1. Statement 1: Assurance engagements do not require independence on the part of the auditor.
Statement 2: Assurance engagements performed by professional accountants are intended to enhance
the credibility of information.
True, True
True, False
False, True
False, False
2. Statement 1: Appropriateness refers to quantity, while sufficiency refers to quality, of evidential
matter.
Statement 2: Evidence obtained directly by the practitioner is less reliable than evidence obtained
indirectly or by inference.
True, True
True, False
False, True
False, False
3. These are standards or benchmarks used to evaluate or measure the subject matter of an assurance
engagement:
Criteria
Engagement process
Assertions
Generally accepted auditing standards
4. In performing an assurance engagement, a professional accountant typically:
Supplies litigation support services
Assesses control risk at low level
Expresses a conclusion about an assertion
Provides management consulting advice
5. Which of the following statements is incorrect?
Assurance services report on the quality of information.
Assurance engagements encompass attestation engagements.
All engagements performed by professional accountants are assurance engagements.
Non-assurance engagements include agreed-upon procedures, compilation of financial or other
information and tax consulting.
6. This engagement involves the application of accounting expertise, as opposed to auditing expertise, in
collecting, classifying and summarizing financial information:
Compilation
Agreed-upon procedures engagement
Tax consulting
Management consulting
7. At the end of this engagement, the CPA provides a report of factual findings as a result of undertaking
procedures
previously agreed with the client:
Tax consulting
Management consulting
Compilation
Agreed-upon procedures engagement
8. Statement 1: After conducting an audit and release of the auditor's report, the primary responsibility
on the fairness of the financial statements is shifted to the auditor.
Statement 2: Information risk is the risk that information provided to users may be materially misstated.
True, True
True, False
False, True
False, False
9. Statement 1: An audit, if properly conducted, ensures that fraud is prevented.
Statement 2: The use of selective testing is one of the reasons why auditors can provide reasonable (but
not absolute) assurance on the fairness of financial statements.
True, True
True, False
False, True
False, False
10. Auditing includes both a(n):
Documentation process and an evaluation process.
Evaluation process and a reporting process.
Investigative process and a reporting process.
Documentation process and a reporting process.
11. For what reason does an independent auditor gather evidence?
To detect fraud.
To appraises the internal control system.
To assess management performance.
To form an opinion on the financial statements.
12. A primary purpose of an operational audit is to provide
A means to assurance that internal accounting controls are functioning as planned.
A measure of management performance in meeting organizational goals.
The results of internal examination of financial and accounting matters to a company's top level
management.
Aid to the independent auditor, who is conduction the examination of the financial statements.
13. Which of the following types of audit are most similar?
Operational audits and compliance audits.
Independent financial statement audits and operational audits.
Compliance audits and independent financial statement audits.
Internal audits and independent financial statement audits.
14. To provide for the greatest degree of independence in performing internal audit functions, an
internal auditor most
like should report to:
Those charged with governance
The corporate controller
The vice-president for finance.
The shareholders of the company
15. The auditor communicates the results of his/her work through the medium of the:
Engagement letter
Management representation letter
Financial statements
Audit report
16. The three common types of attestation services are:
Audit, review, and other attestation services
Audit, verification, and fraud services
Review, verification, and other attest services
Audit, review, and compilation services
17. Which of the following statements is incorrect?
Evidence provided by original documents is more reliable than evidence provided by photocopies or
facsimiles.
Evidence that is generated internally is more reliable when the related controls are effective.
Evidence is more reliable when it is obtained from management rather than independent sources
outside the entity.
Evidence obtained directly by the practitioner is more reliable than evidence obtained indirectly of by
inference.
18. What body establishes international auditing standards?
The Public Company Accounting Oversight Board.
The International Federation of Accountants.
The World Bank.
The United Nations General Assembly.
19. In the conduct of independent financial audit by a CPA, which of the following is most likely a unique
to the conduct of such audit services as to the work done by practitioners of other professions?
