1.

The CPA in public practice violates the Code of Professional Ethics for CPAs if he accepts a fee which was

Fixed by a public authority.

Determined based on the results of judicial proceedings.

Payable after a specified finding was obtained.

Based on a price quotation submitted in competitive bidding.

2. A company has computerized sales and cash receipts journals. The computer programs for these journals have been
properly debugged. The auditor discovered that the total of the accounts receivable subsidiary accounts differs
materially from the accounts receivable control account. This discrepancy could indicate

0 Receivables not being properly aged.

0 Credit memoranda being improperly recorded.

0 Statements being intercepted prior to mailing.

0 Lapping of receivables.

3. One of the ways to reduce non-sampling risk is through

0 controls which ensure that the sample drawn is random and representative.

0 proper supervision and instructions of the audit team members.

0 the use of attributes sampling rather than variables sampling.

0 proper supervision and instruction of the client's employees.

4, A CPA certificate is evidence of

0 Completion of continuing professional education program.

0 Membership in the accredited association.

0 Independence as a professional.
0 Basic competence at the time of certification.

5, Which of the following is not a requisite in applying for the CPA licensure examinations?

0 Holder of the degree of Bachelor of Science in Accountancy

Q Has not been convicted of any criminal offense involving moral turpitude

0 Natural-born citizen of the Philippines

0 Good moral character

6, The application of statistical sampling technique is least related to which of the following generally accepted auditing
standards?

0 Sufficient competent evidential matter is to be obtained through inspection, observation, inquiries, and confirmations
to afford a reasonable basis for an opinion about the financial statements under audit

0 The work is to be adequately planned, and assistants, if any, are to be properly supervised

0 A sufficient understanding of internal control is to be obtained to plan the audit and to determine the nature, timing,
and extent of the tests to be performed
0 In all matters relating to the assignment, an independence in mental attitude is to be maintained by the auditor or
auditors

7, The content of audit engagement letters may include additional matters except which of the following?

0 Fees.

0 Access to audit documentation.

0 Details of audit plan.

0 Involvement of predecessor auditor, internal auditors, or specialists.

8, A CPA should maintain objectivity and be free of conflicts of interest when performing:

0 All assurance and tax services, but not other professional services.

0 All professional services.

0 All assurance services, but not other professional services.

0 Audits, but not any other professional services.

9. The least likely form of pronouncement of the AASC on engagement standards, practices and procedures is

0 Philippine Auditing Practice Statements (PAPSs)

0 Financial reporting framework (e.g., PFRSs)

0 Philippine Standards on Related Services (PSRSs)

0 Philippine Standards on Auditing (PSAs)

10, In which of the following situation would a decision of selecting between a qualified or adverse opinion be
inappropriate?

0 A required disclosure that is significant is omitted from the fmancial statements.

0 A disagreement between the auditor and the client arose because of capitalization of research and development costs.

0 The financial statements are significantly misleading.

0 A limitation in the scope of the audit.

11, Which of the following will an auditor least likely discuss with the former auditors of a potential client prior to
acceptance?

Disagreements with management regarding accounting principles and auditing procedures.

0 Reasons for the amount of audit fee.

Findings of fraud, illegal acts, or internal control deficiencies communicated to audit committee.

0 Integrity of management.

12, Which of the following statements is true?

0 The audit procedures will be the same for either statistical or non-statistical sampling, but they must be performed
differently for each.

0 The same audit procedures are performed in the same manner for either statistical or non-statistical sampling.
0 Statistical sampling requires quantitative audit procedures whereas non-statistical sampling requires judgmental audit
procedures.

0 The audit procedures will vary as a result of using either statistical or non-statistical sampling.

13, Auditors are __ to decide on the combined amount of misstatements in the financial statements that they would
consider material early in the audit.

