer of opinion
b. compilation opinion d. explanatory paragraph
Answer: c
20. The statement that nothing came to our attention which would indicate that these
statements are not fairly presented expresses which of the following?
a. disclaimer of opinion c. negative confirmation
b. negative assurance d. adverse report
Answer: b
21. A CPA who is not independent may issue a
a. Review report
b. Special report
c. Report expressing a qualified opinion
d. Compilation report
Answer: d
22. A CPA should perform analytical procedures when engaged to
I Audit II Review III Compile
a. Yes, Yes, Yes c. No, Yes, No
b. Yes, Yes, No d. Yes, No, No
Answer: b
23. Auditors of public companies are often requested to report on interim financial state-
ments. A review of interim financial information consists primarily of
a. Vouching and tracing c. Inquires and analytical procedures
b. Reconciling and reforming d. Confirmation and observation
Answer: c
24. What level of assurance does an auditor provide in an engagement to perform agreed-
upon procedures?
a. High but not absolute assurance
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b. Limited assurance
c. Moderate assurance
d. No assurance
Answer: d
25. When an independent CPA assists in preparing the financial statements of a publicly
held entity, but has. not audited or reviewed them, the CPA should issue a disclaimer of
opinion. The CPA has no responsibility to apply any procedures beyond
OVERVIEW OF AUDITING
1. An audit of financial statements is conducted to determine if the
5. An audit that involves obtaining and evaluating evidence about the efficiency and ef-
fectiveness of an entity's operating activities in relation to specified objectives is a(n):
a. internal audit
b. external audit
c. operational audit
d. compliance audit
e. financial statement audit
Answer: c
6. An audit that involves obtaining and evaluating evidence in order to determine whether
certain financial or operating activities of an entity conform to specified conditions, rules,
or regulations is a(n):
a. internal audit
b. external audit
c. operational
d. compliance audit
e. financial statement audit
Answer: d
7. In financial statement audits, the ludit—proce; should conform with
a. Philippine Standards on Auditing c. The audit program
b. Financial reporting standards d. The auditor's judg-
ment.
Answer: a
8. Which of the following has the primary responsibility for the fairness of the represen-
tations made in the financial statements?
a. client's management c. Audit committee
b. Independent auditor d. Financial statements
9. The auditor communicates the results of his or her work through the medium of the
a. Engagement letter. c. Audit report.
b. Management letter. d. Financial statements
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Answer: c
10. Which. of the following types of audit uses as its criteria laws and regulations?
a. Operational audit c. Compliance audit
b. Financial statement audit d. Performance audit
Answer: c
11. Which of the following best describes why an independent auditor is asked to express
an opinion on the fair presentation of financial statements?
a. It a difficult to prepare financial statements that fairly present a company's finan-
cial position and changes in cash flows without the expertise of an independent
auditor.
b. It is management's responsibility to seek available independent aid in the apprais-
al of the financial information shown in its financial statements.
c. The opinion of an independent party is needed because a company may not be
objective with respect to its own financial statements.
d. It is a customary courtesy that all stockholders of a company receive an independ-
ent report on management's stewardship in managing the affairs of the business.
Answer: c
12. Which of the following types of auditing is performed most commonly by CPA's on a
contractual basis?
a. Internal auditing c. Income tax auditing
b. Government auditing d. External auditing
Answer: d
13. The primary purpose of an independent financial statement audit is to
a. subset of accounting
b. professional activity data attests to the fair presentation of financial statements
c. professional activity that measures and communicates financial accounting
data
d. regulatory activity that prevents the issuance of improper financial information
Answer: b
15. The reason an independent auditor gathers evidence is to
a. form an opinion on the financial statements
b. detect fraud
c. evaluate management
d. evaluate internal controls
Answer: a
16. The primary goal of the CPA in performing the attest function is to
a. Detect fraud.
b. Examine individual transactions so that the auditor may certify as to their validi-
ty.
c. Determine whether the client's assertions are fairly stated.
d. Assure the consistent application of correct accounting procedures.
