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EASY
1. Which of the following is responsible for the fairness of representations made in financial
statements?
A. The independent auditor. C. The client's management.
B. The internal auditor. D. The audit committee.

2. Which of the following is not represented in the Auditing and Assurance Standards Council?
A. Board of Accountancy C. Bureau of Internal Revenue
B. BangkoSentralngPilipinas D. Securities and Exchange Commission

3. Roel, CPA is applying for renewal of his professional license. He is exempted from the CPE requirements
A. If he is at least 60 years old.
B. If he is working abroad and he has been out of the country for at least two years
immediately prior to the date of renewal.
C. Either a or b.
D. Under no circumstances.

4. The following statements relate to RA 9298. Which statement is true?

A. The Professional Regulation Commission has the authority to remove any member of the Board of
Accountancy for negligence, incompetence, or any other just cause.
B. Insanity is not a ground for proceeding against a CPA.
C. A person shall be considered to be in the professional practice of accounting if, as an officer in a private
enterprise, he makes decisions requiring professional accounting knowledge.
D. After three years, subject to certain conditions, the Board of Accountancy may order the reinstatement of
a CPA whose certificate of registration has been revoked.

5. When the auditor knows that an illegal act has occurred, the auditor must
A. Issue an adverse opinion.
B. Withdraw from the engagement.
C. Report it to the proper government authorities.
D. Consider the effects on the financial statements, including the adequacy of disclosure.

6. It is in the interest of both client and auditor that the auditor sends an engagement letter, preferably before
A. The performance of substantive testing.
B. The commencement of the engagement.
C. The completion of audit.
D. The issuance of audit report.

7. A basic tool used by the auditor to control the audit work and review the progress of the audit.
A. Audit program C. Engagement letter.
B. Progress flowchart D. Time and Expense Summary
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AVERAGE
8. Which of the following engagements provides third parties the highest level of assurance about the client’s
financial statements?
A. Audit C. Agreed-upon procedures
B. Review D. Compilation

9. In which of the following situations can third parties assume responsibility of the auditor
regarding association with financial information?
A. When the auditor attaches a report to that information.
B. When the auditor consents to the use of the auditor's name in a professional connection.
C. Either a or b.
D. Neither a nor b.

10. A concept relating to the accumulation of the audit evidence necessary for the auditor to
conclude that there are no material misstatements in the financial statements taken as a whole.
A. Reasonable assurance C. Moderate assurance
B. Positive assurance D. Negative assurance

11. The independent auditor lends credibility to client’s financial statements by

A. Maintaining a clear-cut distinction between management’s representations and the auditor’s
representation.
B. Testifying under oath about client’s financial statements.
C. Stating in the auditor’s management letter that the examination was made in accordance with generally
accepted auditing standards.
D. Attaching an auditor’s opinion to the client’s financial statements.

12. A study, appraisal, or review by the BOA or its duly authorized representatives, of the quality ofaudit of financial
statements through a review of the quality control measures instituted by an Individual CPA, Firm or Partnership
of CPAs engaged in the practice of public accountancy.
A. Peer review C. Analytical review
B. Quality review D. Administrative review

13. A partner or employee of the firm serving as an officer or as a director on the board of an
assurance client will most likely create
A. Intimidation threat C. Advocacy threat
B. Self-review threat D. Familiarity threat

14. Cash receipts from sales on account have been misappropriated. Which of the following acts would conceal this
defalcation and least likely to be detected by an auditor?
A. Understating the sales journal.
B. Overstating the accounts receivable control account.
C. Overstating the accounts receivable subsidiary ledger.
D. Understating the cash receipts journal.

15. Which statement is correct regarding the auditor’s communications of audit matters with those charged with
governance?
A. The auditor’s communications of matters include all audit matters of governance interest.
B. An audit of financial statements is designed to identify all matters that may be relevant to those charged
with governance.
C. The auditor’s communications with those charged with governance may be made orally or in writing.
D. None of the above.
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16. When a change in the type of engagement from higher to lower level of assurance is
reasonably justified, the report based on the revised engagement (choose the incorrect one)
A. Should not contain a separate paragraph that refers to the original engagement.
B. Should not refer to any procedures that may have been performed in the original
engagement.
C. Should qualify the opinion due to scope limitation.
D. Omits reference to the original engagement.

17. Which of the following is not normally a planning procedure?

A. Assess the conclusions reached and the evaluation of the overall financial statement
presentation through the use analytical procedures.
B. Consider the risk of the existence of related-party transactions.
C. Consider the nature of the audit reports expected to be rendered.
D. Identify items likely to require adjustments.

18. An understanding of the client’s business and industry and knowledge about the company’s
operations are essential for doing an adequate audit. For a new client, most of this information is obtained
A. From the predecessor auditor. C. At the client’s premises.
B. From the SEC. D. From the permanent file.