0 Strongly encouraged 0 Permitted 0 Not allowed 0 Required

14, The Accountancy Law provided that a CPA certificate may be suspended or revoked on grounds except

0 Gross negligence or incompetence in the practice of profession.

0 Refusal to accept an audit engagement with a government corporation.

0 Immoral or dishonorable conduct.

0 Conduct discreditable to the accounting profession

15, If an amendment to other information in a document containing audited financial statements is necessary and the
entity refuses to make the amendment, the auditor would consider issuing:

0 Qualified or disclaimer of opinion

0 Unqualified opinion.

0 Qualified or adverse opinion

o Unqualified opinion with explanatory paragraph

16, How will the results of the auditor's assessment of fraud risk factors further affect the planned audit procedures?

0 Management will be called upon to assist in coordinating audit procedures.

0 Audit procedures and fraud assessment do not relate.

0 By the assignment of qualified audit staff to risky areas of the engagement.

0 The assessment may require a re-audit of previous periods.

17, The auditor's judgment concerning the entity's operations (or the "criteria" used) in an operational audit should be
based on

0 Company policies 0 Rules and regulations 0 Effectiveness and efficiency 0 GAAP

18, A departure from PFRS is disclosed in a note to the financial statements. The auditor should:

0 Issue an unqualified opinion, with no explanatory paragraph, since the departure from PFRSs is disclosed

0 Issue an unqualified opinion, but emphasize the matter in an explanatory paragraph

0 Issue a qualified opinion

0 Disclaim an opinion

19, Which of the following is not a strong indicator of the existence of a material weakness in internal control?

0 An ineffective control environment.

0 Inadequate controls over the selection of the best investment opportunities.

0 Ineffective oversight of external reporting by the audit committee.

0 An ineffective internal audit function.

20, The following are the management's responsibilities that constitute the premise on which the audit is conducted,
except:

0 Preparation and presentation of the FSs.

0 Design, implementation and monitoring of internal control relevant to FSs.

0 To provide the auditor with access to all information relevant to audit and additional information the auditor may
request.

0 To provide the auditor unrestricted access to persons within and outside of the entity.

21, After obtaining an understanding of an entity's internal control, an auditor may assess control risk at the maximum
level for some assertions because he

0 performs tests of controls to restrict detection risk to an acceptable level.

0 believes the internal control policies and procedures are unlikely to be effective.

0 determines that the pertinent internal control components are not well documented.

0 identifies internal control policies and procedures that are likely to prevent material misstatements.

22, The following statements relate to the term of office of the chairman and members of the Board of Accountancy.
Which of them is incorrect?

0 Appointment to fill up an expired term is not to be considered as a complete term.

0 The Board of Accountancy member who has served two successive complete terms as chairman or member shall be
eligible for reappointment until the lapse of three years.

0 Any vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term only.

0 The chairman and members of the Board of Accountancy shall hold office for a term of three years.

23, Statistical sampling provides a technique for

0 eliminating judgment in testing.

0 exactly defining materiality.

0 measuring the sufficiency of evidential matter.

0 greatly reducing the amount of substantive testing.

24, After making the deposit, the daily cash summaries and the validated deposit slips should be forwarded by the
cashier directly to the:

0 Accounts receivable clerk. 0 General accounting. 0 Treasurer. 0 Internal auditor.

25, Evidential matters supporting the financial statements consist of accounting records and other information available
to the auditor. Other information can be found in:

0 The subsidiary ledgers 0 Worksheet supporting cost allocation 0 Minutes of directors' meetings 0 Adjusting entries
26, Which of the following gives an indication of a potential fraudulent activity?

0 Numerous credit memoranda have been issued to the company's biggest customer.

0 Internal auditor cannot locate several credit memoranda to support reductions of customers' balances.

0 No one was absent the day the auditors handed out the paychecks.

0 The year-end bank reconciliation has no outstanding checks or deposits older than 15 days.

27, Which of the following statements is correct concerning statistical sampling in tests of controls?

