CHAPTER 13:

THE CODE OF ETHICS AND REPUBLIC ACT 9298

1. The code of professional ethics for CPA’s promulgated by the Board of Accountancy applies to
a. All CPA’s in public practice.
b. All CPA’s in government
c. All CPA’s in public practice and employed in private business.
d. All CPAs in public practice employed in private business and industry, in government and in
education.

2. The underlying reason for a code of professional ethics.

a. That is required by legislation.
b. To provide the licensing agencies with a basis for measuring the performance of the practitioners.
c. The need for public confidence in the quality of service of the profession.
d. That it provides a safeguard against unscrupulous people.3.

3. The CPA profession deemed it necessary to establish a code of ethics and a mechanism for its enforcement
because.
a. An ethical conduct that stresses the CPAs responsibility to clients and colleagues is a prerequisite
to success.
b. A requirement of law provides that CPAs establish a code of ethics.
c. Acceptance of responsibility to the public is a distinguishing mark of a profession.
d. The establishment of flexible ethical standards provides self-protection for CPAs.

4. Which of the following statements is true when the CPA has been engage to perform an audit of financial
statements?
a. The CPA firm is engage and paid by the client, therefore, the has primary responsibility to be an
advance for the client.
b. The CPA firm is engaged and paid by the client, but the primary beneficiaries of the audit are
those who rely on the financial statements.
c. Should a situation arise where there is no convincing authoritative standards available, and there
is a choice of actions which could impact a client’s financial statements, the CPA is free to endorse
the choice which is in the investors’ interests.
d. The CPA firm’s paramount concern should be the interest of the client.

5. Which of the following is not one of the characters of the profession?

a. Mastery of a particular intellectual skill acquired by training and education.
b. Adherence by its members to a common code of conduct.
c. Acceptance of a duty to society as a whole.
d. A responsibility to protect exclusively the interest of a client or employer.

6. In order to achieve the objectives of the accountancy profession, professional accountants have to observe
a number of prerequisites or fundamentals principles. The fundamental principles include the following,
except.
a. Objectivity
b. Professional Competence and due care.
c. Technical Standards.
d. Confidence.

7. The principle of the professional competence and due care imposes certain obligation on professional
accountants. Which of the following is not one of those obligations required by this principle?
a. To act diligently in accordance with applicable technical and professional standards.
b. To be fair, intellectually honest and free of conflict of interest.
c. To become aware and understand relevant technical, professional and business developments.
d. To obtain professional knowledge and experience to enable them to fulfill their responsibilities.

8. Competence as a certified public accountant includes all of the following except.

a. Having the technical qualified to perform an engagement.
b. Possessing the ability to supervise and evaluate the quality of staff work.
c. Warranting the infallibility of the work performed.
d. Consulting others if additional technical information is needed.

9. An auditor who accepts an audit engagement and does not possess the industry expertise of the business
entity should.
a. Engage financial experts familiar with nature of the business entity.
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 principal auditor.
d. First inform management that an unmodified opinion cannot be issued.

10. Professional competence should include

Attainment of professional maintenance of professional

Competence Competence
a. Yes yes
b. No yes
c. No no
d. Yes no

11. The phase of professional competence that requires a professional accountant to adopt a program design
to ensure a quality control in the performance of professional services consistent with technical and
professional standards is.
a. Attainment of professional competence.
b. Maintenance of professional competence.
c. Application of professional competence.
d. Review of professional competence.

12. Which of the following is the least required in attaining professional competence?
a. High standards of general education.
b. Specific education, training and examination in professionally relevant subjects.
c. Period of meaningful work experience.
d. Continuing awareness of development in the accountancy profession.

13. The essence of the due care principle is that the auditor should not be guilty of.
a. Bias c. fraud
b. Errors in judgment d. negligence.

14. The principle of confidentiality applies to.

a. Professional accountants in public practice.
b. Professional accountants in commerce and industry.
c. Professional accountants in government.
d. All Professional accountants

15. The principle of confidentiality imposes an obligation on professional accountants to refrain from.
a. Disclosing confidential information to another party even if the client authorizes the disclosure.
b. Using confidential information acquired as a result of professional and business relationships to
their personal advantage or the advantage of third parties.
c. Disclosing information to defend themselves in case of litigation.
d. Responding to an inquiry or investigation conducted by the Professional Regulatory Board of
Accountancy.

16. A CPA shall not disclose confidentiality information obtained during an audit engagement in which one of
the following situations?
a. When the security of the state requires.
b. With the consent of the client.
c. In defense of himself when sued by his client.
d. To a successor auditor without the clients permission.

17. Which of the following is incorrect regarding confidentiality?

a. Professional accountants have an obligation to respect the confidentiality.
b. The duty of confidentiality ceases after the end of the relationship between the professional
accountant and the client or employer.
c. Confidentiality should always be observed by a professional accountant unless specific authority
has been given to disclose information or there is a legal or professional duty to disclose.
d. Confidentiality requires that professional accountant acquiring information in the course of
performing professional services neither uses nor appear to use that information for personal
advantage or for the advantage of a third party.

18. The code of ethics for professional accountants states that a CPA shall not disclose any confidential
information obtained in the course of a professional engagement except with the consent of his client. In
which of the situations given below would a CPA be in violation of the principle of confidentiality?
a. Disclosing confidential information in order to properly discharge the CPAs responsibilities in
accordance with his professional standards.
b. Disclosing confidential information in compliance with a subpoena issued by court.
c. Disclosing confidential information to another accountant interest in purchasing the CPAs practice.
 d. Disclosing confidential information in an investigation conducted by the PRC thru the Board of
Accountancy.

19. Which of the following statement is false?

a. Confidentiality is broken when auditor is presented with a subpoena concerning an audit client.
b. Information that a CPA obtains from a client is generally not privileged.
c. When Board of Accountancy conducts a review of the quality controls of another CPA firm,
permission of the client is not needed to examine audit documentation.
d. A CPA firm which observes substandard audit documentation of another firm during a quality
control review should immediately inform the firm being reviewed in order to rectify the
deficiency.

