NAME : C.

The representation of the responsible party

DATE : that has performed the evaluation or
measurement of the subject matter is not
AUDITING available to the intended users.
PQ2 D. The subject matter information is provided
to the intended users in the assurance
1. CPAs, firms and partnerships of CPAs engaged in report.
the practice of public accountancy including
partners and staff members thereof, shall 6. The following statements relate to the three
register with the PRC and the BOA, such parties involved in an assurance engagement.
registration to be renewed every Which is correct?
A. Three years on or before December 31 A. A responsible party is the person who is
B. Two years on or before December 31 responsible for the subject matter or the
C. Two years on or before September 30 subject matter information.
D. Three years on or before September 30 B. In all assurance engagements, the
responsible party is the engaging party, for
2. Which of the following is not one of the instance, the party that engages the
qualifications of the members of the Board of practitioner
Accountancy? C. The responsible party and the intended
A. Must be a duly registered Certified Public users should always be from different
Accountant with at least ten years of entities.
experience in practice of accountancy. D. A practitioner should not accept an
B. Must be of good moral character. assurance engagement when the subject
C. Must be a natural-born CPA and a resident matter of the engagement requires
of the Philippines. specialized skills and knowledge beyond
D. Must not have been convicted of crimes those ordinarily possessed by the
involving moral turpitude. practitioner.

3. No person shall serve the Professional 7. Suitable criteria are required for reasonably
Regulatory Board of Accountancy for more than consistent evaluation or measurement of the
A. 3 years subject matter of an assurance engagement.
B. 6 years Which of the following statements concerning the
C. 9 years characteristics of suitable criteria is correct?
D. 12 years A. Criteria are sufficiently complete when they
contribute conclusions that are clear,
4. It involves a study or appraisal by the Board or comprehensive, and not subject to different
its duly authorized representatives, of the quality interpretations.
of audit of financial statements through an B. Neutral criteria contribute to conclusions
evaluation of the quality control measures that are free from bias.
instituted by the CPA firm to ascertain C. Relevant criteria allow reasonably
compliance with ethical and technical standards consistent evaluation or measurement of
of public practice. the subject matter including, where
A. Peer review relevant, presentation and disclosure, when
B. Compliance audit used in similar circumstances by similarly
C. Quality review qualified practitioners.
D. External audit D. Reliable criteria contribute to conclusions
that are clear, comprehensive, and not
5. The following are characteristics of "direct subject to significantly different
reporting" assurance engagements, except interpretations.
A. The subject matter information is in the
form of an assertion by the responsible 8. If the auditor is unable to agree to a change of
party that is made available to the intended the engagement and is not permitted to continue
users. the original engagement, the auditor should
B. The practitioner either directly performs the A. Insist on continuing the original
evaluation or measurement of the subject engagement
matter or obtains a representation from the B. Express a qualified opinion
responsible party that has performed the C. Express an adverse opinion
evaluation or measurement. D. Withdraw from the engagement
9. The following statements relate to CPA C. To provide complete information to the
examination ratings. Which of the following is auditor.
incorrect? D. The accumulation and evaluation of
A. To pass the examination, candidates should evidence to support the items in the
obtain a general weighted average of 75% financial statements.
and above, with no rating in any subject less
than 65%. 13. Which of the following statements is the most
B. Candidates who failed in four complete correct regarding errors and fraud?
examinations shall no longer be allowed to A. Errors are always fraud and frauds are
take the examinations the fifth time. always errors.
C. Conditioned candidates shall take an B. Auditors have more responsibility for finding
examination in the remaining subjects fraud than errors.
within two years from the preceding C. An error is unintentional, whereas fraud is
examination. intentional.
D. Candidates who obtain a rating of 75% and D. Frauds occur more often than errors in
above in at least four subjects shall receive financial statements.
a conditional credit for the subjects passed.
14. Which of the following is not one of the
10. A review of a company's financial statements by requirements before accepting an assurance
a CPA firm: engagement?
A. Is significantly less in scope than an audit A. The practitioner should be competent and
and results in a report which provides independent.
positive assurance, although not absolute B. The responsible party and the intended user
assurance. of assurance report should be from different
B. Concludes with the issuance of a report organizations.
expressing the CPA's opinion as to the C. The practitioner should accept the
fairness of the financial statements. engagement only if the subject matter is the
C. Is similar in scope to an audit and adds responsibility of another party
similar credibility to the statements. D. The practitioner should accept the
D. Is designed to provide only moderate engagement only if the subject matter is
assurance. identifiable and in the form that can be
subjected to evidence gathering
11. The auditor's best defense when material procedures.
misstatements are not uncovered is to have
conducted the audit 15. Which of the following is an accurate statement
A. as effectively as reasonably possible. about professional skepticism?
B. in a timely manner. A. Professional skepticism is easy to implement
C. in accordance with generally accepted in practice.
auditing standards. B. It is easy for auditors to understand that
D. only after an adequate investigation of the their clients may try to deceive them
management team. throughout the audit process.
C. Professional skepticism involves a critical
12. An audit is conducted on the premise that assessment of the evidence.
management and, where appropriate, those D. Professional skepticism is only necessary for
charged with governance, have acknowledged, the audits of publicly listed companies.
and understand that they have responsibilities
that are fundamental to the conduct of an audit 16. In the planning stage of an audit engagement,
in accordance with PSAs. Which of the following the auditor is required to perform audit
is not one of those responsibilities? procedures to obtain an understanding of the
A. To provide the auditor unrestricted access to entity and its environment, including its internal
persons within the entity from which the control. These procedures are called
auditor determines it necessary to obtain A. Risk assessment procedures
audit evidence. B. Substantive tests
B. The establishment and maintenance of C. Test of controls
internal control relevant to the preparation D. Dual-purpose tests
and presentation of financial statements
that are free from material misstatement, 17. Substantive analytical procedures performed
whether due to fraud or error. during the testing phase of the audit
 A. are used as a substantive test in support of C. Refer a substantial portion of the audit to
account balances. another CPA who will act as the principal
B. are required under generally accepted auditor.
auditing standards. D. First inform management that an
C. are always done independently from other unqualified opinion cannot be issued.
audit procedures.
D. do not need to be documented in the 23. A principal purpose of a letter of representation
working papers. from management is to
A. Serve as an introduction to company
18. Why should the auditor plan more work on personnel and an authorization to examine
individual accounts as lower acceptable levels of the records.
both audit risk and materiality are established? B. Remind management of its primary
A. To find larger errors responsibility for financial statements.
B. To increase the tolerable error in the C. Discharge the auditor from legal liability for
accounts his examination.
C. To find smaller errors D. Confirm in writing management's approval
D. To decrease the risk of overreliance of limitations on the scope of the audit.