A large sample size should be selected as the expected control deviation decreases.

The expected control deviation has little or no effect on determining sample size except for very small populations.

The population size has little or no effect on determining sample size except for very small population.

0 As the population size doubles, the sample size also should double.

28, A CPA who has never audited a commercial bank

0 May accept the engagement after attaining a suitable level of understanding of the transactions and accounting
practices unique to commercial banking.

0 May accept the engagement because training as a CPA transcends unique industry characteristics.

0 May accept the engagement only if the accounting firm specializes in the audit of commercial banks.

0 May not accept such an engagement.

29, The cash account is involved in which cycle?

Q Acquisition and expenditure. 0 Revenue and collection. 0 All of the other given choices are correct. 0 Production and
conversion.

30, As a result of tests of controls, an auditor assessed control risk too low and decreased substantive testing. This
assessment occurred because the true deviation rate in the population was

0 More than the risk of assessing control risk too low, based on the auditor's sample.

0 Less than the deviation rate in the auditor's sample.

0 More than the deviation rate in the auditor's sample.

0 Less than the risk of assessing control risk too low, based on the auditor's sample.

31. The most effective control to prevent unbilled and unrecorded shipments of finished goods is to

0 forward a copy of the signed bill of lading to the stores manager.

0 implement a policy that prevents sales invoices from being mailed to customers in the absence of a properly approved
shipping order and bill of lading signed by the carrier.

0 forward a copy of the shipping order and bill of lading to billing.

0 require all outgoing shipments to be accompanied by a prenumbered shipping order and bill of lading (signed by the
carrier). Forward a copy of these documents to accounting, to be placed in an …

32. An audit client has a matter of material litigation that is threatened, but that has not gone to trial. The auditor's
consideration of such a matter will most likely include all of the following except
0 sending a letter to the client's attorneys for more information.

0 assessment of whether accrual or disclosure by the client.

0 confirmation with the harmed party regarding the amount that will be claimed.

0 discussions of the matter with the client and their insurance adjuster.

33. The nature and extent of planning will vary according the following, except

Q Nature and complexity of the entity

0 Auditor's experience with the entity and knowledge of the business

0 Size of the auditing firm

Changes in circumstances that occur during the audit engagement

34. Which one is not a sample selection method commonly associated with statistical audit sampling?

0 Systematic sample selection. 0 Block sample selection.

Stratified sample selection.

0 Simple random sample selection.

35. An auditor who discovers that a client's employees paid small bribes to municipal officials most likely would
withdraw from the engagement if

0 The client receives financial assistance from a federal government agency.

The payments violated the client's policies regarding the prevention of illegal acts.

0 Management fails to take the appropriate remedial action and reliance on management's representation becomes
doubtful.

0 Documentation that is necessary to prove that the bribes were paid does not exist.

36. Which of the following is least likely a subject matter of an assurance engagement?

0 Systems and processes.

o Degree of loyalty of employees to their employer.

0 Data.

0 Compliance with regulations.

37. ASEAN MRA provides that the arrangement shall cover the provision of accountancy services covered under Central
Product Classification 862 of the Provisional CPC of the United Nations, except:

0 Signing off the independent auditor's report

0 The provision of general accounting and bookkeeping services

0 Management advisory services

0 Shared services and loan staff arrangements

38 Which of the following would require a denial (disclaimer) of the audit opinion?
0 The auditor was not appointed as the auditor until after year end, after the inventory count, and was unable to
satisfy herself concerning inventory values by other means.

0 There is a material misstatement that in the auditor's opinion will overstate the value of an investment by P1,000,000.

0 There is a misstatement that is in the range of P200,000 to P300,000 (materiality is P100,000), but that cannot be
calculated exactly because it involves an estimate.

0 The auditor concludes that there is a going-concern issue for the auditee company.

39 To succeed in an action against the auditor, the client must be able to show that:

0 the auditor was grossly negligent.