Independence
Professional judgment
Competence
Intelligence
20. Based on the evidences gathered, the auditor found that the financial statements are materially
misstated and the
misstatements are pervasive. What auditor's opinion will be expressed?
Unqualified opinion.
Qualified opinion.
Adverse Opinion.
Disclaimer of opinion.
21. Assurance services can be best described as
Engagement designed to enable an independent practitioner to express an opinion as to the fairness of
historical financial information.
Process that measures and communicates financial data to intended users.
Independent professional services intended to enhance credibility of information to meet the needs
of intended users.
Is broader than attestation but lesser in score than audit.
22. Which of the following is not an element of an assurance engagement?
A three-part relationship involving a practitioner, a responsible party, and intended users.
An appropriate subject matter.
Suitable criteria.
Independence.
23. The measure of the quality of evidence
Appropriateness
Sufficient
Relevance
Reliability
24. The measure of the quantity of evidence
Appropriateness
Sufficiency
Relevance
Reliability
25. Which of the following is not included in a three-party relationship of an assurance engagement?
Practitioner
Responsible party
Intender users
Accountant
26. The two levels of conclusion in an assurance engagement are
Positive and negative
Medium and low
High and low
Reasonable and limited
27. According to the framework for assurance engagement, the criteria must be
Sufficient and appropriate
Sufficient or appropriate
Suitable and available to intended users
Suitable or available to intended users
28. Which is incorrect concerning evidence?
The higher the risk of material misstatement is involved; the more evidence is required.
The better the quality of evidence, the less is required.
The volume of evidence can compensate for its poor quality.
The reliability of evidence is influenced by it source and its nature.
29. Select the incorrect statement from the following generalization on the reliability of evidence.
Evidence is more reliable when it is obtained from independent sources outside the entity.
Evidence that is generat3ed internally is more reliable when the related controls are effective.
Evidence obtained directly by the practitioner is more reliable than when obtained, indirectly even if
the source is not competent.
Evidence provided by original documents is more reliable than evidence provided by photocopies or
facsimiles.
30. Which is correct concerning the concept of professional skepticism?
An assumption that the responsible party is dishonest
A critical assessment, with a questioning mind on the validity of evidence obtained
An assumption that responsible party is trustworthy
Disregarding contradicting information against several of consistent evidence
31. What type of assurance engagement is involved when the practitioner expresses a positive form of
conclusion?
Limited assurance engagement
Positive assurance engagement
Reasonable assurance engagement
Absolute assurance engagement
32. What type of assurance engagement is involved when the practitioner expresses a negative form of
conclusion?
Reasonable assurance engagement
Negative assurance engagement
Assertion-based assurance engagement
Limited assurance engagement
33. Reports on agreed-upon procedures are intended to be distributed
To only the involved parties, who are aware of the reasons for the procedures
Only to the stockholders of the entity
To any party to whom the client wishes
Only to the entity’s management
34. The following are components of assurance engagement risk, except
Inherent risk
Control risk
Detection risk
Business risk
35. An unqualified opinion is not appropriate for either reasonable or limited assurance engagement
when
Circumstances prevent the practitioner from obtaining evidence required to reduce assurance
engagement risk to the appropriate level.
The responsible party or engaging party imposes restriction that prevents the practitioner from
obtaining evidence required to reduce assurance engagement risk to the appropriate level.
Both statements above.
Neither statements above.
36. Reducing assurance engagement risk to zero is very rarely attainable or cost beneficial as a result of
the following factors, except
The use of selective testing.
The fact that much of the evidence available to the practitioner is persuasive rather than conclusive.
The practitioner may not have the required assurance knowledge and skills to gather and evaluate
evidence.
The use of judgment in gathering an evaluating evidence and forming conclusions based on that
evidence.
37. The overall objectives of the auditor in conducting an audit of financial statements are:
I. To obtain reasonable assurance about whether the financial statements as a whole are free from
material
misstatement, whether caused by fraud or error.