20. Which of the following is considered a violation of rules on confidentiality?

a. The CPA discloses information to protect his own interest in the course of legal proceedings.
b. The CPA discloses information to a successor auditor after obtaining the client’s permission.
c. The CPA discloses information to another CPA in compliance with a quality control review
conducted by the Board of Accountancy
d. The CPA divulges information disclosed to him by a prospective client.

21. When a professional accountant learns of a material error or omission in a tax return of a prior year, or of
the failure to file a required tax return, the professional accountant has a responsibility to do the following
except.
a. Promptly advise the client or employer of the error or omission and recommended that disclosure
be made to the revenue authorities.
b. Immediately inform the revenue authorities.
c. Take reasonable steps to ensure that the error is not repeated in subsequent tax returns if the
professional accountant concludes that a professional relationship with the client or employer can
be continued.
d. Inform the client or the employer that it is not possible to act for them in connection with that
return or other related information submitted to the authorities if the client or the employer does
not correct the error.

22. In which of the following circumstances would a CPA be bound by ethics to refrain from disclosing any
confidential information obtained during the course of a professional engagement?
a. The CPA is issued a summon enforceable by a court order which orders the CP A to present
confidential information.
b. A major stockholder of a client company seeks accounting information from the CPA after the
management declined to disclose the requested information.
c. Confidential client information is made available with the clients permission.
d. An inquiry by the Professional Regulation Commission and the CPA needs the disclosure to defend
himself.

23. The principle of professional behavior requires a professional accountant to.

a. Be straightforward and honest in performing professional services.
b. Be fair and should not allow prejudice or bias, conflict of interest or influence of others to override
objectivity.
c. Perform professional services with due care, competence and diligence.
d. Act in a manner consistent with the good reputation of the profession and refrain from any
conduct which might bring discredit to the profession.

24. Identify the incorrect statement. “ A professional accountant rendering tax service is entitled to put
forward the best position in favor of a client or an employer, provided:
a. It does not impair the accountants integrity and objectivity
b. It is rendered with professional competence.
c. It is consistent with the law.
d. The professional accountant assumes responsibility for the content of the tax return.

25. A professional accountant’s name can be associated with the information that:
a. Contains a misleading statement.
b. Intentionally omits or obscures information
c. Uses estimates.
d. Contains information without any real knowledge of whether they are true or false.

26. When a professional accountant performs services in a country other than the home country and
differences on specific matters exist between ethical requirements of the two countries, the professional
accountant should apply.
a. The ethical requirements of his or her home country.
b. The ethical requirements of the country in which services are being performed.
c. The stricter of the two ethical requirements.
 d. The less strict ethical requirements.

27. One of the major differences between auditors and other professionals is that most professionals.
a. Do not have to pass rigorous examination to be admitted in the profession.
b. Are not expected to act in the best interest of the public.
c. Need not be concerned about independence.
d. Do not need the confidence of the public.

28. Independence in auditing means.

a. Not having any financial or economic relationship with the client.
b. Being an advocate of the assurance client.
c. Taking an unbiased viewpoint.
d. Not having a loan to or from an assurance client.

29. Which of the following most accurately states how objectivity has been defined by the Code of Ethics?
a. Being honest and straight forward in all professional and business relationships.
b. A state of mind that permits the provision of an opinion without being affected by influences that
compromise professional judgment.
c. A combination of impartiality, intellectual honesty and a freedom from conflict of interest.
d. Avoiding facts and circumstances that could reduce the public confidence in the professional
accountant’s report.

30. Which fundamental principle is seriously threatened by an engagement that is compensated based on the
net proceeds on loans received by the client from a commercials bank?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional behavior.

31. A CPA, while performing an audit, strives to achieve independence in appearance in order to.
a. Reduce risk and liability
b. Become independence in mind
c. Maintain public confidence in the profession.
d. Comply with the generally accepted standards of fieldwork.

32. The concept pf materiality would be least important to an auditor in determining.

a. Transactions that should be reviewed
b. The need for disclosing a particular transaction or event.
c. The extent of audit work planned for particular account.
d. The effect of an auditor’s direct financial interest in a client.

33. The primary factor that distinguishes a direct from an indirect financial interest is the.
a. Materiality of the amount involve\
b. Control over investment decisions.
c. Risk associated with such investment.
d. Relationship between the investors and investee.

34. Ultimately, the decision as to whether the CPA is independent or not, will be made by the
a. Client c. public
b. Audit committee d. auditor

35. The Philippine Code of Ethics for professional accountants requires independence.
Of mind in appearance
a. Yes yes
b. Yes no
c. No no
d. No yes

36. Independence is required whenever a professional accountant performs.

a. Professional services.
b. Assurance services
c. Non-assurance services
d. Tax consultancy services.

37. Not all engagements performed by professional accountants are assurance engagements. Other
engagements frequently performed by professional accountants that are not assurance engagements
include the following, except.
a. Agreed-upon procedures.
b. Compilation of financial or other information.
 c. Management consulting
d. Examination of prospective financial information.

38. It refers to the avoidance of facts and circumstances that are so significant that a reasonable, and
informed third party, having knowledge of all the relevant information , including safeguards applied,
would reasonably conclude a firm’s or a member of the assurance team’s integrity, objectivity or
professional skepticism had been compromised.
a. Independence in fact
b. Independence in appearance
c. Independence in mind.
d. Inherent Independence
39. When CPAs are able to maintain their actual independence , it is referred to as independence in
a. Conduct
b. Appearance
c. Fact
d. Total.

40. According to the Code Of Professional Ethics, professional accountants.

a. Should be independent in fact and in appearance at all times.
b. In public practice should be independent in fact and in appearance at all times.
c. In public practice should be independent in fact and in appearance when providing auditing and
other assurance services.
d. In public practice should be independent in fact and in appearance when providing auditing tax,
and other advisory services.