0 there is a close causal connection between the auditor's behavior and the damages suffered by the client.

0 the auditor was fraudulent.

0 there was a written contract.

40 Internal auditing relates to an

0 Audit which is performed by professional practitioner as an independent contractor

Audit which serves the needs of management

0 Audit wherein the auditor should be independent of management both in fact and in mental attitude

0 Audit which is incidentally concerned with the detection and prevention of fraud

41 An auditor is examining accounts receivable. Which one is the most competent type of evidence in this situation?

0 Receipt by the auditor of a positive confirmation.

0 Verifying that postings to the receivable account from journals have been made.

0 No response received for a request for a negative confirmation.

0 Interviewing the personnel who records accounts receivable.

42 Brainstorming about the manner in which fraud may be committed should include all of the following except

0 Consider the materiality of the individual account balances for substantive testing

0 Consider weaknesses in internal control that would allow a fraud to take place or management override of controls

Consider factors that might affect management motivation to misstate the financial statements

0 Consider factors that may enable an individual capable of committing a fraud to rationalize perpetrating it

43 In a qualified, adverse, or disclaimer report, the auditor

0 is not satisfied that the financial statements are presented fairly

0 either of the two responses

0 has not performed a satisfactory audit.

0 none of the two responses.

44. in cases when the threat to independence is significant and no safeguards are available to reduce it to an acceptable
level, which of the following actions should be taken?
0 Eliminating the activities of interests creating the threat.

0 Refusing to accept or continue the assurance engagement.

0 Neither a nor b

0 Either a or b

45. A CPA, while performing an audit, strives to achieve independence in appearance in order to

0 Reduce risk and liability

0 Comply with PSAs

0 Become independent in fact

0 Maintain public confidence in the profession

46. Which of the following types of audit evidence is the least reliable?

0 Evidence from independent outside sources.

0 Evidence derived from a well-controlled system.

0 Evidence from the client's organization.

0 Original documents.

47 Detection risk may be subdivided into the risk that analytical procedures and other substantive procedures will fail to
detect material misstatements and the allowable:

0 Audit risk. 0 Risk of incorrect rejection. 0 Control risk. 0 Risk of incorrect acceptance.

48 Which of the following is not a required communication with the audit committee?

0 difficulties encountered. 0 economic trends. 0 accounting policies. 0 accounting estimates.

49 Which statement is incorrect regarding auditing fair value measurements and disclosures?

0 The auditor is responsible for predicting future conditions, transactions, or events which, had they been known at
the time of the audit, may have had a significant effect on management's actions or assumptions underlying the fair
value.

0 Many measurements based on estimates, including fair value measurements, are inherently imprecise.

0 The auditor should obtain sufficient appropriate audit evidence that fair value measurements and disclosures are in
accordance with GAAP.

0 The auditor's consideration of such assumptions is based on information

50 In addition to the company's financial statements, which of the following would be covered by the auditor's standard
report?

0 The company's budget for net income for the year being audited

0 The company's tax return for the year being audited

0 The notes to the financial statements

0 Comparative figures in the financial statements

51 Which statement is incorrect regarding audit evidence?

0 Accounting records alone do not provide sufficient audit evidence.

0 The auditor should obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to
base the audit opinion.

0 The matter of difficulty or expense involved is a valid basis for omitting and audit procedure for which there is no
alternative.

0 The auditor uses professional judgments and exercises professional skepticism in evaluating the quantity and quality of
audit evidence, and thus its sufficiency and appropriateness, to support the audit opinion.

52 The definition of auditing includes both a(an)

0 Documentation process and an evaluation process.

0 Evaluation process and a reporting process.

0 Documentation process and a reporting

process.