II. To report on the financial statements.
III. To obtain conclusive evidence rather than persuasive evidence.
IV. To detect all misstatements, whether due to fraud or error.
I and II only
II and IV only
I, II, and III only
I, II, III, and IV
38. The auditor is required to maintain professional skepticism throughout the audit. Which of the
following statements concerning professional skepticism is false?
A belief that management and those charged with governance are honest and have integrity relieves
the auditor of the need to maintain professional skepticism.
Maintaining professional skepticism throughout the audit reduces the risk of using inappropriate
assumptions in determining the nature, timing, and extent of the audit procedures and evaluating the
results thereof.
Professional skepticism is necessary to the critical assessment of audit evidence.
Professional skepticism is an attitude that includes questioning contradictory audit evidence obtained.
39. The primary responsibility for the adequacy of disclosure in the financial statements rest with the
Partner assigned to the audit engagement
Management of the company
Securities and Exchange Commission
Auditor in charge of the field work.
40. Which of the following characteristics is not considered necessary in determining whether the
criteria are suitable?
Relevance
Neutrality
Reliability
Sufficiency
1. Audit procedures performed to obtain an understanding of the entity and its environment,
including its internal control, and to assess the risks of material misstatements at the financial
statement and assertion levels.
Risk assessment procedures
Tests of control
Substantive procedures
Analytical procedures
2. Audit procedures to test the operating effectiveness of controls in preventing or detecting and
correcting material misstatements at the assertion level.
Risk assessment procedures
Tests of control
Substantive procedures
Analytical procedures
3. Audit procedures to detect material misstatements at the assertion level.
Risk assessment procedures
Tests of control
Substantive procedures
Analytical procedures
4. Acts to be performed in order to obtain audit evidence.
Audit standards
Audit procedures
Audit program
Audit strategy
5. Statement 1: Observation consists of looking at a process or procedure being performed by others.
Statement 2: Confirmation is a specific type of inquiry to obtain representation of information or of an
existing
condition from management.
True, True
True, False
False, True
False, False
6. Statement 1: Subject matter information relates to the nature or assertion with which the
practitioner gathers sufficient evidence.
Statement 2: A subject matter is considered appropriate if it can be subjected to audit procedures on a
test basis.
True, True
True, False
False, True
False, False
7. Assurance engagement
Is an engagement in which a practitioner is engaged to issue, or does issue, a written communication
that expresses a conclusion about the reliability of a written assertion that is the responsibility of
another party.
Is a systematic process of objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence between those assertions and
established criteria and communicating the results to interested users.
Is an engagement in which the auditor provides a moderate level of assurance that the information
subject to the engagement is free of material misstatement.
Is an engagement intended to enhance the credibility of information about a subject matter by
evaluating whether the subject matter conforms in all material respects with suitable criteria,
thereby improving the likelihood that the information will meet the needs of an intended user.
[Link], except one, are elements of an assurance engagement.
Subject matter
Written report
Sufficient appropriate evidence
Independence
9. The two levels of conclusion in an assurance engagement are
Positive and negative
High, medium; low
High and low
Reasonable and limited
10. These refers to assurance engagements in which the evaluation or measurement of the subject
matter is performed by
the responsible party, and the subject matter information is in the form of an assertion by the
responsible party that is
made available to the intended users.
Assertion-based engagement
Direct reporting engagement
Indirect reporting engagement
Reasonable assurance engagement
11. Which of the following is not an assurance engagement?
Audit of prospective financial statements
Review of interim historical financial statements
Comprehensive audit
Preparation of tax returns that use estimates
12. Statement 1: The overall objective of the auditor in financial statements audit is to have an
opinion on whether the
financial statements are prepared, in all material respects, in accordance with the criteria.
Statement 2: The opinion to be expressed by the auditor must pertain individually and separately to
each financial
statement presented by management.