Answer: c
17. Any service in which the CPA firm issues a written communication that expresses a
conclusion with respect to the reliability of a written assertion that is the responsibility of
another party is a(n)
a. accounting and bookkeeping service
b. attestation service
c. management advisory service
d. tax service
Answer: b
18. Which of the following criteria is unique to the auditor's attest function?
a. General competence
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a. Determine the future stewardship of the management of the company whose fi-
nancial statements are audited.
a. Many audit conclusions are made on the basis of examining a sample of evidence.
b. Some evidence supporting peso representation in the financial statements must be
obtained by oral or written representation of management.
Answer: d
26. Which of the following statements does not properly describe an element of theoreti-
cal framework of auditing?
a. High
b. Negative
c. positive
d. Reasonable
Answer: c
29. The auditor's satisfaction as to the reliability of as assertion being made by one party
is called:
a. Assurance
b. Audit risk
c. Precision
d. Materiality level
Answer: a
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30. Which of the following is not one of the reasons why absolute assurance can not be
attained when auditing financial statements?
b. Most of the evidence gathered by the auditor is persuasive and not conclusive
PRE-ENGAGEMENT
1. Which of the following is the correct order of steps in the audit process?
A. Obtain understanding of the client's internal control
B. Perform tests of control
C. Obtain understanding of the client's business and its environment
D. Draft an audit report
E. Prepare a management letter
F. Prepare engagement letter G. Perform substantive tests
a. F, C, A, B, G, E, D
b. F,A,C,B,G,E,D
c. F, A, C, B, G, E, D
d. F, C, A, B, G, D, E
Answer: d
2. In making a decision to accept or continue with a client, the auditor should consider:
a b c
d
Its competence YES YES YES
YES
Its own independence YES NO YES
NO
Its ability to service the client properly YES YES YES
NO
The integrity of the client's management YES YES NO YES
Answer: a
3. Which of the following is not one of the reasons why auditor should perform prelimi-
nary engagement activities?
a. To ensure that the auditor maintains the necessary independence and ability to
perform the engagement.
b. To help ensure that there are no issues with management integrity that may affect
the auditor's willingness to continue the engagement.
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c. To ensure that 'there is no misunderstanding with the client as to the terms of the
engagement.
d. To ensure that sufficient appropriate evidence will be obtained to support the au-
ditor's Opinion on the financial statements.
Answer: d
4. An auditor who accepts an audit engagement and does not possess the industry exper-
tise of the business entity should
b. Obtain knowledge of matters that relate to the nature of the entity's business
c. Refer a substantial portion of the audit to another CPA who will act as the princi-
pal auditor
15. Prior to the acceptance of an audit engagement with a client who has terminated the
services of the predecessor auditor, the CPA should
a. a. Contact the predecessor auditor without advising the prospective client and re-
quest a complete report of the circumstance leading to the termination with the
understanding that all information disclosed will be kept confidential.
b. b. Accept the engagement without contacting the predecessor auditor since the
CPA can include audit procedures to verify the reason given by the client for the
termination.
c. c. Not communicate with the predecessor auditor because this would in effect be
asking the auditor to violate the confidential relationship between the auditor and
client.
d. d. Advise the client of the intention to contact the predecessor auditor and request
permission for the contact.
Answer: d
16. When a CPA is approached to perform an audit for the first time, the CPA should
make inquires of the predecessor auditor. This is a necessary procedure because the pre-
decessor may be able to provide the successor with information that will assist the suc-
cessor in determining.
18. Which of the following will an auditor least likely discuss with the former auditors of
a potential client prior to acceptance?
a. Integrity of management
a. State that he found material misstatements that the client would not revise
c. Suggest that the successor obtain the client's permission to discuss the reasons
Answer: b
26. According to PSA 210, the auditor and the client should agree on the terms of en-
gagement. The agreed terms would need to be recorded in
b. engagement letter
d. comfort letter
Answer: b
27. Engagement letter that documents and confirms the auditor's acceptance of the en-
gagement would normally be sent to the client.
c. Yes No No
d. No No No
Answer: a
29. The primary reason an engagement letter is obtained by audit firms prior to starting
the work is that
a. billing arrangement
a. auditor's responsibilities
b. Fees and billing
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b. An estimate of the time to be spent on the audit work by audit staff and manage-
ment