0 Investigative process and a reporting process.

53 Which of the following is true about sampling and nonsampling risks?

0 Nonsampling risk can be eliminated by proper engagement planning, supervision and review

0 Nonsampling risk arises from the possibility that the auditor's conclusion, based on a sample may be different from the
conclusion reached if the entire population were subjected to the same audit procedure

0 Sampling risk can be reduced by increasing the sample size

0 Sampling risk cannot be eliminated

54 The failure of the auditor to meet PSAs

0 an accepted practice.

0 tantamount to criminal behavior.

0 an evidence of negligence.

Q a suggestion of negligence.

55 A bank auditor is interested in estimating the average account balance of its depositors based on a sample. This
substantive test is an example of

0 attribute sampling. 0 acceptance sampling. variables sampling. 0 discovery sampling.

56, An external auditor is conducting an audit of the financial statements of Camden Corporation under PSAs. The
external auditor is expected to

0 Express an opinion as to the fairness of Camden's financial statements.

0 Critique the wisdom and legality of Camden's business decisions.

0 Express an opinion as to the attractiveness of Camden for investment purposes.

0 Certify to the correctness of Camden's financial statements.

57 An auditor ordinarily should send a standard confirmation request to all banks with which the client has done
business during the year under audit, regardless of the year-end balance because this procedure

0 Detect kiting activities that may otherwise not be discovered.

0 Provides for confirmation regarding compensating arrangements

0 Seek information about indebtedness to the bank

0 Verifies securities held by the bank in safekeeping

58 The following are examples of circumstances that may indicate the possibility that the financial statements may
contain a material misstatement resulting from fraud, except

0 Tolerance of violations of the entity's Code of Conduct

0 Accounting policies that appear to be consistent with industry norms.

0 Frequent changes in accounting estimates that do not appear to result from changed circumstances.

0 Unwillingness by management to permit the auditor to meet privately with those charged with governance.

59 If the financial statements, including accompanying notes, fail to disclose information that is required by PFRSs, the
auditor should express either a(an)

0 Unqualified opinion with a separate explanatory paragraph or an "except for" qualified opinion.

0 Adverse opinion or a "subject to" qualified opinion.

0 "Except for qualified opinion or adverse opinion.

0 "Subject to" qualified opinion or unqualified opinion with a separate explanatory paragraph.

60 If an illegal act is discovered during the audit of a publicly held company, the auditor should

Modify the extent of auditing procedures.

0 Determine who was responsible for the act.

0 Notify the regulatory authorities.

0 Report the act to high-level personnel within the client's organization.

61 This term is used to describe the effects or possible effects on the financial statements of a matter that, in the
auditor's judgment, are not confined to specific elements, accounts or items of the financial statements, or, if confined,
represent or could represent a substantial proportion of the financial statements.

0 Persuasive 0 Pervasive 0 Reasonable 0 Effective

62 The objective of assurance services is to

0 Improve the entity's outcomes.

0 Enhance decision making.

0 Compare internal information and policies to those of other entities.

0 Provide more timely information.

63 The extent of procedures is affected mostly by which of the following factors?

the sheer volume of procedures to be applied by the auditor.

0 the time of year in which the client takes a physical inventory in the warehouse.

0 the availability of the client's staff at or near the balance sheet date.

0 the auditor's judgment that misstatements are probable in certain balances.

64 Which of the following factors is generally not considered in determining the sample size for a test of controls?

0 Tolerable rate 0 Risk of assessing control risk too low 0 Expected population deviation rate 0 Population size

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

0 Audit risk

0 Assurance engagement risk

0 Detection risk

0 Business risk

66, For all audits of financial statements made in accordance with PSAs, the use of analytical procedures is required to
some extent (1) in the assessment of risks of material misstatement, (2) as a substantive audit procedure, and (3) as an
overall review at the completion stage.