19. The management’s assessment of the entity’s ability to continue as a going concern covers a period of:
A. Not longer than 12 months from balance date.
B. At least 12 months from the balance sheet date.
C. Not longer than 12 months from the date of audit report.
D. At least 12 months from the date of audit report.

DIFFICULT
20. Which of the following best describes “high level of assurance”?
A. It refers to the professional accountant having obtained evidence based on procedures
agreed upon between the practitioner and the intended users to be satisfied that findings be reported to
the intended users.
B. It refers to the professional accountant having obtained sufficient external and internal
appropriate evidence to be satisfied that the subject matter is plausible in the
circumstances.
C. It refers to the professional accountant having obtained sufficient appropriate evidence to conclude that
the subject matter conforms in all material respects with identified suitable criteria.
D. It refers to the professional accountant having obtained sufficient evidence to conclude that he has no
knowledge of any required modifications to be made in the financial statements in order for them to
conform of prescribed criteria.

21. Which statement is incorrect regarding assurance engagement risk?

A. Engagement risk is the risk that the practitioner will express an inappropriate conclusion that the subject
matter conforms in all material respects with suitable criteria.
B. All components of the engagement risk model will be significant for all assurance
engagements.
C. The extent to which the practitioner considers the relevant components of engagement risk will be affected
by the engagement circumstances.
D. Business risk is not part of engagement risk and does not affect the application of Philippine Standard on
Assurance Engagements.
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22. Which statement is incorrect regarding an engagement to perform agreed-upon procedures?
A. An auditor is engaged to carry out those 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.
B. The recipients of the report must form their own conclusions from the report by the auditor.
C. The report is restricted to those parties that have agreed to the procedures to be performed.
D. The report on factual findings is expressed in the form of negative assurance.

23. Which statement is incorrect regarding the external auditor’s consideration of the work of
internal auditing?
A. The external auditor should consider the activities of internal auditing and their effect, if any, on external
audit procedures.
B. The external auditor should obtain a sufficient understanding of internal audit activities to assist in planning
the audit and developing an effective audit approach.
C. During the course of planning the audit, the external auditor should perform a preliminary assessment of
the internal audit function when it appears that internal auditing is relevant to the external audit of the
financial statements in specific audit areas.
D. When the external auditor intends to use specific work of internal auditing, the external auditor need not
evaluate and test that work to confirm its adequacy for the external auditor's purposes.

24. Indicate the normal pattern of development for a professional accountant.

I. A period of work experience.
II. High standard of general education.
III. Specific education, training and examination in professionally relevant subjects
A. I, II, III B. II, III, I C. III, II, I D. II, I, III

25. Which statement is incorrect regarding the auditor’s responsibility to consider fraud and error in the audit of
financial statements?
A. The auditor is entitled to accept records and documents as genuine.
B. The auditor is may be held responsible for the prevention of fraud and error.
C. The auditor should consider the risk of material misstatements in the financial statements resulting from
fraud or error.
D. The risk of not detecting a material misstatement resulting from error is lower than the risk of not
detecting a material misstatement resulting from fraud.

26. Example of the type of information that may come to the auditor's attention that may indicate
that noncompliance with laws or regulations has occurred most likely include
A. Payments for specified services or loans to consultants, related parties, employees or
government employees.
B. Payments for goods or services made to the country from which the goods or services
originated.
C. Purchasing at prices significantly above or below market price.
D. Sales commissions or agent's fees that appear reasonable in relation to those ordinarily paid by the entity or
in its industry or to the services actually received.

27. Which of the following is a valid statement about the assessment of control risk?
A. There is a positive relationship between detection risk and the combined level of inherent and control risk.
B. The auditor should consider the assessed levels of inherent and control risks in determining the nature,
timing, and extent of substantive procedures required to eliminate audit risk.
C. Misstatements discovered by conducting substantive procedures may cause the auditor to modify the
previous assessment of control risk.
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D. The assessed level of inherent and control risks can be sufficiently low in order to eliminate the auditor’s
need to perform substantive tests on some assertions.

28. Which statement is incorrect regarding the nature, timing and extent of tests of controls?
A. Those controls subject to testing by performing inquiry combined with inspection or
reperformance ordinarily provide more assurance than those controls for which the audit evidence consists
solely of inquiry and observation.
B. If the auditor plans to rely on controls that have not changed since they were last tested, the auditor
should test the operating effectiveness of such controls at least once in every third audit.
C. The length of time period between retesting controls is a matter of professional judgment, but cannot
exceed three years.
D. The more the auditor relies on the operating effectiveness of controls in the assessment of risk, the greater
is the extent of the auditor’s tests of controls.

29. Which of the following statements is correct regarding the auditor’s primary objective in
performing procedures to obtain an understanding of the internal control structure?
A. The primary objective is to provide the auditor with an evaluation of the consistency of
application of management’s policies.
B. The primary objective is to provide the auditor with knowledge necessary for audit planning.
C. The primary objective is to provide the auditor with evidential matter to use in assessing inherent risk.
D. The primary objective is to provide the auditor with a basis for modifying tests of controls.