INTEGRATED REVIEW 3:​ Auditing

#6 |​ ​Non-Assurance & Related Services, Code of Ethics

Part I: Other Assurance, Non-Assurance, & Related Services (1-65)

1. Reports on compilation engagements should contain the following, except:

A. A statement that the engagement was performed in accordance with the PSA
applicable to compilation engagements.
B. Identification of the financial information noting that it is based on information
provided by management.
C. A statement that management is responsible for the financial information
compiled by the accountant.
D. A statement that the accountant does not express an opinion but expresses only
limited assurance on the financial statements.
(CPAR, 2018)

2. The objective of a compilation engagement is

A. For the accountant to use accounting expertise, as opposed to auditing expertise,
to collect, classify, and summarize financial information.
B. For the auditor to carry out procedures of an audit nature to which the auditor and
the entity and any appropriate third parties have agreed and to report on factual
findings.
C. To enable an auditor to state, on the basis of the procedures which do not provide
all the evidence that would be required in an audit, anything has come to the
auditor’s attention that causes the auditor to believe that the financial statements
are not prepared, in all material respects, in accordance with an identified
financial reporting framework.
D. For the auditor to provide a high, but not absolute, level of assurance that the
financial information is free of material misstatement.
(​Roque, 2016)

3. In performing a compilation of financial statements of an entity, the accountant decides

that modification of the report is not adequate to indicate deficiencies in the financial
statements taken as whole, and the client is not willing to correct the deficiencies. The
accountant should therefore
A. Express an adverse opinion
B. Express a qualification of the negative assurance.
C. Withdraw from the engagement.
D. Perform a review of the financial statements.
(​Roque, 2016)
4. “Prospective financial information” means financial information based on assumptions
about events may occur in the future and possible actions by an entity. It can be in the
form of a projection, a forecast, or a combination of both. A forecast
A. Presents estimates given one or more hypothetical assumptions.
B. Is based on assumptions reflecting conditions expected to exist and courses of
action expected to be taken.
C. Unlike a projection, may contain a range.
D. Is based on the most conservative estimates.
(​Roque, 2016)

5. An examination of a financial forecast is a professional service that involves

A. Assuming responsibility to update management on key events for one year after
the report’s date.
B. Compiling or assembling a financial forecast that is based on management’s
assumptions.
C. Limiting the distribution of the accountant’s report to management and board of
directors.
D. Evaluating the preparation of a financial forecast and the support underlying
management’s assumptions.
(​Roque, 2016)

6. Which of the following standards are to be applied to compilation engagements,

engagements to apply agreed-upon procedures to information, and other related services
engagements as specified by the AASC?
A. PSRSs
B. PSAs
C. PSAEs
D. PSREs
(Roque, 2015)

7. These statements are issued by the AASC to provide interpretive guidance and practical
assistance to auditors in the implementation of PSAs and to promote good practice.
A. PREPSs
B. PAPSs
C. PAEPs
D. PRSPSs
(Roque, 2015)
8. Each page of the financial information compiled by the accountant should include the
following reference, except
A. “Unaudited”
B. “Compiled without Audit or Review”
C. “Refer to Compilation Report”
D. “Compiled, Negative Assurance Expressed”
(Roque, 2015)

9. When performing a compilation engagement, the accountant is required to

A. Assess internal controls
B. Make inquiries of management to assess the reliability and completeness of the
information provided
C. Verify matters and explanations
D. Obtain a general knowledge of the business and operations of the entity
(Roque, 2015)

10. Statements on Standards for Accounting and Review Services establish standards and
procedures for which of the following engagements?
A. Assisting in adjusting the books of account for a partnership
B. Reviewing interim financial data required to be filed with the SEC
C. Processing financial data for clients of other accounting firms
D. Compiling an individual’s personal financial statement to be used to obtain a
mortgage
(Wiley, 2015)

11. The authoritative body designed to promulgate standards concerning an accountant's

association with unaudited financial statements of an entity that is not required to file
financial statements with an agency regulating the issuance of the entity's securities is the
A. Financial Accounting Standards Board
B. General Accounting Office
C. Accounting and Review Services Committee
D. Auditing Standards Board
(Wiley, 2015)

12. A company hires a CPA who has invested in its outstanding bonds payable to issue
accounting reports for the company. Assuming any required disclosures are made, which
of the following reports may the CPA issue?
A. Compilations
B. Reviews
 C. Audits
D. Agreed-upon procedures
(Wiley, 2015)

13. An accountant is required to comply with the provisions of Statements on Standards for
Accounting and Review Services when
■ Reproducing client-prepared financial statements, without modification, as an
accommodation to a client
■ Preparing standard monthly journal entries for depreciation and expiration of
prepaid expenses
A. I only
B. II only
C. Both I & II
D. Neither I nor II
(Wiley, 2015)

14. When compiled financial statements are accompanied by an accountant's report, that
report should state that
A. A compilation includes assessing the accounting principles used and significant
management estimates, as well as evaluating the overall financial statement
presentation
B. The accountant compiled the financial statements in accordance with Statements
on Standards for Accounting and Review Services
C. A compilation is substantially less in scope than an audit in accordance with
GAAS, the objective of which is the expression of an opinion
D. The accountant is not aware of any material modification that should be made to
the financial statements to conform with GAAP
(Wiley, 2015)