True, True
True, False
False, True
False, False
13. Which of the following statements refers to the definition of auditing?
A service activity which function is to provide quantitative information primarily financial in nature
about economic entities that is intended to be useful in making economic decisions.
The art of recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are in part at least of a financial character and interpreting the results
thereof.
The process of identifying, measuring, and communicating economic information to permit informed
judgment and decisions by users of the information.
A systematic process of objectively obtaining and evaluating evidence regarding assertions about
economic actions and events to ascertain the degree of correspondence between these assertions and
established criteria and communicating the results thereof
14. Absolute assurance is rare in practice due to limitations of assurance engagement. Which of the
following does not
describe such limitation?
Use of selective testing
Inherent limitation of internal controls
The fact that most evidence are merely persuasive
The procedures applied to reasonable assurance engagement are usually comprehensive
15.
Primary responsibility for the assertions in financial statements rests with the:
Audit partner assigned to the engagement
Senior auditor in charge of field work
Staff auditor who drafts the statements
Client’s management
16.
Which of the following statements relating to elements of an audit engagement is incorrect?
Parties in an audit engagement only includes the auditor and the client's management.
The criteria used is the PFRS or IFRS
The auditor shall obtain sufficient appropriate evidence which will be used as a basis in expressing an
opinion
The recipient of the audit report may be restricted.
17.
Which of the following is the best reason why audits are necessary?
Several regulations require financial statements to be audited
So that management and the auditor will share the responsibility for the financial statement
So that additional confidence is available to users of financial statements through the audit report
So that responsibility for the financial statements is transferred from management to the auditor
18.
The following statements relate to CPA examination ratings. Which statement is incorrect?
To pass the examination, the candidates should obtain a general weighted average of 75% and above,
with no rating in any subject less than 65%.
Candidates who obtain a rating of 75% and above in at least four (4) subjects shall receive a
conditional credit for the subjects passed.
Conditioned candidates shall take an examination in the remaining subjects within three (3) years
from the preceding examination.
Candidates who fail in two (2) complete CPA examinations may be allowed to take examinations a
third time provided he or she submits evidence to the satisfaction of the Board that he/she enrolled in
and completed at least twenty-four (24) units of subjects given in the board exam.
19.
The following rating were obtained by an examinee during the May 2021 examination: 98, 95, 74, 64,
98, 72. Based on this information, the examinee is considered
Passed
Topnotcher
Conditional
Failed
20. How many CPE credit units must be accumulated by a registered accounting professional within
the 3-year period starting 2019?
60 credit units
80 credit units
100 credit units
120 credit units
21.
The minimum credit units that shall be earned in each year as required by accreditation of CPAs is
15 credit units in each year
20 credit units in each year
25 credit units in each year
30 credit units in each year
22. The government agency tasked by law of implementing and enforcing the regulatory policies of
the national government with respect to the regulation and licensing of the various professions and
occupations under its jurisdiction
Professional Regulation Commission
Professional Regulatory Board of Accountancy
Commission on Audit
Department of Justice
23.
The area of practice of accountancy namely, public accountancy, commerce and industry,
academe/education, and
government.
Line
Section
Sector
Segment
24.
Which of the following is not mentioned as a power of the Board?
To supervise the registration, licensure, and practice of accountancy.
To issue, suspend, revoke, or reinstate the Certificate of Registration for the practice of the
accountancy profession.
To monitor the conditions affecting the practice of accountancy.
To sentence to imprisonment CPAs who have been found guilty of violations of the Accountancy
Act.
25.
Which of the following is the accredited national professional organization of CPAs in the Philippines?
Board of Accountancy
Association of CPAs in Public Practice
Securities and Exchange Commission
Philippine Institute of Certified Public Accountants
26.
Statement 1: The amount of audit fees depends largely on the volume of audit work and degree of
competence and
responsibility involved.