0 (1) Yes, (2) No, (3) Yes

0 (1) Yes, (2) No, (3) No

0 (1) No, (2) Yes, (3) No

0 (1) No, (2) Yes, (3) Yes

67 An auditor expressed a qualified opinion on the prior year's financial statements because of a lack of adequate
disclosure. These financial statements are properly restated in the current year and presented in comparative form with
the current year's financial statements. The auditor's updated report on the prior year's financial statements should

0 Continue to express a qualified opinion on the prior year's financial statements.

0 Be accompanied by the auditor's original report on the prior year's financial statements.

0 Make no reference to the type of opinion expressed on the prior year's financial statements.

0 Express an unqualified opinion on the

68 Which of the following statements is true? If control risk is assessed at the maximum, the

0 nature of related substantive tests should be changed from more to less effective.

0 nature of related substantive tests should be changed from less to more effective.

extent of related substantive tests should be changed from a larger to a smaller sample.

0 timing of related substantive tests should be changed from year-end to an interim date.

69 According to Revised Rules on Advertising adopted by the BOA, the following form of advertising or publicity is
prohibited:
0 Publicity of the appointment or other activity in a matter of local or national importance or the award of any
distinction to a professional accountant.

0 Listing of professional accountant in directories.

0 Publishing services in billboard (e.g., tarpaulin, streamers, etc.) advertisements.

0 Stating the professional accountant's name and his/her professional qualifications and name of the organization
connected with the professional accountant in the books or articles on professional subjects that he/she authored.

70 After an audit report is issued, the auditor discovers through a peer review that an important audit procedure has
been omitted. The auditor should do which of the following?

0 immediately request the client recall the report.

0 notify all parties known to be relying on the report.

determine whether the report can still be supported in light of the omitted procedure.

0 contact his or her professional liability insurance carrier.

71 What audit opinions would be possible when the audited company refuses to record adequate amortization for fixed
assets? Assume the amount in question exceeds materiality.

0 Only qualified or unqualified opinions are possible.

0 Only unqualified or adverse opinions are possible.

0 Only adverse or denial opinions are possible.

0 Only qualified or adverse opinions are possible.

72 A CPA wrote an article for publication in PICPA Accountants Journal or News Magazine. The Code of Professional
Ethics would be violated if the CPA allowed the article to state that the CPA was a

0 Professor at a school of professional accountancy

O Partner in a national CPA firm

0 Member of PICPA

0 Practitioner specializing in providing tax services.

73 How is the auditor's report on the financial statements that require final approval by stockholders before such
financial statements are issued publicly dated?

0 The auditor's report should be dated after the approval of the financial statements by the stockholders.

0 The audit report should be dual dated, the first date coinciding the approval by the board of directors and the second
date to coincide with the approval by the stockholders.

0 The date of the auditor's report coincides the date of approval of the financial statements by the board of directors.

0 The auditor's report should be dated coinciding the date of approval of the financial statements by the stockholders.

74 The deviation rate that the auditor will permit in the population and still be willing to reduce the assessed level of
control risk is:

Q acceptable risk of assessing control risk too low.

tolerable deviation rate.

0 estimated population deviation rate.

0 sample deviation rate.

75 When the auditor goes through a population and selects items for the sample without regard to their size, source, or
other distinguishing characteristics, it is called:

0 Haphazard selection.

0 Statistical selection.

0 Systematic sample selection.

0 Block sample selection.

76 Which of the following best describes the auditor's responsibility for "other information" included in the annual
report to stockholders, which contains financial statements and the auditor's report?

The auditor has no obligation to corroborate the "other information" but should read the "other information" to
determine whether it is materially inconsistent with the financial statements.

0 The auditor has no obligation to read the "other information."

0 The auditor should extend the examination to the extent necessary to verify the "other information."

0 The auditor must modify the auditor's report to state that the "other information is unaudited" or "not covered by the
auditor's

77 Auditors are most likely to use the most rigorous audit procedures to examine

0 Management assertions that are deemed to be of high risk.

0 Routine transactions.

0 Only the rights and obligations assertion.

0 Management assertions that are deemed to be of low risk.

78 Which of the following statements is true concerning an external auditor's responsibilities regarding financial
statements?