15. If requested to perform a review engagement for a nonissuer in which an accountant has
an immaterial direct financial interest, the accountant is
A. Not independent and, therefore, may not be associated with the financial
statements
B. Not independent and, therefore, may not issue a review report
C. Not independent and, therefore, may issue a review report, but may not issue an
auditor’s report
D. Independent because the financial interest is immaterial and, therefore, may issue
a review report
(Wiley 2015)
16. An accountant’s compilation report should be dated as of the date of
A. Completion of fieldwork.
B. Completion of the engagement.
C. Transmittal of the compilation report.
D. The latest subsequent event referred to in the notes to the financial statements.
(CPAR Quizzer)

17. Which of the following is not a basic element of a review report?

A. Title of the report
B. Client’s address
C. Introductory paragraph
D. Auditor’s address
(CPAR Quizzer)

18. The CPA is asked to audit financial statements prepared on a modified cash basis. This is
acceptable provided the CPA
A. Converts the financial statement to an accrual basis before rendering an audit
report.
B. Qualifies the audit opinion for a departure from GAAP.
C. Issues an adverse opinion.
D. States clearly in the audit report that fairness was evaluated within the framework
of the other basis rather than GAAP.
(CPAR Quizzer)

19. An auditor should not issue a report on

A. The achievability of forecasts
B. Internal control
C. Management performance
D. Quarterly financial information
(CPAR Quizzer)

20. Each page of a non-public entity's financial statements reviewed by an accountant should
include the following reference:
A. See Accountant's Review Report.
B. Reviewed, No Accountant's Assurance Expressed.
C. See Accompanying Accountant's Footnotes.
D. Reviewed, No Material Modifications Required.
(Konrath)
21. When the auditor believes that the presentation and disclosure of the prospective financial
information is not adequate, the auditor should
A. Express a qualified or adverse opinion in the report on the prospective financial
information.
B. Withdraw from the engagement.
C. Disclaim the opinion in the report on the prospective financial information.
D. Either A or B.
(CPAR)

22. Which statement is incorrect regarding examination of prospective financial information?

A. The auditor should not accept, or should withdraw from, an engagement when the
assumptions are clearly unrealistic or when the auditor believes that the
prospective financial information will be inappropriate for its intended use.
B. The auditor and the client should agree on the terms of the engagement.
C. The auditor should obtain a sufficient level of knowledge of the business to be
able to evaluate whether all significant assumptions required for the preparation
of the prospective financial information have been identified.
D. The auditor need not obtain written representations from management regarding
the intended use of the prospective financial information, the completeness of
significant management assumptions and management’s acceptance of its
responsibility for the prospective financial information.
(CPAR)

23. Prospective financial information can include financial statements or one or more
elements of financial statements and may be prepared for distribution to third parties in
A. A prospectus to provide potential investors with information about future
expectations.
B. An annual report to provide information to shareholders, regulatory bodies and
other interested parties.
C. A document for the information of lenders which may include, for example, cash
flow forecasts.
D. Any of the above.
(CPAR)

24. Which statement is incorrect regarding report on summarized financial statements?

A. Unless the auditor has expressed an audit opinion on the financial statements from
which the summarized financial statements were derived, the auditor should not
report on summarized financial statements.
 B. Summarized financial statements are presented in considerably less detail than
annual audited financial statements.
C. Summarized financial statements need to be appropriately titled to identify the
audited financial statements from which they have been derived.
D. Summarized financial statements contain all the information required by the
financial reporting framework used for the annual audited financial statements.
(CPAR)

25. Which statement is incorrect regarding report on compliance with contractual

agreements?
A. The auditor cannot be requested to report on an entity’s compliance with certain
aspects of contractual agreements, such as bond indentures or loan agreements.
B. Engagements to express an opinion as to an entity’s compliance with contractual
agreements should be undertaken only when the overall aspects of compliance
relate to accounting and financial matters within the scope of the auditor’s
professional competence.
C. When there are particular matters forming part of the engagement that are outside
the auditor’s expertise, the auditor would consider using the work of an expert.
D. The report should state whether, in the auditor’s opinion, the entity has complied
with the particular provisions of the agreement.
(CPAR)

26. Which statement is correct regarding report on a component of financial statements?

A. This type of engagement may be undertaken as a separate engagement or in
conjunction with an audit of the entity’s financial statements.
B. In determining the scope of the engagement, the auditor need not consider those
financial statement items that are interrelated and which could materially affect
the information on which the audit opinion is to be expressed.
C. The auditor’s examination will ordinarily be less extensive than if the same
component were to be audited in connection with a report on the entire financial
statements.
D. When an adverse opinion or disclaimer of opinion on the entire financial
statements has been expressed, the auditor may report on components of the
financial statements even if those components are so extensive as to constitute a
major portion of the financial statements.
(CPAR)
27. A comprehensive basis of accounting comprises a set of criteria used in preparing
financial statements which applies to all material items and which has substantial support.
Other comprehensive financial reporting frameworks may include the following, except
A. A conglomeration of accounting conventions devised to suit individual
preference.
B. That used by an entity to prepare its income tax return.
C. The cash receipts and disbursements basis of accounting.
D. The financial reporting provisions of a government regulatory agency.
(CPAR)

28. Which statement is incorrect regarding special purpose audit engagements?

A. Before undertaking a special purpose audit engagement, the auditor should ensure
there is agreement with the client as to the exact nature of the engagement and the
form and content of the report to be issued.
B. To avoid the possibility of the auditor’s report being used for purposes for which
it was not intended, the auditor may wish to indicate in the report the purpose for
which the report is prepared and any restrictions on its distribution and use
C. When requested to report in a prescribed format, the auditor should consider the
substance and wording of the prescribed report.
D. The auditor need not consider whether any significant interpretations of an
agreement on which the financial information is based are clearly disclosed in the
financial information.
(CPAR)

