A.

Vigorous enforcement of an established code of ethics is the best way to

prevent unscrupulous acts.
B. Ethical standards that emphasize excellence in performance over material
reward establish a reputation for competence and character.
C. A distinguished mark of a profession is its acceptance of responsibility to the
public.
D. A requirement for a profession is to establish ethical standards that stress
primarily a responsibility to clients and colleagues.
2. Which of the following fundamental ethical principles requires a professional
accountant to act diligently and in accordance with applicable technical and
professional standards?
A.
B.
C.
D.

Objectivity
Professional behavior
Professional competence and due care
Integrity

3. Which part of the Code establishes the fundamental principles of professional

ethics for professional accountants and provides a conceptual framework that
professional accountants shall apply to identify threats to compliance with the
fundamental principles, evaluate the significance of the threats identified, and apply
safeguards, when necessary, to eliminate the threats or reduce them to an
acceptable level?
A.
B.
C.
D.

Part
Part
Part
Part

A
B
C
D

4. Which part of the Code applies to professional accountants in public practice?

A.
B.
C.
D.

Part
Part
Part
Part

A
B
C
D

5. The threat that a professional accountant will be deterred from acting objectively
because of actual or perceived pressures from the client is known as
A.
B.
C.
D.

Intimidation threat
Familiarity threat
Self-interest threat
Advocacy threat

6. Which of the following will not create self-interest threat for a professional
accountant in public practice?
A. The possibility of losing a significant client

B. Direct financial interest in the assurance client

C. Undue dependence on total fees from a client
D. Preparing the original data used to generate records that are the suggest
matter of the assurance engagement
7. Familiarity threat could be created under the following circumstances except
A. A professional accountant accepting gifts from a client whose value is
inconsequential or trivial
B. Senior personnel having a long association with assurance client
C. A director or officer of the client or an employee in a position to exert
significant influence over the subject matter of the engagement having
recently served as the engagement partner
D. A member of the engagement team having a close or immediate family
member who is a director or officer of the client
8. This threat to independence occurs when a member of the assurance team has
recently performed services for an assurance client that directly affect the subject
matter information of the assurance engagement (e.g., valuation services)
A.
B.
C.
D.

Self-review threat
Advocacy threat
Self-interest threat
Familiarity threat

9. Which of the following circumstances may create advocacy threat for a

professional accountant in public practice?
A. The firm promoting shares in an audit client
B. A firm issuing an assurance report on the effectiveness of the operation of
financial systems after designing or implementing the systems
C. A firm being threatened with dismissal from a client engagement
D. A firm being concerned about the possibility of losing a significant client
10. The following circumstances may create intimidation threats, except
A. Being threatened with dismissal or replacement in related to a client
engagement
B. Being pressured to reduce inappropriately the extend of work performed in
order to reduce fees
C. Being threatened with litigation
D. A member of the assurance team being, or having recently been, a director
or officer of the client
11. Which of the following is an example of engagement-specific safeguards in the
work environment?
A. Advising partners and professional staff of those assurance clients and
related entities from which they must be independent

B. Disclosing to those charged with governance of the client the nature of

service provided and extend of fees charged
C. A disciplinary mechanism to promote compliance with the firms policies and
procedures
D. Published policies and procedures to encourage and empower staff to
communicate to senior levels within the firm any issue relating to compliance
with the fundamental principles that concerns them
12. According to Section 240 of the Code of Ethics, fees charged for assurance
engagements should be a fair reflection of the value of the work involved. In
determining professional fees, the following should be taken into account, except
A.
B.
C.
D.

The time necessarily occupied by each person engaged on the work

The outcome or result of a transaction or the result of the work performed
The skill and knowledge required for the type of work involved
The level of training and experience of the persons necessarily engaged on
the work

13. In the case of audit engagements, it is in the public interest and, therefore,
required by the Code that members of audit teams, firms and network firms shall be
independent of audit clients. Independence requires
A.
B.
C.
D.

Independence of mind only

Independence in appearance only
Both Independence of mind or independence in appearance
Either Independence of mind or independence in appearance

14. When the professional accountant determines that appropriate safeguards are
not available or cannot be applied to eliminate the threats to independence or
reduce them to an acceptable level, the professional accountant shall
I. Eliminate the circumstance or relationship creating the threats
II. Decline or terminate the audit engagement
A.
B.
C.
D.

I only
II only
Neither I or II
Either I or II

15. Independence from the audit client is required

I. During the engagement period.
II. During the period covered by the financial statements.
A. I only
B. Both I and II
C. II only

D. Neither I nor II
16. Financial interest may be held through an intermediary (for example, a
collective investment vehicle, estate or trust). When control over the investment
vehicle or the ability to influence investment decisions exists, the code defines that
financial interest to be a/an
A.
B.
C.
D.