41. If requested to perform a review engagement for a non-public entity in which an accountant has an
immaterial deirct financial interest, the accountant is
a. Independent and therefore may issue a review report.
b. Not independent and therefore, may not issue a review report.
c. Not independent and therefore, may issue a review report.
d. Not independent and therefore , may not be associated with the financial statements.

42. The network firms are required to be independent of the client.

a. For assurance engagements provided to an audit client.
b. For assurance engagements provided to clients that are not audit clients, when the report is not
expressly restricted for use by identified users.
c. For assurance engagements provided to clients that are not audit clients, when the assurance
report is expressly restricted for use by identified users
d. For non-assurance engagements.

43. Which of the following should be independent of the financial statement audit client?
A b c d
The members of the assurance team yes yes yes yes
The firms yes yes no no
Network firms yes no no yes

44. For assurance engagements provided to clients that are not audit clients, when the assurance report is
expressly restricted for use by identified users, the following should be independent of the clients.
A b c d
The members of the assurance team yes yes yes yes
The firms yes yes no no
Network firms yes no no yes

45. Which of the following statements is not correct about independence requirements?
a. For assurance engagement provided to audit client, the members of the assurance team, the firm
and network firms are required to be independent of the client.
b. For assurance engagements provided to non-audit clients, the members of the assurance team
and the firm are required to be independent of the client.
c. For assurance engagements provided to non-audit clients, where the distribution of the assurance
reports limited only to specified users, the members of the assurance team are required to be
independent of the client.
d. For assurance engagements provided to non-audit clients, where the distribution of the assurance
report is limited only to specified users, the firm should independent of the client.

46. Which of the following professional are services does not require independence?
a. Direct reporting engagements.
b. Examination of financial forecast
c. Tax consultancy services
d. Assertion-based engagements
47. For which of the following professional services must CPAs be independent?
a. Management advisory services
b. Audits of financial statements.
c. Preparation of tax returns.
d. All three of the above.

48. A CPA firm should decline an offer to perform consulting services engagement if:
a. The proposed engagement is not accounting related.
b. Recommendations made by the CPA firm are to be subject to review by the client.
c. Acceptance would require the CPA firm to make management decisions for an audit client.
d. Any of the above is true.

49. The member of the assurance e team and the firm should be independent of the assurance client during
the period of the assurance engagement. For this purpose, the period of the engagement.
a. Starts when the assurance begins to perform assurance services and ends when the assurance
report is issued.
b. Starts when the assurance team begins to perform assurance services and ends when the
fieldwork is completed.
c. Starts when the engagement letters prepared and ends when the fieldwork is completed.
d. Starts when the engagement letter is prepared and ends when assurance report issued.

50. This occurs as a result of the financial or other interest of a professional accountant or of an immediate or
close family member.
a. Self-interest threat c. advocacy threat
b. Self-review threat d. familiarity threat.

51. This occurs when, because of a close relationship, a professional accountant becomes too sympathetic to
the interest of others.
a. Self-interest threat c. advocacy threat
b. Self-review threat d. familiarity threat.

52. According to the Philippine Code of Ethics, compliance with fundamental principles is potentially affected
by self-interest, self-review, advocacy, familiarity and intimidation threats. Which of the following best
describes “advocacy threat”?
a. This occurs when a firm on a member of the assurance team could benefit from financial interest
in an assurance client.
b. This occurs when any product or judgment of a previous engagement needs to be re-evaluating in
reaching conclusions on the assurance engagement.
c. This occurs when a member of assurance team was previously a director or officer of the
assurance client.
d. This occurs when a firm, or a member of the assurance team, promotes, or may be perceived to
promote, an assurance clients position or opinion to the point that objectivity may , or may be
perceived to be, compromised.

53. This occurs when any product or judgment of a previous assurance engagement or non-assurance
engagement needs to be revaluated in reaching conclusions on the assurance engagement or when a
member of the assurance team was previously a director or officer of the assurance client, or was an
employee in a position to exert direct and significant influence over the subject matter if the assurance
engagement.
a. Self-interest threat c. advocacy threat
b. Self-review threat d. familiarity threat

54. This threat occurs when a member of the assurance team may be deterred from acting objectively and
exercising professional skepticism by threats, actual or perceived, from the directors, officers or employees
of an assurance client.
a. Intimidation threat
b. Familiarity threat
c. Advocacy threat
d. Self-interest threat

55. Which of the following circumstances would least likely create self-interest threat?
a. Contingent fees relating to assurance engagements
b. A direct financial interest or material indirect financial interest in an interest client.
c. A loan or guarantee to or from an assurance client or any of its directors or officers.
d. Having close personal relationship between a member of the assurance team and the assurance
client, its directors, officers or employees.

56. Which of the following would least likely create “self-interest threat “?
 a. Undue dependence on total fees from an assurance client
b. Concern about the possibility of losing the engagement.
c. Having a close business relationships with an assurance client.
d. Pressure to reduce inappropriately the extent of work performed in order to reduce fees.

57. Which of the following would most likely create a self-review threat?
a. Financial interest in a client
b. Litigation involving professional accountant and client
c. A former partner joins the assurance client.
d. A former officer of a client is now a member of the assurance team.

58. Examples of circumstances that may create self-review threat do not include.
a. Preparation of original data used to generate financial statements or preparation of other records
that are the subject matter of the assurance engagement.
b. A member of the assurance team being or having recently been, an employee of the assurance
client in apposition to exert direct and significant influence over the subject matter of the
assurance engagement.
c. Performing services for an assurance client that directly affect the subject matter of the assurance
engagement.
d. Potential employment with an assurance client.

59. Which of the following is an example of an intimidation threat that may affect the independence of the
professional accountant?
a. Preparation of original data used to generate financial statements or preparation of other records
that are the subject matter of the assurance engagement.
b. Threat of replacement over disagreement in the application of an accounting principle.
c. Dealing in or being a promoter of share or other securities in an audit client.
d. A member of the assurance team having an immediate family member or close family member or
close family who is a director or officer of the assurance client.