29. If the CPA has reason to believe that the information subject to review may be materially
misstated, the CPA should
A. Express a qualified negative assurance.
B. Express an adverse opinion.
C. Withdraw from the engagement.
D. Carry out additional or more extensive procedures.
(Salosagcol, 2014)

30. If the financial statements reviewed contain material misstatements, the practitioner’s
review report should:
A. Express a qualification of the negative assurance.
B. Give an adverse statement
C. Not provide any assurance
D. Either A or B
(Salosagcol, 2014)
31. A report on factual findings is the end product of the auditor when performing
A. Examination
B. Audit
C. Review
D. Agreed-upon procedures
(Salosagcol, 2014)

32. Which of the following procedures would an accountant most likely perform in a
compilation engagement?
A. Collect, classify and summarize financial information.
B. Apply analytical procedures
C. Assess risk components
D. Test the accounting records
(Salosagcol, 2014)

33. Which of the following ethical principles does not apply to an agreed-upon procedure
engagement?
A. Independence
B. Confidentiality
C. Professional behavior
D. Professional competence and due care
(Salosagcol, 2014)

34. In planning a review of financial statements, the auditor should obtain or update his
knowledge of the business. Which of the following is not one of this knowledge of the
business?
A. Entity’s organization
B. Nature of entity’s assets, liabilities, revenues and expenses
C. Accounting system
D. Internal control
(Bobadilla, 2011)

35. A report for agreed-upon procedures ordinarily includes:

Findings Negative Assurance
A. Yes Yes
B. Yes No
C. No Yes
D. No No
(Bobadilla, 2011)
36. Which of the following is generally more important in a review than in a compilation?
A. Determining the accounting basis on which the financial statements are to be
presented.
B. Gaining familiarity with the industry’s accounting principles and practices.
C. Obtaining a signed engagement letter.
D. Obtaining a signed representation letter.
(Bobadilla, 2011)

37. The Philippines Standards on Review Engagements (PSREs) are to be applied in:
A. The audit of historical financial information.
B. Assurance engagements dealing with subject matters other than historical
financial information.
C. The review of historical financial information.
D. The review of both historical and prospective financial information.
(Roque, 2016))

38. In reviewing a company’s financial statements, a practitioner is required to:

A. Send Bank Confirmations.
B. Obtain knowledge of the client’s industry.
C. Obtain a signed engagement letter from the client.
D. Observe client’s physical inventory.
(Roque, 2016)

39. Reports on agreed - upon procedures are intended to be distributed:

A. To only the involved parties, who are aware of the reasons for the procedures.
B. Only to the stockholders of the entity.
C. To any party to whom the client wishers.
D. Only to the entity’s management.
(Roque, 2016))

40. The Philippine Standards on Quality Control (PSQCs) are to be applied to:
A. Assurance engagements only
B. Review engagements only.
C. Compilation and review engagements only.
D. All services that fall under the AASC’s engagement standards.
(Roque, 2016)

41. Statement 1: ​PSA 120 (Framework of Philippine Standards on Auditing) applies to

audits and related services such as taxation and consultancy.
 Statement 2: ​In a review engagement, the auditor provides a high, but not absolute level
of assurance (expressed in the form of negative assurance) that the information subject to
review is free of material misstatement.
A. Only 1 is True
B. Only 2 is True
C. Both are True
D. Both are False
(Roque, 2016)

42. Statement 1: A review of financial statements normally involves an assessment of an

entity’s accounting and internal control systems.
Statement 2: A practitioner engaged to perform related services such as agreed-upon
procedures, review, and compilation need not be the auditor of the entity’s financial
statements.
A. Only 1 is True
B. Only 2 is True
C. Both are True
D. Both are False
(Roque, 2016)

43. Statement 1: In a financial statement audit, reasonable assurance is obtained when the
auditor has gathered sufficient appropriate audit evidence to reduce audit risk to an
acceptably low level.
Statement 2: In general, misstatements are considered to be material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on basis of the financial statements.
A. Only 1 is True
B. Only 2 is True
C. Both are True
D. Both are False
(Roque, 2016)

44. Statement 1: In an engagement to provide assurance about the effectiveness of an

entity’s internal control, the subject matter is the assertion of management about its
effectiveness.
Statement 2:​ An appropriate subject matter is one that is capable of consistent evaluation
or measurement against the identified criteria.
A. Only 1 is True
B. Only 2 is True
 C. Both are True
D. Both are False
(Roque, 2016)

45. Statement 1: The criteria of benchmarks that are used to measure or evaluate the subject
matter of the assurance engagement need not to be available to the intended users.
Statement 2: The quantity of evidence is affected by the risk of the subject matter
information being materially misstated and also by the quality of such evidence (the
greater the risk and the higher then quality, the more evidence is likely to be required).
A. Only 1 is True
B. Only 2 is True
C. Both are True
D. Both are False
(Roque, 2016)

46. Engagement letter for a review of financial statements least likely includes
A. The objective of the service being performed.
B. The fact that the engagement cannot be relied upon to disclose errors, illegal acts
or other irregularities, for example, fraud or defalcations that may exist.
C. A statement that an audit is not being performed and that an audit opinion will not
be expressed.
D. The fact that because of the test nature and other inherent limitations of an audit,
together with the inherent limitations of any accounting and internal control
system, there is an unavoidable risk that even some material misstatement may
remain undiscovered.
(CPAR Handout 2011)

