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Which statement is correct regarding the Code of Ethics for Professional Accountants in the
Philippines?
D. All CPAs are expected to comply with the ethical requirements of the Code and other ethical
requirements that may be adopted and approved by IFAC. Apparent failure to do so may result in
an investigation into the CPA’s conduct.
5. A financial interest beneficially owned through a collective investment vehicle, estate, trust or
other intermediary over which the individual or entity has no control.
A. Indirect financial interest
8. The communication to the public of facts about a professional accountant which are not designed
for the deliberate promotion of that professional accountant.
A. Publicity
10. The term professional accountant in public practice includes the following, except
C. Professional accountants employed in the public sector having managerial responsibilities.
A. I, II and III
15. Professional accountants may encounter problems in identifying unethical behavior or in resolving
an ethical conflict. When faced with significant ethical issues, professional accountants should do
the following, except
C. If the problem is not resolved with the immediate superior and the professional accountant
determines to go to the next higher managerial level, the immediate superior need not be notified
of the decision.
17. Which of the following is the least required in attaining professional competence?
D. Continuing awareness of development in the accountancy profession.
19. Which of the following is incorrect regarding the professional accountants’ tax practice?
C. A professional accountant may hold out to a client or an employer the assurance that the tax
return prepared and the tax advice offered are beyond challenge.
(SOURCE: https://edoc.site/at-5903code-of-ethics-pdf-free.html)
22. Reyes, CPA, has been retained to audit the financial statements of Monday Co. Monday's
predecessor auditor was Evangelista, CPA, whom Monday has notified by that its services have
been terminated. Under these circumstances, which party should initiate the communications
between Reyes and Evangelista?
A. Reyes, the successor auditor
23. Which of the following auditor concerns most likely could be so serious that the auditor would
conclude that a financial statement audit cannot be conducted?
B. The integrity of entity's management is suspect.
24. The scope and nature of an auditor’s contractual obligation to a client is ordinarily set forth in the
C. Engagement letter.
25. Which of the following statements would least likely appear in an auditor's engagement letter?
D. After performing our preliminary analytical procedures, we will discuss with you the other
procedures we consider necessary to complete the engagement
26. Which of the following procedures is an auditor least likely to perform in planning a financial
statement audit?
C. Selecting a sample of vendors' invoices for comparison with receiving reports.
27. Which of the following procedures would an auditor most likely include in the initial planning of a
financial statement audit?
D. Determining the extent of involvement of the client's internal auditors.
30. Prior to beginning the field work on a new audit engagement in which a CPA does NOT possess
expertise in the industry in which the client operates, the CPA should
D. Perform risk assessment procedures
32. The objective of performing analytical procedures in planning an audit is to identify the existence
of
a. unusual transactions and events
33. For audits of financial statements made in accordance with generally accepted auditing
standards, the use of analytical procedures is required to some extent.
In the Planning Stage As a Substantive Test In the Final Review Stage
C. Yes No Yes
34. The primary objective of analytical procedures used in the final review stage of an audit is to
C. Assist the auditor in assessing the validity of the conclusions reached
35. The risk that an auditor’s procedures will lead to the conclusion that a material misstatement does
not exist in an account balance when, in fact, such misstatement does exist is
b. inherent risk
37. Which of the following audit risk components may be assessed in nonquantitative terms
Control risk Detection risk Inherent risk
A. Yes Yes Yes
38. Which of the following would an auditor most likely use in determining the auditor's preliminary
judgment about materiality?
b. The entity's annualized interim financial statements
39. When assessing an internal auditor's competence, a CPA ordinarily obtains information about all
of the following, except:
B. Educational background of the internal auditors
41. Which of the following characteristics most likely will heighten an auditor’s concern about the risk
of material misstatements in an entity's financial statements?
a. the entity's industry is experiencing declining customer demand
42. Which of the following information discovered during an audit most likely would raise a question
concerning possible illegal acts?