60. Acting for an audit client in the resolution of a dispute or litigation would most likely create.
a. Self-interest threat c. advocacy threat
b. Intimidation threat d. familiarity threat.

61. The preparation of accounting records or financial statements for an audit client will most likely create.
a. Self-interest threat c. intimidation threat
b. Self-review threat d. familiarity threat.

62. Using the same senior personnel on an assurance engagement over a long period of time would most
likely create
a. Intimidation threats c. familiarity threat
b. Advocacy threat d. self-interest threat

63. Accepting gifts or undue hospitality from an assurance client would most likely create.
a. Familiarity threat c. advocacy threat
b. Self-interest threat d. intimidation threat

64. Which of the following circumstances would least likely create familiarity threat?
a. A member of the assurance team having an immediate family member or close family member
who is a director or officer of the assurance team.
b. A member of the assurance team having an immediate family member of close family member
who, as an employee of the assurance client , is in apposition to exert direct and significant
influence over the subject matter of the assurance engagement.
c. A former partner of the firm being a director, officer of the assurance client or an employee in a
position to exert direct and significant influence over the subject matter of the assurance
engagement.
d. A former director or officer of the assurance client joins the assurance team.

65. When the total fees generated by an assurance client represent a large proportion of a firm’s total fees,
the dependence on that client or client group and concern about the possibility of losing the direct will
most likely create:
a. Self-interest threat c. intimidation threat
b. Self0review threat d. familiarity threat

66. The provision of services by a firm or network firm to an audit client that involve the design and
implementation of financial information technology system that are used to generate information forming
part of a client’s financial statements may most likely create.
a. Self-interest threat c. intimidation threat
b. Self-review threat d. familiarity threat
67. When threats to independence that are other than those clearly insignificant are identified, the
professional accountant should.
a. Continue the assurance engagement but with heightened level of professional skepticism.
b. Downgrade the nature of engagement to one that does not require independence.
c. Assign more experienced staff to the assurance engagement.
d. Apply appropriate safeguards to eliminate threats to independence or to reduce them to an
acceptable level.

68. Safeguards fall into two broad categories created by the profession, legislation or regulation does not
include
a. Educational, training and experience requirements for entry into the profession.
b. Continuing professional development requirements.
c. Corporate governance regulations.
d. Documented policies regarding identification of threats to compliance with the fundamental
principles.

69. When the safeguards available are insufficient to eliminate the threats to independence or to reduce them
to an acceptable level, or when a firm chooses not to eliminate the activities or interest creating the
threat , the only course of action available will be the
a. Issuance of an adverse opinion
b. Issuance of qualified opinion or disclaimer of opinion.
c. Issuance of unmodified opinion with explanatory paragraph
d. Refusal to perform, or withdrawal from , the assurance engagement.

70. Firm-wide safeguards in the work environment may include.

a. Leadership of the firm that stresses the importance of compliance with the fundamental
principles.
b. Having appropriate body independent of management appoint the external auditor.
c. The creation of a corporate governance structure that provides appropriate oversight and
communication regarding the firm’s services.
d. Professional standards.

71. Safeguards within the clients systems and procedure may include:
a. Involving another firm to perform or re-perform part of the assurance engagement.
b. Discussing independence issues with audit committee or others charged with governance.
c. Policies and procedures to emphasize the assurance client’s commitment to fair financial
reporting.
d. Involving an additional professional accountant to review the work done or otherwise advise as
necessary.

72. The rotation of senior accounting personnel can be regarded as a safeguard

a. Created by the profession.
b. Created within the client’s system and procedures
c. Created in the work environment
d. Created within the business community.
73. Which of the following is not one of the safeguards in the work environment?
a. Using different partners and teams with separate reporting lines for the provision of non-
assurance services to an assurance client.
b. Rotation of senior personnel
c. Documented internal policies and procedures requiring compliance with the fundamental
principles.
d. Continuing professional education requirements.

74. Which of the following statements about CPA’s financial interest in a client is incorrect?
a. Immaterial indirect financial interest impairs the CPA’s independence.
b. Immaterial direct financial interest impairs the CPA’s independence.
c. Material direct financial interest impairs the CPA’s independence.
d. Material indirect financial interest impairs the CPA’s independence.

75. Which of the following safeguards could address the threat created by a material direct financial interest in
an assurance client?
A b c d
Disposal of financial interest in total yes yes no yes
Disposal of sufficient amount of financial interest to make
It immaterial yes yes yes no
Removing its member of the assurance team from
The assurance client. Yes no no yes
76. If a firm, or a network firm, has a material direct financial interest in an audit client of the firm, the self-
interest threat created would be so significant no safeguards could reduce the threat to an acceptable
level. The action appropriate to permit the firm to perform the engagement would be to.
a. Dispose of the financial interest
b. Dispose of a sufficient amount of it so that the remaining interest is no longer material.
c. Either a or b
d. Neither a nor b.

77. If a member of the assurance team, or their immediate family member has a direct financial interest, or a
material indirect financial interest, in the assurance client, the self-interest threat created would be so
significant. Consequently, the professional accountant should apply appropriate safeguards in order to
eliminate the threat or reduce it to an acceptable level. Which of the following safeguards would not be
appropriate?
a. Dispose of the direct financial interest prior to the individual becoming a member of the
assurance team.
b. Dispose of the indirect financial interest in total prior to the individual becoming a member of the
assurance team.
c. Dispose of a sufficient amount of the indirect financial interest so that the remaining interest is no
longer material prior to the individual becoming a member of the assurance team.
d. Limit the participation of the member of the assurance team.