47. Which of the following procedures is not included in a review engagement on a

nonpublic entity?
A. Inquiries of management.
B. Inquiries regarding events subsequent to the balance sheet date.
C. Any procedures designed to identify relationships among data that appear to be
unusual.
D. Communicating any material weaknesses discovered during the study and
evaluation of internal accounting control.
(CPAR Handout 2011)
48. The scope paragraph of the review report least likely includes
A. A reference to Philippine Standard on Auditing applicable to review
engagements.
B. A statement that a review is limited primarily to inquiries and analytical
procedures.
C. A statement that an audit has not been performed, that the procedures undertaken
provide less assurance than an audit and that an audit opinion is not expressed.
D. A statement of the responsibility of the entity's management and the responsibility
of the Auditor.
(CPAR Handout 2011)

49. Which of the following would not be appropriate to a report on an engagement to apply
agreed-upon procedures to specified financial statement items?
A. Indicate the intended distribution of the report.
B. Provide an opinion on the specified elements, accounts, or items.
C. Enumerate the procedures performed.
D. State that the report relates only to the elements, accounts, or items specified
(CPAR Handout 2011)

50. Which statement is incorrect regarding the procedures performed in a compilation

engagement?
A. If the accountant becomes aware that information supplied by management is
incorrect, incomplete, or otherwise unsatisfactory, the accountant should consider
performing appropriate procedures and request management to provide additional
information.
B. The accountant should read the compiled information and consider whether it
appears to be appropriate in form and free from obvious material misstatements.
C. The generally accepted accounting principles in the Philippines and any known
departures therefrom should be disclosed within the financial information, and
their effects should be quantified.
D. The accountant should obtain an acknowledgment from management of its
responsibility for the appropriate presentation of the financial information and of
its approval of the financial information.
(CPAR Handout 2011)

51. Which is incorrect regarding the general principles of a review engagement?

A. The auditor is not required to comply with the “Code of Professional Ethics for
Certified Public Accountants” promulgated by the Board of Accountancy.
B. The auditor should conduct a review in accordance with PSA 910.
 C. The auditor should plan and perform the review with an attitude of professional
skepticism recognizing that circumstances may exist which cause the financial
statements to be materially misstated.
D. For the purpose of expressing negative assurance in the review report, the auditor
should obtain sufficient appropriate evidence primarily through inquiry and
analytical procedures to be able to draw conclusions.
(CPAR 2018)

52. Which of the following is required to be performed in an audit but not in review
engagement?
A. Complying with the “Code of Professional Ethics for Certified Public
Accountants” promulgated by the Board of Accountancy.
B. Planning the engagement.
C. Agreeing on the terms of engagement.
D. Studying and evaluating internal control structure.
(CPAR 2018)

53. Which statement is incorrect regarding procedures and evidence obtained in a review
engagement?
A. The auditor should apply judgment in determining the specific nature, timing and
extent of review procedures.
B. The auditor should apply the same materiality considerations as would be applied
if an audit opinion on the financial statements were being given.
C. There is a greater risk that misstatements will not be detected in an audit than in a
review.
D. The judgment as to what is material is made by reference to the information on
which the auditor is reporting and the needs of those relying on that information,
not to the level of assurance provided.
(CPAR 2018)

54. Which of the following procedures is not included in a review engagement on a

nonpublic entity?
A. Inquiries of management.
B. Inquiries regarding events subsequent to the balance sheet date.
C. Any procedures designed to identify relationships among data that appear to be
unusual.
D. Communicating any material weaknesses discovered during the study and
evaluation of internal accounting control.
(CPAR 2018)
55. An auditor’s standard report on a review of the financial statements of a nonpublic entity
should state that
A. The auditor does not express an opinion or any form of limited assurance on the
financial statements
B. Nothing has come to the auditor's attention based on the review that causes the
auditor to believe the financial statements are not presented fairly, in all material
respects in accordance with generally accepted accounting principles in the
Philippines.
C. The auditor obtained reasonable assurance about whether the financial statements
are free of material misstatement
D. The auditor examined evidence, on a test basis, supporting the amounts and
disclosures in the financial statements
(CPAR 2018)

56. Which of the following statements is correct concerning both an engagement to compile
and an engagement to review a nonissuer’s financial statements?
A. The accountant does not contemplate obtaining an understanding of internal
control.
B. The accountant must be independent in fact and appearance.
C. The accountant expresses no assurance on the financial statements.
D. The accountant should obtain a written management representation letter.
(Wiley, 2014)

57. Statements on Standards for Accounting and Review Services (SSARS) apply when an
accountant has
A. Typed client-prepared financial statements, without modification, as an
accommodation to the client.
B. Provided a client with a financial statement format that does not include dollar
amounts, to be used by the client in preparing financial statements.
C. Proposed correcting journal entries to be recorded by the client that change
client-prepared financial statements.
D. Generated, through the use of computer software, financial statements prepared in
accordance with a comprehensive basis of accounting other than GAAP.
(Wiley, 2014)

58. A CPA is reporting on comparative financial statements of a nonissuer. The CPA audited
the prior year’s financial statements and compiled those of the current year in accordance
with Statements on Standards for Accounting and Review Services (SSARS). The CPA
has added a separate paragraph to the review report to describe the responsibility
 assumed for the prior year’s audited financial statements. This separate paragraph should
indicate
A. The type of opinion expressed previously.
B. That the CPA did not update the assessment of control risk.
C. The reasons for the change from an audit to a review.
D. That the audit report should no longer be relied on.
(Wiley, 2014)

