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An Introduction to Assurance,

Auditing, And Related Services


(review lecture)

Assurance engagements performed by


professional accountants are 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.

The level of assurance provided by


the
professional
a ou ta ts
conclusion conveys the degree of
confidence that the intended user
may place in the credibility of the
subject matter.

The objective of an assurance engagement is for a


professional accountant to evaluate or measure a subject
matter that is the responsibility of another party against
identified suitable criteria, and to express a conclusion
that provides the intended user with a level of assurance
about the subject matter.

An assurance engagement is intended to enhance the


credibility of information about a subject matter by
evaluating whether the subject matter conforms in all
materials respects with suitable criteria, thereby
improving the likelihood that the information will meet
the needs of an intended user.

Assurance services differ from consulting services


in that they:
1. Focus on enhancing the credibility of
information rather than providing advice.
2. Typically involve situations in which one party
wants to monitor another.
Consulting services are usually two-party
arrangements that focus on providing advice on
how to use the information for better outcomes.

The Framework defines and describes the elements and


objectives of an assurance engagement and identifies
engagements to which Philippine standards on Auditing
(PSAs), Philippine Standards on Review Engagements
(PSREs), and Philippine Standards on Assurance
Engagements (PSAEs) apply.

The Framework does not itself establish standards or


provide procedural requirements for the performance of
assurance engagements. PSAs, PSREs, and PSAEs contain
basic principles ,essential procedures and related
guidance, consistent with the concepts in the Framework,
for the performance assurance engagements.

The Philippine Standards on Related Services


(PSRSs) are to be applied to non-assurance
engagements such as compilation and agreedupon procedures engagements.

For assurance engagements regarding historical


financial information, reasonable assurance
engagements are called audits, while limited
assurance engagements are called reviews .

1. Relevance
- Relevance criteria contribute to conclusions that assist decisionmaking by the intended users.
2. Completeness
- Criteria are sufficiently complete when relevant factors that could
affect the conclusion in the context of the engagement are not omitted.
- Complete criteria include, where relevant, bench-marks for
presentation and disclosure.
3. Reliability
- Reliability criteria allow reasonably consistent evaluation or
measurement of the subject matter including, where relevant, presentation
and disclosure, when in similar circumstances by similarly qualified
practitioners.
4. Neutrality
- Neutral criteria contribute to conclusions that are free from bias.
5. Understandability
- Understandability criteria contribute to conclusions that are clear,
comprehensive, and not subject to significantly different interpretations.

The responsible party is the one responsible for the subject matter
of an assurance engagement. For example, an e titys management
is responsible for the preparation and presentation of financial
statements or the establishment and implementation of internal
control.
The term su je t matter i for atio is used in the Framework for
Assurance Engagements to mean the outcome of the evaluation of
the subject matter.
In assertion-based assurance engagements, the evaluation or
measurement of the subject matter against criteria is perfoemed by
the responsible party and the subject matter information ( outcome)
is in the form of an assertion by the responsible party that is made
available to the intended users.

A propose assurance engagement can be accepted when the


pra titio ers preliminary knowledge of the engagement
circumstances indicates that relevant ethical requirements such
as independence and professional competence will be met and
the engagement exhibit all of the characteristics describe in
statement I to V.
Sufficiency is the measure of the quantity of evidence. The
quantity of evidence needed is affected by the quality of such
evidence (the higher the quality the less may be required).
However, merely obtaining more evidence may not
compensate for its poor quality.
Appropriateness is the measure of quality of evidence, that is,
its relevance and its reliability. The reliability of evidence is
influenced by its source and by its nature.

1. The risk that the subject matter information is materially


misstated. This consist of:
a. Inherent risk the susceptibility of the subject matter
information to a material misstatement, assuming that
there are no related controls; and
b. Control risk the risk that a misstatement that could
occur will not be prevented, or detected and corrected, on
a timely basis by related internal controls.
2. Detection risk the risk that the practitioner will not
detect a material misstatement that exists.

The Philippine Standards on Related Services (PSRSs) are to be applied to


compilation engagements, engagements to apply agreed-upon procedures to
information, and other related services engagements as specified by the
AACS.
PSRE 2400 (Engagements to review Financial Statements) and PSRE 2410
(Review of Interim Financial Information Performed by the Independent
Auditor of the Entry) were amended by the AASC in February 2008. The
objective of the amendments made is to clarify to which engagements each
of the standards is to be applied.
The effect of the amendments is summarized as follows:
- PSRE 2400 applies to reviews of historical financial information by
a practitioner other than the e titys auditor.
- PSRE 2410 applies to reviews of historical financial information by
the e titys auditor.
- Reviews of other historical information fall under PSAE 3000
(Revised), Assurance Engagements other than Audits or Reviews of Historical
Financial Information.