19. After discovering that a related-party 24. Which is least likely beneficial in adequately
transaction exists, the auditor should be aware planning an audit of financial statements?
that the A. Aid the auditor to identify and resolve
A. Transaction is assumed to be outside the potential problems on a timely basis
ordinary course of business. B. Assist in coordination of work done by
B. Substance of the transaction could be auditors of components and experts
significantly different from its form. C. Aid the auditor to devote appropriate
C. Adequacy of disclosure of the transaction is attention to all areas of the audit
secondary to its legal form. D. Assist in the selection of engagement team
D. Financial statements should recognize the members with appropriate levels of
legal form of the transaction rather than its capabilities
substance.
25. An audit supervisor reviewed the work
20. The review of unaudited financial statements performed by the staff to determine if the audit
consists of: was adequately performed. The supervisor
A. Analytical procedures and compliance with accomplished this by primarily reviewing which
laws and regulations. of the following?
B. Inquiry of management and documentation A. Working papers
of internal controls. B. Analytical procedures
C. Inquiry of management and analytical C. Financial statements
procedures. D. Checklists
D. Internal control evaluation and
management representation. 26. Which of the following statements does not
properly describe an element of the theoretical
21. In an assurance engagement, this refers to the framework of auditing?
information obtained by the practitioner in A. An audit benefits the public.
arriving at the conclusions on which the B. The data to be audited are verifiable.
conclusion is based. C. Remoteness of users.
A. Generally accepted auditing standards D. Auditor should maintain independence with
B. Assertions respect to the audit client.
C. Evidence
D. Criteria 27. Inherent limitations in an audit stem from the
following factors except
22. An auditor who accepts an audit engagement A. Most audit evidence is persuasive rather
and does not possess the industry expertise of than conclusive.
the business entity, should B. Internal control limitation.
A. Obtain a knowledge of matters that relates C. Incompetence of the auditor.
to the nature of the entity's business. D. Use of testing.
B. Engage financial experts familiar with the
nature of the business entity.
28. Which of the following statements is true when issuing assurance reports and (b) CPAs
the CPA has been engaged to do an attestation issuing no assurance reports.
engagement?
A. The CPA firm is engaged and paid by the ---Nothing Follows---
client; therefore, the firm has primary
responsibility to be an advocate for the
client.
B. Should a situation arise where there is no
convincing authoritative standard available,
and there is a choice of actions which could
impact client's financial statements either
positively or negatively, the CPA is free to
endorse the choice which is best in the
client's interest.
C. As long as CPA firms are competent, it is not
required that they remain unbiased.
D. The CPA firm is engaged and paid by the
client, but the primary beneficiaries of the
audit are the statement users.

29. In planning and conducting a high-level

assurance engagement, which of the following
statements should the practitioner do?
A. Acknowledge an engagement only if the
subject matter is the responsibility of
another party.
B. Accept the engagement only if the subject
matter is identifiable and in a form that can
be subjected to evidence gathering
procedures.
C. Be satisfied that those performing the
engagement possess collectively the
necessary professional expertise to perform
the engagement.
D. Obtain knowledge of the engagement
circumstances sufficient to identify and
understand the events and transactions that
may have a significant effect on the subject
matter.

30. Which of the following statements about BOA’s

Quality Assurance Review (QAR) Inspection
Program is incorrect?
A. The QAR Program covers all CPAs in the
public accounting sectors, whether as an
individual practitioner or a partnership.
B. Failure to comply with the prescribed
registration and to submit the QAR process
shall be a ground for the non-renewal of the
CPA practitioner’s registration with BOA.
C. The registration of CPA Practitioner with the
QAR program is valid for one year, and shall
be renewed annually for a long as the CPA
issues audit report on the financial
statements of its clients within the first two
months of each calendar year.
D. All CPAs shall be registered in accordance
with the following risk categories: (a) CPAs