59. An accountant may compile a nonissuer’s financial statements that omit all of the
disclosures required by GAAP only if the omission is
I. Clearly indicated in the accountant’s report.
II. Not undertaken with the intention of misleading the financial statement
users.
A. I only.
B. II only.
C. Both I and II.
D. Either I or II.
(Wiley, 2014)

60. Baker, CPA, was engaged to review the financial statements of Hall Co., a nonissuer.
During the engagement Baker uncovered a complex scheme involving client illegal acts
that materially affect Hall’s financial statements. If Baker believes that modification of
the standard review report is not adequate to indicate the deficiencies in the financial
statements, Baker should
A. Disclaim an opinion.
B. Issue an adverse opinion.
C. Withdraw from the engagement.
D. Issue a qualified opinion.
(Wiley, 2014)

61. One of the conditions required for an accountant to submit a written personal financial
plan containing unaudited financial statements to a client without complying with the
requirements of Statements on Standards of Accounting and Review Services, is that the
A. Client agrees that the financial statements will not be used to obtain credit.
B. Accountant compiled or reviewed the client’s financial statements for the
immediate prior year.
C. Engagement letter acknowledges that the financial statements will contain
departures from generally accepted accounting principles.
 D. Accountant expresses limited assurance that the financial statements are free of
any material misstatements.
(Wiley, 2014)

62. An engagement to apply agreed-upon procedure engagement may be accepted, provided

A. The CPA has audited the financial statements of the client
B. The CPA is independent with respect to the client
C. The client takes full responsibility for the adequacy of procedures to be performed
D. The adequacy of the procedures to be performed will be determined by the CPA
(Salosagcol, 2014)

63. A summary of findings rather than assurance is most likely to be issued on which
engagement?
A. Review
B. Compilation
C. Examination
D. Agreed-upon procedures
(Salosagcol, 2014)

64. Which statement is incorrect regarding agreed-upon procedures?

A. Users of the report assess for themselves the procedures and findings reported by
the auditor and draw their own conclusions from work
B. The report is restricted to those parties that have agreed to the procedures to be
performed since others, unaware of the reasons for the procedures, may interpret
the results.
C. The auditor should conduct an agreed-upon procedures engagement in accordance
with PSRS and the terms of the engagement
D. Where the auditor is not independent, a statement to that effect need not be made
in the report of factual findings
(Salosagcol, 2014)

65. A CPA is not required to comply with the “Code of Professional Ethics for Certified
Public Accountants” promulgated by the Board of Accountancy when performing
A. Review
B. Agreed-upon procedures
C. Compilation
D. None of the above
(Salosagcol, 2014)
Part II: Code of Ethics & The Philippine Accountancy Law (66-130)

66. Due professional care requires

A. A critical review of the work done at every level of supervision
B. The examination of all corroborating evidence available
C. The exercise of error-free judgment
D. A consideration of internal control structure that include tests of controls
(AICPA Adapted)

67. The first general standard requires that the audit of financial statements be performed by
a person or persons having adequate technical training and
A. Independence with respect to the financial statements and supplementary
disclosures
B. Exercising professional care as judged by peer reviewers
C. Proficiency as an auditor, which likely has been acquired from previous
experience
D. Objectivity as an auditor, as verified by proper supervision
(AICPA Adapted)

68. Adequate technical training and proficiency as an auditor encompasses an ability to

understand a computer system sufficiently to identify and evaluate
A. The processing and imparting of information
B. Essential accounting control features
C. All control procedures
D. The degree to which programming conforms to the application of generally
accepted accounting principles
(AICPA Adapted)

69. Competence as a certified public accountant includes all of the following except
A. Having the technical qualifications 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
(AICPA Adapted)

70. Which of the following best describes what is meant by generally accepted auditing
standards?
A. Acts to be performed by the auditor
B. Measures of the quality of an auditor’s performance
 C. Procedures used to gather evidence to support financial statements
D. Audit objectives generally determined on audit engagements
(AICPA Adapted)

71. 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
(Salosagcol, 2014)

72. A CPA shall not disclose confidential 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 client’s permission
(Salosagcol, 2014)

73. The essence of the due care principle is that the auditor should not be guilty of
A. Bias
B. Errors in judgement
C. Fraud
D. Negligence
(Salosagcol, 2014)

74. The code of professional ethics for CPAs promulgated by the Board of Accountancy
applies to
A. All CPAs in Public practice
B. All CPAs in Government
C. All CPAs in public practice and employed in private business
D. All CPAs in public practice, employed in private business and industry, in the
government, and in education.
(Salosagcol, 2014)

75. The underlying reason for a code of professional ethics is

A. That it 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
(Salosagcol, 2014)

76. According to Section 240 of the Code of Ethics, fees charged for assurance engagements
should be a fair reflection of the value of the work involved. In determining professional
fees, the following should be taken into account, except
A. The time necessarily occupied by each person engaged on the work.
B. The outcome or result of a transaction or the result of the work performed.
C. The skill and knowledge required for the type of work involved.
D. The level of training and experience of the persons necessarily engaged on the
work.
(CPAR Special Handouts, 2018)

77. As defined in the Code of Ethics, what is the communication to the public of information
as to the services or skills provided by professional accountants in public practice with a
view to procuring professional business?
A. Advertising
B. Publicity
C. Solicitation
D. Marketing professional services
(CPAR Special Handouts, 2018)

78. When the professional accountant determines that appropriate safeguards are not
available or cannot be applied to eliminate the threats to independence or reduce them to
an acceptable level, the professional accountant shall
I. Eliminate the circumstance or relationship creating the threats.
II. Decline or terminate the audit engagement.
A. I only
B. II only
C. Neither I nor II
D. Either I or II
(CPAR Special Handouts, 2018)