B. The entity prepared several large checks payable to cash during the year.
44. Audits of financial statements are designed to obtain reasonable assurance of detecting
misstatement due to:
Errors Fraudulent Financial Reporting Misappropriation of Assets
A. Yes Yes Yes
45. An auditor is unable to obtain absolute assurance that misstatements due to fraud will be
detected for all of the following except
A. Professional Skepticism
47. Which of the following conditions identified during fieldwork of an audit is most likely to affect the
auditor’s assessment of the risk of the misstatement due to fraud?
C. Missing Documents
48. Which of the following is correct concerning the required documentation in the working papers of
the performance of the assessment of the risk of material misstatement due to fraud?
B. Those risk factors identified and the auditor’s response to them should be documented.
50. Which of the following statements describes why a properly designed and executed audit may not
detect material fraud?
A. Audit procedures that are effective for detecting an unintentional misstatements may be
ineffective for an intentional misstatement that is concealed through collusions.
ANSWER: C. Either I or II
54. The auditor is required to comply with all PSAs relevant to the audit of an entity’s financial
statement. A PSA is relevant to the audit when
I. The PSA is in effect
II. The circumstances addressed by the PSA exist
ANSWER: A. A belief that management and those charged with governance are honest and
have integrity relieves the auditor of the need to maintain professional skepticism.
57. Which of the following best describes the reason why independent auditors report on financial
statements?
ANSWER: B. Different interests may exist between the company preparing the statements and
the persons using the statements.
58. Which of the following professionals has primary responsibility for the performance of an audit?
ANSWER: D. The partner in charge of the engagement
61. Governmental auditing often extends beyond examinations leading to the expression of opinion
on the fairness of financial presentation and includes audits of efficiency, economy, effectiveness,
and also
ANSWER: C. Compliance
62. Which of the following terms best describes the audit of a taxpayer’s return by BIR auditor?
ANSWER: C. Compliance
65. Which of the following is most appropriate action to be taken by a CPA who has been asked to
perform a consulting services engagement concerning the analysis of a potential merger if he/she
has little experience with the industry involved?
ANSWER: A. Accept the engagement but he/she should conduct research or consult with others
to obtain sufficient competence.
66. For which of the following judgments may an independent auditor share responsibility with the
entity’s internal auditor who is assessed to be both competent and objective?
ANSWER: Inherent Risk – NO, Control Risk – NO
67. During an audit, an internal auditor may provide direct assistance to an independent CPA
ANSWER: D. Internal Control – YES, Performing test of controls – YES, Performing substantive
Tests – NO
68. Which of the following statements is correct about the auditor’s use of the work of a specialist?
ANSWER: D. The auditor should obtain understanding of the methods and assumptions used by
the specialist.
69. When auditing related part transactions, an auditor places primary emphasis on PUTOL
ANSWER: C. Evaluating the disclosure of the related party transactions
70. Which of the following most likely would indicate the existence of related party?
ANSWER: D. Borrowing money at an interest rate significantly below the market rate
71. After determining that a related party transaction has in fact, occurred, an auditor should
ANSWER: Obtain an understanding of the business purpose of the transaction
74. In designing written audit programs, an auditor should establish specific objectives that relate
primarily to the
ANSWER: D. Financial Statements Assertions
76. In comparison with the detailed audit program of the independent auditor who is engaged to
audit the financial statements of a large publicly held company. The audit client’s comprehensive
internal program is
ANSWER: A. A more detailed and covers areas that normally are not considered by the
independent auditor
77. The auditor work performed by each assistant should be reviewed to determine whether it
adequately performed and to evaluate whether the
ANSWER: D. Results are consistent with the conclusions to be presented in the auditor’s report
78. The in-charge auditor most likely would have a supervisory responsibility to explain to the staff
assistants
ANSWER: B. How the results of various auditing procedures performed by the assistants should
be evaluated
79. After field work audit procedures are completed, a partner of the CPA firm who has not been
involved in the audit performs a second or wrap-up working paper review. The second review
usually focuses on
ANSWER: A. The fair presentation of the financial statements in conformity with PAS.
80. An auditor ordinarily uses a working trial balance resembling the financial statements without
footnotes, but containing columns for
ANSWER: C. Reclassifications and adjustments.
81. The audit working paper that reflects the major components of an amount reported in the financial
statements is the
ANSWER: D. Lead Schedule