Direct financial interest

Material direct financial interest
Indirect financial interest
Material indirect financial interest

17. Holding a financial interest in an audit client may create a self-interest threat.
The existence and significance of any threat created depends on
I. The role of the person holding the financial interest.
II. Whether the financial interest is direct or indirect.
III. The materiality of the financial interest.
A.
B.
C.
D.

I and II only
I and III only.
II and III only
I, II and III.

18. The concept of materiality is least important to an auditor when considering the
A. Effects of a direct interest in the client upon the auditors independence.
B. Decision whether to use positive or negative conformations of accounts
receivable.
C. Adequacy of disclosure of a clients illegal act.
D. Discovery of weaknesses in a clients international control.
19. A direct financial interest or a material indirect financial interest in the audit
client of a member of the audit team or his immediate family member may create a
significant self-interest threat. Which of the following safeguards would be least
likely considered to eliminate the threat or reduce it to an acceptable level?
A. Discuss the matter with those charged with governance of the audit client.
B. Dispose of the direct financial interest prior to the individual becoming a
member of the audit team.
C. Dispose of the indirect financial interest in total or dispose of a sufficient
amount of it so that the remaining interest is no longer material prior to the
individual becoming a member of the audit team.
D. Remove the member of the audit team from the audit engagement.
20. Jayson, CPA, was offered the engagement to audit W corporation for the year
ended December 31, 2013. He had served as a director of W Corporation until

December 31, 2011, and his spouse currently owns 6,000 of the 100,000
outstanding share capital of W Corporation. Jayson disassociated from W
Corporation prior to being offered the engagement. Moreover, the engagement does
not cover any period that includes Jaysons association or employment with W
Corporation. Under the code of ethics, Jayson should
A.
B.
C.
D.

Accepts the engagement.

Let a partner from the same office accept and conduct the engagement.
Refuse the engagement because he had served as a director.
Refuse the engagement because of his spouses stock ownership.

21. A loan, or guarantee of a loan, to the firm from an audit client that is a bank or a
similar institution, would not create a threat to independence provide
I. The loan, or guarantee, is made under normal lending procedures, terms and
requirements.
II. The loan is immaterial to both the firm receiving the loan and the audit client.
A.
B.
C.
D.

I only
II only
Neither I nor II
Both I and II

22. A close business relationship between a firm or a member of the audit team, or
a member of that individuals immediate family, and the audit client or its
management may create
A.
B.
C.
D.

Self-interest and intimidation threats

Self-review and familiarity threats
Advocacy and self-review threats
Self-interest and self-review threats

23. When immediate family member of a member of the assurance team is a

director, an officer, or an employee of the assurance client in a position to exert
direct and significant influence over the subject matter information of the assurance
engagement, or was in such a position during the period covered by the
engagement, the threats to independence can only be reduced to an acceptable
level by
A. Where possible, structuring the responsibilities of the assurance team so that
the professional does not deal with matters that are within the responsibility
of the immediate family member.
B. Withdrawing from the assurance engagement.
C. Removing the individual from the assurance team.
D. Discussing the issue with those charged with governance, such as the audit
committee.

24. Which of the following threats to independence is created when a member of

the assurance team participates in the assurance engagement while knowing, or
having a reasonable to believe, that he is to, or may, join the assurance client
sometime in the future?
A.
B.
C.
D.

Intimidation threat
Self-interest threat
Self-review threat
Familiarity threat

25. Which of the following would not generally create a threat to independence?
A. The purchase of goods and services from an assurance client by the firm (or
from a financial statements audit client by a network firm) or a member of
the assurance team provided that the transaction is in the normal course of
the business and on an arms length basis.
B. A partner or employee of the firm or a network firm serves as Company
Secretary for a financial statement audit client.
C. Determining which recommendation of the firm should be implemented.
D. Reporting, in a management role, to those charged with governance.
26. The following forms of assistance to a financial statement audit client do not
generally threaten the firms independence, except
A.
B.
C.
D.

Analyzing and accumulating information for regulatory reporting.

Assisting in resolving account reconciliation problems.
Authorizing or approving transactions.
Assisting in the preparation of consolidated financial statements.

27. As defined in the code, a valuation comprise the making of assumptions with
regard to future developments, the application of certain methodologies and
techniques, and the combination of both in order to compute a certain value, or
range of values, for an asset, a liability or for a business as a whole. Which of the
following threats may be created when a firm or a teamwork firm performs
valuation for an audit client that is to be incorporated in the clients financial
statements?
A.
B.
C.
D.

Advocacy threat
Familiarity threat
Self-review threat
Intimidation threat