79. A close business relationship between a firm or a member of the audit team, or a member
of that individual’s immediate family, and the audit client or its management may create
A. Self-interest and intimidation threats
B. Self-review and familiarity threats
C. Advocacy and self-review threats
 D. Self-interest and self-review threats
(CPAR Special Handouts, 2018)

80. After evaluating the significance of the threat created by an actual or threatened litigation,
the following safeguards should be applied to reduce the threat to an acceptable level,
except
A. Disclosing to the audit committee, or others charged with governance, the extent
and nature of the litigation.
B. If the litigation involves a member of the assurance team, removing that
individual from the assurance team.
C. Involving an additional professional accountant in the firm who was not a
member of the assurance team to review the work or otherwise advise as
necessary.
D. Withdraw from, or refuse to accept, the assurance engagement.
(CPAR Special Handouts, 2018)

81. The term professional accountant in public practice includes the following, except
A. A sole proprietor providing professional services to a client.
B. Each partner or person occupying a position similar to that of a partner staff in a
practice providing professional services to a client.
C. Professional accountants employed in the public sector having managerial
responsibilities.
D. A firm of professional accountants in public practice.
(CPAR Special Handouts, 2018)

82. 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.
(CPAR Special Handouts, 2018)

83. Which statement is incorrect regarding the Code of Code of Ethics for Professional
Accountants in the Philippines?
A. The objectives as well as the fundamental principles are of a general nature and
are not intended to be used to solve a professional accountant’s ethical problems
in a specific case.
 B. The code is divided into two parts, part A and part B.
C. Part A applies to all professional accountants unless otherwise specified.
D. Part B applies only to those professional accountants in public practice.
(CPAR Special Handouts, 2018)

84. Which of the following is incorrect regarding integrity and objectivity?

A. Integrity implies not merely honesty but fair dealing and truthfulness.
B. The principle of objectivity imposes the obligation on all professional accountants
to be fair, intellectually honest and free of conflicts of interest.
C. Professional accountants serve in many different capacities and should
demonstrate their objectivity in varying circumstances.
D. Professional accountants should neither accept nor offer any gifts or
entertainment.
(CPAR Special Handouts, 2018)

85. Occurs when any product or judgment of a previous assurance engagement or

non-assurance engagement needs to be re-evaluated 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 of the assurance engagement.
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
(CPAR Special Handouts, 2018)

86. Which of the following statements best describes the enforceability of the Interpretations
of the Rules of Conduct?
A. The Interpretations are not enforceable.
B. The Interpretations are enforceable.
C. The Interpretations may be enforceable if they have been reviewed and approved
by the AICPA's Division of Professional Ethics.
D. The Interpretations are not enforceable, but a practitioner must justify departure
from them.
(2012 Pearson Education)

87. Of the four parts of the AICPA's Code of Professional Conduct, which part is
enforceable?
A. Ethical Rulings
 B. Rules of Conduct
C. Principles
D. Interpretations
(2012 Pearson Education)

88. Ethical Rulings are:

I. Explanations relating to broad hypothetical circumstances
II. Not enforceable, but one must justify departure.
III. Explanations relating to specific factual circumstances.
A. I and II
B. I and III
C. II and III
D. I, II, and III
(2012 Pearson Education)

89. Which of the following is not one of the four parts of the AICPA's Code of Professional
Conduct?
A. Principles
B. Rules of Conduct
C. Interpretations
D. Definitions
(2012 Pearson Education)

90. According to the Principles section of the Code of Professional Conduct, all members:
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 attestations services.
D. in public practice should be independent in fact and in appearance when providing
auditing, tax, and other attestation services.
(2012 Pearson Education)

91. Which of the following statements is true when the CPA has been engaged to perform an
audit of financial statements?
A. The CPA firm is engaged and paid by the client therefore, the firm has primary
responsibility to be an advocate 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 standard
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
(Salosagcol 2018)

92. Which of the following is not one of the characteristics of a 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
(Salosagcol 2018)

93. In order to achieve the objectives of the accountancy profession, professional accountants
have to observe a number of prerequisites or fundamental principles. The fundamental
principles include the following, except
A. Objectivity
B. Professional competence and due care
C. Technical standards
D. Confidence
(Salosagcol 2018)

94. 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.
(Salosagcol 2018)

95. Which of the following is the least required in attaining professional competence?
A. High standard 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.
(Salosagcol 2018)
96. Which statement is ​incorrect regarding the Code of Ethics for Professional Accountants
in the Philippines?
A. Professional accountants refer to persons who are Certified Public Accountants
(CPA) and who hold a valid certificate issued by the Board of Accountancy.
B. Where a national statutory requirement is in conflict with a provision of the IFAC
Code, the IFAC Code requirement prevails.
C. The Code of Ethics for Professional Accountants in the Philippines is mandatory
for all CPAs and is applicable to professional services performed in the
Philippines on or after January 1, 2004.
D. Professional accountants should consider the ethical requirements as the basic
principles which they should follow in performing their work.
(CPAR AT-5903)