0 An auditor may draft an entity's financial statements based on information from management's accounting system.

0 The fair presentation of audited financial statements in conformity with GAAP is an implicit part of the auditor's
responsibilities.

0 Making suggestions that are adopted about the form and content of an entity's financial statements impairs an
auditor's independence.

0 An auditor's responsibilities for audited financial statements are not confined to the expression of the auditor's
opinion.

79. If all other factors that are specified in a sampling plan remain constant, changing the expected population deviation
rate from 1 percent to 2 percent would cause the required sample size to

0 become indeterminate 0 increase. 0 decrease. Q remain the same.

80Which of the following situations represents a risk factor that relates to misstatements arising from misappropriation
of assets?
0 A high turnover of senior management.

0 A strained relationship between management and the predecessor auditor.

0 An inability to generate cash flow from operations.

0 A lack of independent checks.

81 …. business, accounting, taxation law, education and related fields earned from any graduate school duly recognized
by the Commission on Higher Education (CHED) will qualify for this requirement. II. Completion of 12 units of relevant
education subjects from the CHED recognized schools. III. A total of three years meaningful experience in actual
accounting work either in the Public Practice, Commerce and Industry or Government sector. IV. Proof that the CPA has
undergone Continuing Professional Education(CPE).

0 II, III and IV only.

0 I, II and III only. 0

II and III only.

0 I, and IV only.

82 No deletions of audit documentation are allowed after the

0 Last date of significant fieldwork. 0 Report release date. 0 Client's year-end. 0 Documentation completion date.

83 King, CPA, was engaged to audit the financial statements of Newton Company after its fiscal year had ended. King
neither observed the inventory count nor confirmed the receivables by direct communication with debtors but was
satisfied concerning both after applying alternative procedures. King's auditor's report most likely contained a(an)

0 Disclaimer of opinion.

0 Qualified opinion.

0 Unqualified opinion without mentioning the alternative procedures.

0 Unqualified opinion with an explanatory paragraph.

84 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

0 Practice in Government

0 Practice in Education

Practice of Public Accountancy

0 Practice in Commerce and Industry

85 After considering a client's internal control, the auditor has concluded that the system is well designed and is
functioning as anticipated. Under these circumstances, the auditor would most likely

0 increase the extent of anticipated analytical procedures.

0 perform all tests of controls to the extent outlined in the preplanned audit program.

0 cease to perform further substantive tests.

0 not increase the extent of planned substantive tests.

86 An auditor concludes that there is a material inconsistency in the other information in an annual report to
shareholders containing audited financial statements. If the auditor concludes that the financial statements do not
require revision, but the client refuses to revise or eliminate the material inconsistency, the auditor may

0 Disclaim an opinion on the financial statements after explaining the material inconsistency in a separate explanatory
paragraph.

0 Consider the matter closed since the other information is not in the audited financial statements.

0 Issue an "except for" qualified opinion after discussing the matter with the client's board of directors.

0 Revise the auditor's report to include a separate explanatory paragraph describing the material inconsistency.

87 Which of the following is not true of Practice Statements?

0 These statements are issued to provide practical assistance to auditors in implementing the standards

0 These statements are not intended to replace standards

0 These statements are intended to have the authority of the standards

0 These are not form of interpretations issued by the AASC

88 Which of the following may an auditor least likely consider a symptom of an entity's significant going-concern
problems?

0 A recurring default in meeting the entity's financial obligation.

0 A new government regulation imposes a change in accounting principle.

0 Significant recurring working capital deficiencies.

0 Legal proceedings that might jeopardize the entity's ability to operate.

89 The tolerable deviation rate has a significant effect on sample size. The relationship of tolerable deviation rate to the
sample size is

0 inverse. 0 parallel. 0 variable. 0 direct.

90 In which of the following circumstances would the use of negative form of accounts receivable confirmation most
likely be justified?