The term assura e means the pra titio ers satisfaction as to the
reliability of an assertion being made by one party for use by another party.
The level of assurance that may be provided depends on the procedures
performed and the evidence collected by the practitioner.
According to PSRS 4410 (Engagements to Compile Financial Information),
the accountant should obtain a general knowledge of the business and
operations of the entity and should be familiar with the accounting
principle practices of the industry in which in which the entity operates
and with the form and content of the financial information that is
appropriate in the ir u sta es .
The standard further provides that, the accountant ordinarily obtains
knowledge of these matters through experience with the entity or inquiry
of the e titys perso el .

According to the standard, professional judgment is necessary to the


proper conduct of an audit. The auditor exercises professional judgment in
making decisions about:
- Materiality and audit risk.
- The nature, timing, and extent of audit procedures to be
performed in gathering audit evidence.
- Evaluating whether sufficient appropriate audit evidence has
been obtained.
- Evaluating a age e ts judgments in applying the e titys
applicable financial reporting framework.
- Conclusions to be drawn based on the audit evidence gathered.

Internal auditing includes the audit of:

1. Financial and operating information;


2. Compliance with policies, plans, procedures, laws, regulation,
and contracts;

3. The means of safeguarding assets and verifying their existence;


4. The economy and efficiency with which resources are
employed; and
5. Operations or programs to ascertain whether results are
consistent with established objectives and goals and whether
they are being carried out as prescribed.

Internal auditing is defined as a


independent objective assurance and
consulting activity designed to add value and
improve an orga izatio s operation. It helps
an organization accomplish its objectives by
bringing a systematic , disciplined approach to
evaluate and improve the effectiveness of risk
management, control, and government
processes.

The audit committee is composed of outside directors


who are independent of management. The primary purpose
is to assure that the directors are exercising due care and
external and internal auditors are independent of
management.
The following are some of the audit committee's functions:
1. Select the external auditors.
2. Re ie the e ter al auditors o erall audit pla .
3. Evaluate the results of external and internal audits.
4. Review the internal auditing work schedule, budget, etc.
5. Meet regularly with the internal auditing director.

The o pa s a age e t is respo si le for


setting operating standards. The internal
auditors respo si ilities are to deter i e
that:
1. Management has established such standards
2. The standards are being met.
3. Deviations from established standards are
being identified and corrected.
4. Corrective actions has been taken.

Operational auditing involves a systematic


review and evaluation of an e tit s activities in
relation to the efficient use of its resources and
the effectiveness is accomplishing its
objectives. The objective of operational
auditing is to assess performance, identify
areas for improvement, and develop
recommendations.

A governmental audit is typically designed


to determine whether the auditee has
complied with applicable laws and
regulations.
The types of audits conducted by the
Commission on Audit (COA) are financial audit
and performance audit. Performance audits
include economy, efficiency and program
audits. Included in the scope of financial and
performance audits is determining whether
the entity has complied with applicable laws
and regulations.

Government auditors are required to prepare a


ritte report o the e tit s i ter al o trol a d
assessment of control risk made as part of a
fi a ial state e t audit. The auditors report
should include the following:
1. The s ope of the auditors ork i o tai i g a
u dersta di g of the e tit s i ter al o trol
and in his/her assessment of control risk.
2. The e tit s sig ifi a t o trols i ludi g those
that are established to ensure compliance with
laws and regulations that have a material impact
on the financial statement.

Consulting Services:
While maintaining objectivity and integrity,
the CPA in a consulting services engagement
serves the lie ts interest by pursuing the
objectives established by the understanding with
the client.
Assurance services are
i depe de t
professional services that are intended to
enhance the credibility of information to meet
the needs of an intended user. assurance
services do not encompass consulting services.
Advisory services and transaction services are
both consulting services.

The form of communication with a client in a


consulting service may be written or oral
depending on the:
1. Understanding with the client;
2. Need for a forma; record;
3. Intended use of result;
4. Significance or sensitivity of material
covered; and
5. Degree results are communicated during the
engagement.

AUDITING
A RISK-BASED APPROACH TO
CONDUCTING A QUALITY AUDIT
9th Edition
Karla M. Johnstone | Audrey A. Gramling | Larry E. Rittenberg

NATURE, PHILOSOPHY AND OBJECTIVES

Copyright 2014 South-Western/Cengage Learning

LEARNING OBJECTIVES
1.