97. Close family include the following, except

A. Parent
B. Sibling
C. Non-dependent child
D. Spouse
(CPAR AT-5903)

98. FWhich of the following is incorrect regarding independence?

A. Independence consists of independence of mind and independence in appearance.
B. Independence of mind is the state of mind that permits the provision of an opinion
without being affected by influences that compromise professional judgment,
allowing an individual to act with integrity, and exercise objectivity and
professional skepticism.
C. Independence in appearance is the avoidance of facts and circumstances that are
so significant a reasonable and informed third party, having knowledge of all
relevant information, including any safeguards applied, would reasonably
conclude a firm's or a member of the assurance team’s integrity, objectivity or
professional skepticism had been compromised.
D. Independence is a combination of impartiality, intellectual honesty and a freedom
from conflicts of interest.
(CPAR AT-5903)

99. A combination of impartiality, intellectual honesty and a freedom from conflicts of

interest.
 A. Objectivity
B. Independence of mind
C. Professional skepticism
D. Independence
(CPAR AT-5903)

100. Which of the following is incorrect regarding confidentiality?

A. Professional accountants have an obligation to respect the confidentiality of
information about a client’s or employer’s affairs acquired in the course of
professional services.
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 a 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.
(CPAR AT-5903)

101. Safeguards created by the profession, legislation or regulation include the following
except
A. Continuing professional development requirement
B. Professional standards
C. Firm-wide and engagement specific safeguards
D. Educational, training and experience requirements for entry into the profession
(Roque, 2015)

102. Which of the following is not a contingent fee

A. A fee that is dependent upon the approval of the assurance client’s loan
application
B. An audit fee that is based on 5% of the client’s adjusted net income for the current
year
C. A fee that is fixed by a court or other public authority
D. None of the Above
(Roque, 2015)

103. Which of the following is a misunderstanding created by the use of the word
“independence”
 A. Possessing the ability to act with integrity and objectivity
B. Independence precludes relationships that may appear to impair objectivity in
rendering assurance services
C. A person exercising professional judgement should be free from all economic,
financial, and other relationships.
D. Possessing the ability to express a conclusion without being affected by influence
that compromise professional judgment
(Roque, 2015)

104. Which of the following threats to independence may be created by a family and
personal relationships between a member of the assurance team and a director, an officer,
or an employee of the assurance client in a position to exert direct and significant
influence over the subject matter information of the assurance engagement?
A. Self-interest, Familiarity, or Intimidation threat
B. Self-review, Familiarity, or advocacy threat
C. Advocacy, Familiarity or Intimidation
D. Self-interest, advocacy or self-review threats
(Roque, 2015)

105. The following forms of assistance to a financial statement audit client do not
generally threaten the firm’s independence, except
A. Analyzing and accumulating information for regulatory reporting
B. Assisting in resolving account reconciliation problems
C. Authorizing or approving transactions
D. Assisting in the preparation of consolidated financial statements
(Roque, 2015)

106. Litigation support services include the following activities, except

A. Acting as an expert witness
B. Providing assistance to an audit client’s internal legal department
C. Calculating estimated damages or amount that might become receivable or
payable as the result of litigation or other legal dispute
D. Assistance with document management and retrieval in relation to a dispute or
litigation
(Roque, 2015)

107. Which part of the Code of Ethics applies to professional accountants in public
practice?
A. Part A
 B. Part B
C. Part C
D. Part D
(Roque, 2016)

108. Which of the following fundamental ethical principles prohibits association of

professional accountants with reports, returns, communications or other information that
is believed to contain a materially false or misleading statement?
A. Integrity
B. Objectivity
C. Professional competence and due care
D. Confidentiality
(Roque, 2016)

109. For audits of financial statements of listed entities, the engagement partner should not
issue the auditor’s report until the completion of the
A. Engagement Quality Control Review
B. Management Review
C. Engagement Team Review
D. Engagement Partner Review
(Roque, 2016)

110. The implementation of quality control procedures that are applicable to the individual
audit engagement is the responsibility of the
A. CPA firm
B. Engagement quality control reviewer
C. Engagement team
D. Expert contracted by the firm in connection with the audit engagement
(Roque, 2016)

111. The engagement partner should take responsibility for the direction, supervision, and
performance of the audit engagement in compliance with professional standards and
regulatory and legal requirements, and for the auditor’s report that is issued to be
appropriate in the circumstances. Supervision includes the following, except
A. Tracking the progress of the audit engagement.
B. Addressing significant issues arising during the audit engagement, considering
their significance, and modifying the planned approach appropriately.
C. Informing the members of the engagement team of their responsibilities.
 D. Identifying matters for consultation or consideration by more experienced
engagement team members during the audit engagement.
(CPAR 2018)

112. Which of the following threats to independence may be created by family and
personal relationships between a member of the assurance team and a director, an officer,
or an employee of the assurance client in a position to exert direct and significant
influence over the subject matter information of the assurance engagement?
A. Self-interest, familiarity or intimidation threats
B. Self-review, familiarity, or advocacy threats
C. Advocacy, familiarity or self-review threats
D. Self-interest, advocacy or self-review threats
(CPAR 2018)

113. 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 client may create a/an
A. Self-interest threat
B. Self-review threat.
C. Intimidation threat
D. Advocacy threat
(CPAR 2018)

114. Which of the following would not generally create a threat to independence?
A. The purchase of goods and services from an assurance client by the firm (or from
a financial statement audit client by a network firm) or a member of the assurance
team provided that the transaction is in the normal course of business and on an
arm’s length basis.
B. A partner or employee of the firm or a network firm serves as Company Secretary
for a financial statement audit client.
C. Determining which recommendations of the firm should be implemented.
D. Reporting, in a management role, to those charged with governance.
(CPAR 2018)