78. Close business relationship can be regarded as an indirect financial interest and therefore would impair the
professional accountan’s independence unless.
a. The amount is immaterial
b. The relationship is insignificant
c. Bothe a and b
d. Neither a or b

79. Close family members do not include.

a. Parents c. non-dependent child
b. Sibling d. spouse

80. Immediate family members include.

a. Parent c. non-dependent child
b. Sibling d. spouse

81. Loans from an assurance client that is a financial institution will not impair the independence of the
professional accountant if:

A b c d
The loan is immaterial yes yes no no
The loan was obtained under normal
Lending procedures, terms and requirements yes no no yes

82. The following loans and guarantees would not create a threat to independence , except:
a. A loan form, or a guarantee thereof by , an assurance client that is a bank or a similar institution,
to the firm, provided the loan is immaterial to both the firm and the assurance client.
b. A loan from, or a guarantee thereof by, an assurance client that is bank or a similar institution, to
a member of the assurance team, provided the loan is immaterial to both the firm and assurance
client.
c. Deposits made by, or broker accounts of a, firm or a member of the assurance team with an
assurance client that is a bank, broker or similar institution, provided the deposit or account is
held under normal a commercial terms.
d. A loan to an assurance client that is not a bank or similar institution.

83. An auditor’s independence is considered impaired if the auditor has :

a. An immaterial, indirect financial interest in a client.
b. An outstanding P5,000 balance on a credit card issued by a client.
c. An automobile loan from a client bank, collateralized by the automobile.
d. A joint, closely held business investment with the client that is material to the auditor’s net worth.

84. A self-interest threat may be created if fees due from an assurance client for professional services remain
unpaid for a long time. Hence, professional fees for prior year’s engagements must be paid before:
a. The client engages the services of the professional accountant to audit the current year’s
financial statements.
b. The professional accountant formulates an opnion on the current year’s financial statements.
c. The audit report on the current year’s financial statements is issued.
 d. The commencement of the current year’s audit engagement.

85. Examples of close business relationships that may create self-interest and intimidation threat likely
include.
a. Having a material financial interest in a joint venture with the assurance client or a controlling
owner, director, officer, or other individual who performs senior managerial functions for that
client.
b. Arrangements to combine one or more services or products of the firm with one or more services
or products of the assurance client and to market the package with reference to both parties.
c. Distribution or marketing arrangements under which the firm acts as a distributor or marketer of
the assurance client’s products or services, or the assurance client acts as the distributor or
marketer of the products or services of the firm.
d. The purchase of goods and services from an assurance client by the firm (or from an audit client
by a network firm) or a member of the assurance team, provided the transaction is in the normal
course of business and on an arm’s length basis.

86. Which of the following activities would least likely impair the professional accountant’s independence?
a. Serving as an officer or director of an auditor client.
b. Determining which recommendation of the firm should be implemented.
c. Being an honorary board member of an audit client.
d. Reporting in a management role, to those changed with governance.

87. Which of the following would least likely be considered a violation of the independence rules?
a. Receiving a gift from an assurance client.
b. Providing tax consultancy services to an audit client.
c. Providing legal services to an assurance client in legal dispute.
d. Providing bookkeeping services to an audit client that is listed in the stock exchange.

88. Independence of an auditor in relation to the enterprise may be impaired under the following cases, except
a. Having a direct or material indirect financial interest in the enterprise.
b. Connection with the enterprise as a promoter, underwriter, voting trustee, director, officer or
employee.
c. Having a loan to or from the enterprise or any officer, director, or principal stockholder thereof
with certain exceptions.
d. Engaged to render management advisory services to the enterprise.

89. An engagement partner who is rotated in the audit of financial statements of listed entity can only
participate on the audit engagement for the same client after a period of.
a. Two years
b. Three years
c. Five years
d. Twelve years.

90. Which of the following will not normally impair the auditor’s independence ?
a. An 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 of the assurance engagement.
b. A member of the assurance team participates in the assurance engagement while knowing or
having reason to believe, that he or she is to, or may, join the assurance client sometime in the
future.
c. A partner or employee of the firm serves as an officer or as a director on the board of an
assurance client.
d. A partner or an employee of the firm receives a token gift from an assurance client.

91. Contingent fee pricing of public accounting services is:

a. Never restricted in public accounting practice.
b. Considered an act discreditable to the profession.
c. Always strictly prohibited in public accounting practice.
d. Prohibited for clients for whom assurance services are provided.

92. In determining estimates of fees, an auditor may take into account each of the following, except the
a. Value of the service to the client.
b. Degree of responsibility assumed by undertaking the engagement
c. Skills required to perform the service.
d. Attainment of specific findings.

93. The CPA should not undertake an engagement if his fee is to be based upon.
a. A percentage of audited net income.
b. Per diem rates plus expenses.
 c. A fixed amount
d. The complexity of the service rendered

94. In which of the following situations would a public accounting firm have violated the Code of Ethics in
determining its fee?
a. A fee which is based upon the nature of the engagement rather than upon the actual time spent
on the engagement.
b. A fee based on the degree of responsibility that the service entails.
c. A fee based on whether or not the audit report leads to the approval of client’s application for
loan.
d. A fee that will be established as a result of a bankruptcy proceedings.

95. Fees are not to be regarded as contingent if these are.

a. Computed as a percentage of the client’s net income.
b. Computed as a percentage of the amount tat the company can save from its tax return.
c. Dependent on the approval of a bank loan.
d. Based on judicial or other government agency proceedings.

96. The provision of legal services by a firm, or network firm, to an entity that is an audit client may create
Advocacy threat self-review threat
a. Yes no
b. No yes
c. No no
d. Yes yes

97. A director, an officer or an employee of the assurance client in a position to exert direct and significant
influence over the subject matter of the assurance engagement has been a member of the assurance
team or partner of the firm. This would situation most likely create.
a. Self-interest threat c. intimidation threat
b. Self-review threat d. familiarity threat

98. The approach to a potential client for the purpose of offering professional services is called.
a. Indecent proposal c. encroachment
b. Solicitation d. advertising

99. The communication to the public of facts about a professional accountant which are not designed for the
deliberate promotion of that promotional accountant is called.
a. Advertising c. solicitation
b. Publicity d. advertising

100.A professional accountant in public practice to whom the existing accountant or the client of existing
accountant has referred audit, accounting , taxation, consulting or similar appointments, or who is
consulted in order to meet the needs of the client is called:
a. A management consultant c. an expert
b. A receiving accountant d. a successor auditor

101.A successor auditor is required to communicate with the previous auditor. The primary concern in this
communication is
a. Information which will help the successor auditor determine whether there are issues about
management integrity.
b. To learn about client by examining predecessor’s working papers.
c. To enable successor auditor to perform a more efficient audit.
d. To save successor auditor time and money in gathering data.