Statement 2: The most satisfactory method of determining audit fees is to set them at an agreed
percentage of net
profit since this is the best measurement of ability to pay.
True, True
True, False
False, True
False, False
27. CPAs may practice under the following forms of organization, except:
Sole proprietorships
General partnerships
Limited liability partnerships
Corporations
28.
Which of the following statements best describes why the profession of CPAs has deemed it essential
to promulgate a code of professional ethics and to establish a mechanism for enforcing observation of
the Code?
A distinguishing mark of a profession is its acceptance of responsibility to the public.
A pre-requisite to success is the establishment of an ethical code that primarily defines the
professional's responsibility to clients and colleagues.
A requirement of most state laws calls for the profession to establish a code of ethics.
An essential means of self-protection for the profession is the establishment of flexible ethical
standards by the profession.
29.
The following steps are part of the conceptual framework approach. Set the steps in proper order.
I Address threats which are other than clearly insignificant through the application of safeguards.
II. Evaluate the significance of threats to compliance with fundamental principles.
III. Identify threats to compliance with the fundamental principles.
I, II, III
II, III, I
III, I, II
III, II, I
30.
If a CPA cannot implement appropriate safeguards, the professional accountant should do the
following, except:
Decline the specific professional service involved
Discontinue the specific professional service involved.
Resign from the client or the employing organization, as necessary
Issue an adverse opinion on the subject matter of the engagement
31.
The state of mind that permits the provision of an opinion without being affected by influences that
compromise
professional judgment.
Professional skepticism
Integrity
Objectivity
Independence of mind
32.
In which of the situations given below would disclosure by a CPA be in violation of the Code?
Disclosing confidential Information in order to properly discharge the CPA's responsibilities in
accordance with his profession's standards.
Disclosing confidential information in compliance with a subpoena issued by a court.
Disclosing confidential information to another accountant interested in purchasing the CPA's
practice.
Disclosing confidential information in a review of the CPA's professional practice by the Quality
Review Committee.
33. May occur when a previous judgment needs to be re-evaluated by the professional accountant
responsible for that
judgment.
Self-interest threat
Self-review threat
Advocacy threat
Familiarity threat
34.
May occur when a professional accountant promotes a position or opinion to the point that
subsequent objectivity
may be compromised.
Self-interest threat
Self-review threat
Advocacy threat
Familiarity threat
35. Statement 1: Independence requirements must be maintained even after the end of the
engagement.
Statement 2: Independence of mind and in appearance is necessary to enable the professional
accountant in public
practice to express a conclusion, and be seen to express a conclusion, without bias, conflict of interest
or undue
influence.
True, True
True, False
False, True
False, False
36. Statement 1: A professional accountant's compliance with the principle of confidentiality begins
from the start of the professional activity and ends upon its completion.
Statement 2: A professional accountant in business should neither manipulate information nor use
confidential information for personal gain.
True, True
True, False
False, True
False, False
37.
Which of the following is not likely to create a threat to independence?
A court or other public authority established fees
The total fees generated by an assurance client represent a large proportion of a firm's total fees.
A firm obtains an assurance engagement at a significantly lower fee level than that charged by the
predecessor firm or quoted by other firms.
Fees due from an assurance client for professional services remain unpaid for a long time.
38.
A professional accountant in business who is responsible for the financial reporting of the employing
organization when an immediate or close family member employed by the organization makes
decisions that affect the financial reporting of the organization may create
Intimidation Threat
Familiarity Threat
Self-interest Threat
Self-review Threat
39.
A professional accountant or immediate or dose family member facing the threat of dismissal or
replacement over a
disagreement about the application of an accounting principle may create
Self-review Threat
Self-interest Threat
Intimidation Threat
Familiarity Threat
40.
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
Issuance of an adverse opinion
Issuance of qualified opinion or disclaimer opinion
Issuance of unqualified opinion with explanatory paragraph
Refusal to perform, or withdraw from, the assurance engagement