115. When 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 information of the assurance engagement, or
was in such a position during the period covered by the engagement, the threats to
independence can only be reduced to an acceptable level by
 A. Where possible, structuring the responsibilities of the assurance team so that the
professional does not deal with matters that are within the responsibility of the
immediate family member.
B. Withdrawing from the assurance engagement.
C. Removing the individual from the assurance team.
D. Discussing the issue with those charged with governance, such as the audit
committee.
(CPAR 2018)

116. Is the threat that a professional accountant will not objectively evaluate the results of
the previous judgment made or service performed in forming a conclusion about the
subject matter of the engagement
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
(Salosagcol, 2018)

117. Is the threat that a professional accountant will promote a client’s or employer’s
position to the point that the professional accountant’s objectivity is compromised
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
(Salosagcol, 2018)

118. These are actions or other measures that may eliminate threats or reduce them to an
acceptable level
A. Safeguards
B. Professional behavior
C. Professionalism
D. Fundamental principles
(Salosagcol, 2018)

119. A fundamental principle that imposes the obligation on all professional accountants to
be fair, intellectually honest and free of conflicts of interest
A. Integrity
B. Objectivity
C. Professional competence and due care
 D. Confidentiality
(Salosagcol, 2018)

120. A fundamental principle that implies not merely honesty but it requires being brave
enough to fight for what you believe in
A. Integrity
B. Objectivity
C. Professional competence and due care
D. Confidentiality
(Salosagcol, 2018)

121. Which of the following statements best explains why the CPA profession has found it
essential to establish ethical standards and means for ensuring their observance?
A. Vigorous enforcement of an established code of ethics is the best way to prevent
unscrupulous acts.
B. Ethical standards that emphasize excellence in performance over material rewards
establish a reputation for competence and character.
C. A distinguishing mark of a profession is its acceptance of responsibility to the
public.
D. A requirement for a profession is to establish ethical standards that stress
primarily a responsibility to clients and colleagues.
(CPAR Reviewer, 2016)

122. Which part of the Code establishes the fundamental principles of professional ethics
for professional accountants and provides a conceptual framework that professional
accountants shall apply to identify threats to compliance with the fundamental principles,
evaluate the significance of the threats identified, and apply safeguards, when necessary,
to eliminate the threats or reduce them to an acceptable level?
A. Part A.
B. Part B.
C. Part C.
D. Part D.
​(CPAR Reviewer, 2016)

123. Which of the following is an example of engagement-specific safeguards in the work

environment?
A. Advising partners and professional staff of those assurance clients and related
entities from which they must be independent.
 B. Disclosing to those charged with governance of the client the nature of service
provided and extent of fees charged.
C. A disciplinary mechanism to promote compliance with the firm’s policies and
procedures.
D. Published policies and procedures to encourage and empower staff to
communicate to senior levels within the firm any issue relating to compliance
with the fundamental principles that concerns them.
​(CPAR Reviewer, 2016)

124. Financial interests may be held through an intermediary (for example, a collective
investment vehicle, estate or trust). When control over the investment vehicle or the
ability to influence investment decisions exists, the code defines that financial interest to
be a/an
A. Direct financial interest.
B. Material direct financial interest.
C. Indirect financial interest.
D. Material indirect financial interest.
​(CPAR Reviewer, 2016)

125. Holding a financial interest in an audit client may create a self-interest threat. The
existence and significance of any threat created depends on
I. The role of the person holding the financial interest.
II. Whether the financial interest is direct or indirect.
III. The materiality of the financial interest.
A. I and II only.
B. I and III only.
C. II and III only.
D. I, II, and III.
(CPAR Reviewer, 2016)

126. The concept of materiality is least important to an auditor when considering the
A. Effects of a direct financial interest in the client upon the auditor’s independence.
B. Decision whether to use positive or negative confirmations of accounts
receivable.
C. Adequacy of disclosure of a client’s illegal act.
D. Discovery of weaknesses in a client’s internal control.
(CPAR Reviewer, 2016)
127. A direct financial interest or a material indirect financial interest in the audit client of
a member of the audit team or his immediate family member may create a significant
self-interest threat. Which of the following safeguards would be least likely considered
to eliminate the threat or reduce it to an acceptable level?
A. Discuss the matter with those charged with governance of the audit client.
B. Dispose of the direct financial interest prior to the individual becoming a member
of the audit team.
C. Dispose of the indirect financial interest in total or dispose of a sufficient amount
of it so that the remaining interest is no longer material prior to the individual
becoming a member of the audit team.
D. Remove the member of the audit team from the audit engagement.
​(CPAR Reviewer, 2016)

128. In which of the following situations would a public accounting firm have violated the
code of ethics in determining its fee?
A. A fee is based on whether or not the public accounting firm’s audit report leads to
the approval of the client’s application for bank financing
B. A fee is to be established at a later date by the Bankruptcy Court
C. A fee is based upon the nature of the engagement rather than upon the actual time
spent on the engagement
D. A fee is based on the fee charged by the client’s former auditors
(​Cabrera 2015)​

129. One difference between auditors and other professionals is that most professionals
A. Need not be concerned about remaining independent
B. Don’t have requirements for Continuing Education beyond college
C. Don’t have to pass a rigorous examination
D. Aren’t expected to act in public interest
(​Cabrera 2015)​

130. Although it is impossible to take the extreme position that anything affecting either
independence in fact or in appearance must be eliminated to ensure a high level of respect
in the community, the difficulty with this position is that it is likely to restrict
significantly
A. The services offered to clients
B. The freedom of CPAs to practice in the traditional manner
C. The ability of CPA firms to hire competent safe
D. All of the above
(​Cabrera 2015)​