Philippine Accountancy Act of 2004

102.The objective of the Philippine Accountancy Act 2004 includes:

a. The standardization and regulation of accounting education
b. The examination for registration of certified public accountants.
c. The supervision, control, and regulation of the practice of accountancy in the Philippines.
d. All of the above.

103.Which of the following does not constitute a practice of accountancy>

a. a person holding out himself as one skilled in the knowledge, science and practice of accounting
and as a qualified person render professional services as a CPA to more than one client.
 b. A person representing his/her employer before government agencies on tax and other accounting
related matters.
c. A person in educational institution teaching accounting, auditing, business law, taxation or other
technically related subjects.
d. A person is appointed as a marketing director of a government owned and controlled corporation.

104.The following statements relates to the Board of Accountancy. Which statement is correct?
a. The board consists of a Chairman and six members.
b. The chairman and members are appointed by the President of the Philippines upon
recommendation of PICPA.
c. The Professional Regulation Commission may recover from the Board and members whose
certificate to practice has been removed or suspended.
d. Majority of the board members shall as much as possible be in public practice.

105.The Professional Regulatory Board of Accountancy shall be composed of the chairman and (6) members to
be appointed by the (LISTA A) from a list of three recommences for each position and ranked by the (list B)
from a list of five (5) nominees for each position submitted by (LIST C).
LIST A LIST B LIST C
a. Commission PICPA President of the Phils.
b. President of the Phils PICPA commission
c. Commission Commission PICPA
d. President of the Philippines Commission PICPA.

106.Which of the following statements about the composition of the Board of Accountancy is incorrect?
a. The board shall be composed of a chairman and six members.
b. The members of the Board shall be appointed by the President of the Philippines from a list of
three recommendees for each position and ranked by the Commission, from a list of five
nominees for each positions submitted by accredited Professional Organization or PICPA.
c. The Board shall elect a chairman from among its members to serve for a term of one year.
d. If the APO fails to submit its nominees within 60days prior to expiry of the team of an incumbent
chairman or member, the commission in consultation with the Board shall submit to the president
a list of three nominees for each vacant position.

107.Which of the following is not one of the qualifications of the members of the Board of Accountancy?
a. He/she must be a natural-born citizen and a resident of the Philippines.
b. He/she must be a duly Certified Public Accountant with at least ten years of experience in practice
of public accountancy.
c. He/she must not have any direct or indirect pecuniary interest in any school, college, university,
or institution offering a BS Accountancy course or institution conducting review classes in the
preparation for the licensure examination at the time of his appointment to the Board.
d. He/she must not be a director or officer of PICPA at the time of his appointment.

108.Which of the following is not one of the qualifications of the members of the Board of accountancy?
a. Must be a natural –born CPA and resident of the Philippines.
b. Must be a duly Certified Public Accountant with at least ten years of experience in practice of
accountancy.
c. Must be of good moral character.
d. Must not have been convicted of crimes involving moral turpitude.

109.Which statement is correct regarding the term of office of the chairman and the members of the Board of
Accountancy (BOA)?
a. No person who has served three (3) successive complete terms shall be eligible for reappointment
until the lapse of one (1) year.
b. Appointment to fill up an unexpected term is to be considered a complete term.
c. A person may serve in the Board of Accountancy for eight consecutive years.
d. No person shall serve in the Board for more than 10 years.

110.The president of the Philippines, upon the recommendation of the commission, may suspend or remove
any member of the Board of Accountancy. Which of the following is not a valid ground for suspension or
removal of members of the board of Accountancy?
a. Neglect of duty or incompetence.
b. A member of the Board of Accountancy manipulated the CPA licensure examination results.
c. A member of the Board has violated RA 9298.
d. A member of the Board has been sued of crimes involving moral turpitude.

111.Which of the following is not a function of the Board of Accountancy?

a. To supervise the registration, licensure and practice of accountancy in the Philippines.
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.

112.Which is least function of the Board of Accountancy?

a. To prepare, adopt, issue or amend syllabi at the subjects for examinations in consultation with the
academe.
b. To prepare question for the CPA licensure examination which shall strictly within the scope of the
syllabi of the subjects for examination?
c. To investigate violation of the RA 9298
d. To supervise PICPA

113.Which of the following is not one of the functions of the Board of Accountancy specifically provided under
the RA 9298?
a. To monitor the conditions affecting the practice of accountancy and adopt such measures deemed
proper for the enhancement and maintenance of high professional, ethical, accounting and
auditing standards.
b. To conduct an oversight into the quality of audits of financial statements trough a review of the
quality control measures.
c. To delegate its power and function to determine and prepare test questions for the CPA licensure
examination.
d. To make investigation as it deems necessary to determine whether any person has violated any
provisions of this law or any standards promulgated by the Bard as part of the rules governing the
practice of accountancy.

114.The auditing standards setting body created by the PRC is known as

a. Financial Reporting Standards Council (FRSC)
b. Auditing Standards and Practices Council (ASPC)
c. Accounting Standards Council (ASC)
d. Auditing and Assurance Standards Council (AASC)

115.Which of the following statements is correct about AASC?

a. The AASC shall be composed of a chairman and six members.
b. The chairman and members of the AASC shall be appointed by the President of the Philippines
from a list of three recommendees ranked by the Commission from the list of % nominees for
each position submitted by APO.
c. The chairman and members of the AASC shall have a term of three years renewable for another
term.
d. The AASC shall elect a Vice Chairman from among its members for a term of one year.