0 A small number of accounts may be in dispute and the accounts receivable balance arises from sales to many
customers with small balances.

0 A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to many
customers with small balances.

0 A substantial number of accounts may be in dispute and the accounts receivable balance arises from sales to a few
major customers.

0 A small number of accounts may be in dispute and the accounts receivable balance arises from sales to a few major
customers.

91 If there is a significant difference of opinion between a senior auditor and an audit manager on an audit engagement,
to whose attention should the senior auditor first bring the matter?

0 The engagement partner on the engagement

0 The managing partner or senior partner of the firm

0 Another audit manager in the firm

0 The practice advisor in the CPA affiliate office

92 Which of the following is the most likely response of the successor auditor when a client refused to grant permission
or the predecessor auditor failed to respond fully to the communication?

0 Accept the engagement.

0 Decline the engagement.

0 Inquire the Board of Accountancy.

0 Evaluate the implication of such refusal or failure of communication.

93Which of the following is required if the professional accountant uses experts who are not professional accountants?

Q Experts who are not professional accountants need not be informed of ethical requirements because they are not
members of the Accountancy profession.

The professional accountant must take steps to see that such experts are aware of the ethical requirements of the
profession.

0 The professional accountant is discouraged to engage the services of experts who are not a professional accountant.

The ultimate responsibility for the professional service is assumed by the expert who is not a professional accountant.

94. The expected population deviation rate of client billing errors is 3%. The auditor has established a tolerable rate of
5%. In the review of client invoices the auditor should use

0 Stratified sampling.

0 Attribute sampling.

0 Variable sampling.

0 Discovery sampling.

95. Which of the following is not true regarding planning in an electronic environment?

0 Auditing standards are not changed

0 The procedures used are not changed

0 The purposes of auditing is not changed

0 The definition of auditing is not changed

96Which of the following is most likely to provide management with incentives to overstate earnings?

0 Issuance of preferred stock. 0 A projected stock split. 0 Projected quarterly dividends. 0 Unbudgeted increase in
materials prices.

97In relation to revised Rules on Advertising adopted by BOA, which of the following statements is false:

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.

0 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.
0 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,

0 All advertisements must have prior review and approval in writing by the Board of Accountancy.

98Which of the following internal control procedures most likely would deter lapping of collections from customers?

0 Authorization of write-offs of uncollectible accounts by a supervisor who is independent of credit approval.

0 Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries.

0 Supervisor's comparison of the daily cash summary with the sum of the cash receipts journal entries.

Segregation of duties between receiving cash and posting collections to the accounts receivable ledger.

99Assurance services least likely involve

0 Improving the quality of the decision model used.

0 Improving the quality of information for decision making purposes.

0 Improving the relevance of information.
Implementing a system that improves the processing of information.

100 The following statements relate to the Board of Accountancy. Which statement is incorrect?

0 The Board consists of a Chairman and six members

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

0 No person shall be appointed a member of the Board unless he is a natural-born citizen of the Philippines, a duly
registered CPA and has been in the practice of accountancy for at least ten years

0 The Chairman and members are appointed by the President of the Philippines upon recommendation of PRC

101. Which of the following requirements below shall not apply to those CPAs already engaged in teaching as of the date
of the effectively of the rules regarding accreditation of accounting teachers? I. Possession of relevant Master's degree.
Any post-graduate degree program in business, accounting, taxation law, education and related fields eared from any
graduate school duly recognized by the Commission on Higher Education (CHED) will qualify for this requirement. II.
Completion of 12 units of relevant education subjects from the CHED recognized schools. III. A total of three years
meaningful experience in actual accounting work either in the Public Practice, Commerce and Industry or Government
sector IV. Proof that the CPA has undergone Continuing Professional Education(CPE).

0 I and II only.

0 II, IiI and IV only .

0 I, and IV only.

0 II and Ill only.