116.The sector that is most represented in the AASC is the.

a. Commerce and industry
b. Academe
c. Government
d. Public practice

117.Which of the following statements about Accounting Standards Setting Council is false?
a. The accounting standards setting body is to be known as Financial Reporting Standards Council
(FRSC)
b. The Accounting standards setting body shall be composed of a chairman and fourteen members.
c. The chairman and members of the standard setting council shall be appointed by the commission
upon the recommendation of the Board in coordination with APO.
d. The public accounting practice is the sector that is most represented in the accounting standard
setting council.
118.Which of the following government regulatory agencies is not represented in the AASC?
a. Securities and exchange Commission
b. Bureau of internal revenue
c. Banko Sentral Ng Pilipinas
d. Board of Accountancy.

119.Educational Technical Council (ETC) differs from accounting and auditing standards setting council in that
a. ETC is composed of 15 members with chairman.
b. The chairman and members of ETC are appointed by the Commission.
c. The chairman and members of ETC have a three year term renewable for another term.
d. The chairman of ETC must have been or presently a senior accounting practitioner in
Academe/education.

120.Which of the following is not one of the functions of ETC?

 a. Recommended to the Board the revocation of the certificate of registration and the professional
identification card of an individual CPA or CPA firm including any of their members who have not
complied with the standards of quality prescribed for the practice of public accountancy.
b. Determine a minimum standard curriculum for the study of accountancy to be implemented in all
schools offering BS Accountancy.
c. Establish teaching standards, including the qualification of the members of the faculty of schools
and colleges of accountancy.
d. Monitor the progress of the program on the study of accountancy and undertaking measures for
the attainment of a high quality accountancy education in the country.

121.The following statements relate to the RA9298. Which statement is true?

a. The Professional Regulation commission has the authority to remove any member of the Board of
Accountancy for negligence, incompetence, or any other just cause.
b. Insanity is not a ground for proceeding against a CPA.
c. No person shall be appointed as a member of the Board of Accountancy unless he has been in the
practice of Accountancy for at least 10 years, among others.
d. After three years, subject to certain conditions, the Board of Accountancy may order the
restatement of a CPA whose certificate of registration has been revoked.

122.The following are qualifications of applicants for CPA licensure examination except.
a. He/she is Filipino Citizen.
b. He/she is of good moral character
c. He/she is holder of the degree of Bachelor of Science in Accountancy
d. He/she is at least 21 years of age.

123.To be qualified as having passed the CPA licensure examination

a. The candidate must have a general weighted average of at least 75%.
b. The candidate must not have a grade lower than 65% in any given subject.
c. Both A and B
d. Neither A or B

124.The board of accountancy shall submit to the PRC the ratings obtained by each candidate within
______days after the examination unless extended for just a cause.
a. 10 b. 5 c. 2 d. 3

125.Any candidate who fails in 2 complete CPA Board examination shall be disqualified from taking another set
of examination unless he or she submits evidence to the satisfaction of the Board that.
a. He/she enrolled in and completed at least 24 units of subjects given in the licensure examination.
b. He/she enrolled in an educational institution offering or conducting review classes in preparation
for CPA Board Examination.
c. He/she enrolled the subject given in the CPA board Examination in the regular course offering.
d. He/she is ready to take another set of examination.

126.Which of the following shall be issued to examinees who pass the CPA licensure examination?
a. Certificate of accreditation
b. Personal identification card.
c. Certificate of registration and professional identification card.
d. Certificate of full compliance and PRC ID.

127.Which of the following is one of the reasons for not issuing a certificate of registration to a successful
examinee? The individual:
a. Is of unsold mind
b. Had been guilty of immoral and dishonorable conduct.
c. Had been convicted by a court of a criminal offense involving moral turpitude.
d. All of given choices.

128.A CPA whose certificate of registration has been revoked.

a. Can no longer be reinstated
b. Is automatically reinstated as a CPA by the PRC after two years if he has acted in an exemplary
manner
c. May he reinstated by the Professional Regulation Commission after two years if he has acted in an
exemplary manner.
d. May he reinstate as a CPA by the Board of Accountancy after two years if he has acted in an
exemplary manner.

129.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.

130.RA 9298, requires that whenever a CPA signs a document in connection with the practice of his/her
profession, he or she must indicate the
Certificate of
Registration social Security Professional Tax
Number number receipt number
a. Yes yes yes
b. Yes no yes
c. No yes no
d. Yes no no

131.The Board of Accountancy may issue certificate of registration and professional identification 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 examination?

132.The Board of Accountancy may, after the expiration of _____ years from the date revocation of a certificate
of registration, reinstate the validity of a revoked certificate of registration.
a. 2 b. 3 c. 4 d. 5

133.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 necessary.
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 news paper of public circulation
shall be deemed compliance with the requirements of RA 9298.

134.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 fine of not more than p50,000
c. Imprisonment for a period not exceeding two years.
d. A fine of not less than P50,000 or by imprisonment for a period not exceeding two years or both.

135.Who is not permitted under RA9298 to practice public accountancy?

a. A corporation, whose stockholders are all CPAs
b. A general partnership
c. A limited liability partnership.
d. A sole proprietorship.

136.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 areas of
public practice?

a. One b. two c. three d. four

137.Below are names of four CPA firms and pertinent facts relating to them. Unless otherwise indicated, the
individuals named are C.P.As. and partners and there are no other partners. Which firm name and
related facts indicated a violation of the Philippines Accountancy Act of 2004?
a. Binhi , binti and bigti CPAs (bigti died about 5 years ago: Binhi and Binti are continuing the firm)
b. Tui and Ramos, CPAs (the name of R. Hermosilla, CPA, a third partner is omitted from the firm).
c. Bitay, and Bigo, CPAs ( Bitay died about three years ago, Bigo is continuing the firm as a sole
practitioner )
d. J. Vicencio and Co., CPAs (J. Vicencio has ten other partners who are all CPAs)
 141 and 143 are based on the following information:
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 ______ on or before _____.

138.a. one year c. three years

b. two years d. five years

139. a. April 15 c. September 30

b December 31 d. May 31

140.If the application for registration to practice public accountancy of Vicencio and CO. CPAs, was approved on
April #0,2016, the registration shall expire on.
a. September 30,2018 c. April 30,2019
b. September 30,2019 d. December 31, 2018

141.Which of the following organization has been recognized by the Commission on October 2,1975 per
Accreditation No. 15 , as Accredited Professional Organization?
a. Board of Accountancy (BOA)
b. Philippine Institute of CPAs (PICPA)
c. Association o f CPAs in Public Practice (ACPAPP)
d. ASSOCIATION OF CPAs IN Education (ACPAE)

142.The PICPA shall renew its certificate of accreditation once every

a. Two years c. four years
b. Three years d. five years

143.Which of the following statements is correct about the PRC CPE Council?
a. The Council shall be composed of six members and a chairperson.
b. The members of the Board shall choose a chairperson from among themselves
c. The members of the Council shall be appointed by the Commission upon recommendation of the
Board in coordination with APO.
d. The chairperson and members of the Council shall have a term of three years renewable for
another term.

144.For every CPE seminars or conventions attended, participant CPAs shall get.
a. One credit unit per hour c. three credit units per hour.
b. Two credit units per hour d. five credit units per hour.

145.A registered professional shall be permanently exempted from CPE requirements upon reaching the age of.
a. 55 years old c. 60 years old.
b. 65 years old d. 70 years old.

146.A registered CPA who is working or practicing his/her professional furthering abroad shall be temporarily
exempted from compliance with CPE requirements during the period of his/her stay abroad, provided that
prior to the date of renewal he/ she has been out of the country for at least.
a. Four years c. two years
b. Three years d. one year

147.Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed the
CPE requirements shall.
a. Be dropped from the roster of CPAs
b. Not be allowed to renew their professional licenses.
c. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills
and experience to discharge their professional responsibility.
d. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE
requirements.

148.Affixing the CPAs real and signature on the auditor’s report is an indication of:
a. CPA’s acceptance of responsibility for the financial statements audited.
b. Compliance by the CPA of the requisite accounting and auditing standards and rules.
c. CPA’s accreditation to practice public accountancy
d. Fair presentation of financial statements audited.

149.Special/temporary permit may be issued by the Board to the following persons except.
 a. A foreign CPA called for consultation or specific purpose which is essential for the development of
the country and that there are no Filipino CPA’s qualified for such consultation or specific purpose.
b. A foreign CPA engaged as a professor or lecturer in the fields essential to accountancy education
in the Philippines.
c. A foreign CPA with specialization in any branch of accountancy and his/her service is essential for
the advancement of accountancy in the Philippines.
d. A foreign CPA who can prove that the country of which he or she is a citizen admits of the
Philippines to the practice of the same professional without restriction.

150.Which of the following statements about working paper is correct?

a. Working papers prepared by a CPA including those prepared and submitted by the client are the
personal property of the auditor and the client has no right to these working papers.
b. Working papers may substitute the client’s accounting records
c. Working papers are subject to confidentiality rules and they cannot be shown to third parties in
any circumstances.
d. Working papers should not serve as a reference source for the clients accounting records.

151.The following statements relate to RA 9298. Identify the incorrect statement.

a. Implementing rules and regulations shall take effect 15 days following its publication in the official
gazette or in any daily newspapers of general circulation.
b. Any person who shall violate any of the provisions of RA 9298 or the IRR shall upon conviction , be
punished by a fine of not more than P50,000 or by imprisonment for a period not exceeding 2
years or both.
c. The board mat after the expiration of 2 years from the date of revocation of Certificate of
registration may reinstate the revoked certificate.
d. All graduates with bachelor’s degree major in Accounting shall be allowed to take the CPA
Licensure examination within two years from the affectivity of RA 9298 or until May 2006.

152.Which of the following functions to promulgate auditing standards?

a. A national Accredited Professional Organization.
b. Financial Reporting Standards Council
c. ACPAPP
d. Auditing and Assurance Standards Council.

153.Rio, CPA is applying for renewal of his professional license. She is exempted from the CPE requirements.
a. If she is at least 65 years old.
b. If she is working abroad and he has been out of the country for at least two years immediately
prior to the date of renewal.
c. Either A or B
d. Under no circumstance.

4. B 12. D 20. C
KEY 5. D 13. D
ANSWER
6. D 14. D
S. 7. B 15. B
8. C 16. D
1. D 9. B 17. B
2. C 10. A 18. C
3. C 11. B 19. A
KEY 100.B 111.D 122.D
ANSWER 112.D 123.C
S 113.C 124.A
114.A 125.A
115.C 126.C
116.D 127.D
117.D 128.D
118.A 129.B
119.D 130.B 141.B
120.A 131.B 142.B
132.A 143.B
21. B 133.D 144.A
22. B 134.D 145.B
23. D 135.A 146.C
24. D 136.C 147.B
25. C 137.C 148.B
26. C 138.C 149.D
27. C 139.C 150.A
28. C 140.D 151.B
29. C 152.D
30. B 41. B 153.C
31. C 42. A
32. D 43. A
33. B 44. C
34. D 45. D
35. A 46. C
36. B 47. B
37. D 48. C
38. B 49. A
39. C 50. A 61. B
40. C 51. D 62. C
52. D 63. A
53. B 64. D
54. A 65. A
55. A 66. B
56. D 67. D
57. B 68. D
58. D 69. D
59. B 70. A 81. A
60. C 71. C 82. D
72. C 83. D
73. D 84. C
74. A 85. D
75. D 86. C
76. A 87. B
77. B 88. D
78. C 89. A
79. D 90. D 101.A
80. D 91. D 102.D
92. D 103.D
93. A 104.A
94. C 105.D
95. D 106.C
96. D 107.B
97. A 108.A
98. B 109.C
99. B 110.D 121.C