2.

3.

4.

Define the objective of external auditing and


describe its role in meeting societys demands for
reliable financial and internal control information
Identify parties involved in preparing and auditing
financial statements and briefly describe their roles
List the types of audit service providers and the
skills and knowledge needed by professionals
entering the external auditing profession
Identify organizations that affect the external
auditing profession and the nature of their effects
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LEARNING OBJECTIVES
5.

6.

Define audit quality and identify drivers of audit


quality as specified by the Financial Reporting
Councils Audit Quality Framework
Identify professional requirements that help to
achieve audit quality and minimize auditor
exposure to lawsuits

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PROFESSIONAL JUDGMENT IN CONTEXT - IMPORTANCE OF


CONDUCTING A QUALITY AUDIT AND COMPLYING WITH
PROFESSIONAL STANDARDS

Penalties MAY BE imposed on PRACTITIONERS if they


failed to:
Exercise due professional care
Exercise professional skepticism
Obtain sufficient evidence necessary to issue an audit
opinion on the financial statements.

Copyright 2014 South-Western/Cengage Learning

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PROFESSIONAL JUDGMENT IN CONTEXT - IMPORTANCE OF


CONDUCTING A QUALITY AUDIT AND COMPLYING WITH
PROFESSIONAL STANDARDS

What is the objective of auditing, and what process


should auditors follow to accomplish this objective?
Why do companies obtain audited financial
statements?
Who are the users of audited financial statements?
What skills and knowledge are needed to be a
competent audit professional?

Copyright 2014 South-Western/Cengage Learning

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PROFESSIONAL JUDGMENT IN CONTEXT - IMPORTANCE OF


CONDUCTING A QUALITY AUDIT AND COMPLYING WITH
PROFESSIONAL STANDARDS

Why is it vital to perform an audit in a quality


manner?
Why are low quality audits, like those performed in
this case, harmful?

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LEARNING OBJECTIVE 1
DEFINE THE OBJECTIVE OF EXTERNAL AUDITING AND DESCRIBE
ITS ROLE IN MEETING SOCIETYS DEMANDS FOR RELIABLE
FINANCIAL AND INTERNAL CONTROL INFORMATION

Copyright 2014 South-Western/Cengage Learning

EXTERNAL AUDITING PROFESSION

Financial statement audit


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

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EXTERNAL AUDITING PROFESSION


Objectives of external auditing is to provide opinions
on:
Reliability of financial statements
Internal control effectiveness

Integrated audit: Provided when an external auditor


is engaged to perform an audit of the effectiveness
of internal control over financial reporting that is
integrated with an audit of financial statements

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EXTERNAL AUDITING PROFESSION


External audit is intended to enhance confidence
that users can place on management-prepared
financial statements
Unqualified audit report: When the auditor issues
this type of report, it implies that the auditor has no
reservations about managements financial
statements or internal controls

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EXTERNAL AUDITING PROFESSION


When the auditor has reservations about the fair
presentation of the financial statements
Audit report is modified to explain the nature of the
reservations

Adverse opinion is expressed when auditors believe


that:
Financial statements taken as a whole are not
presented fairly in conformity with GAAP and/or
Clients internal controls not effective
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EXTERNAL AUDITING: A SPECIAL


FUNCTION
Described as the essence of the external auditing
profession
Most important party served by the auditors is the
public
Auditing requires:
Technical competence
Freedom from bias
Concern for the integrity of the financial reporting
process

Auditors - Guardians of the capital markets


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EXTERNAL AUDITING: A SPECIAL


FUNCTION
Public expects auditors to:
Find fraud
Require that management use accounting principles
that best portray the spirit of the concepts adopted by
accounting standard setters
Be independent of management

Auditing profession faces many pressures


Keeping fees down
Making careful decisions regarding independence
Conducting a quality audit
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AUDITING IN PRACTICE - WHY IS OWNING


STOCK IN AN AUDIT CLIENT UNACCEPTABLE?
When auditors own stock in their audit clients
They are not independent of their clients because they
are part owners

Auditors may make judgments that favor the client


company rather than external users of the financial
statements
External users may perceive an independence
conflict

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EXHIBIT 1.2 - USERS OF AUDITED FINANCIAL STATEMENTS


AND DECISIONS THEY MAKE BASED ON THE REPORTS

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NEED FOR UNBIASED REPORTING AND


INDEPENDENT ASSURANCE - FACTORS
Why is there a risk that information provided by
management may not always be reliable?
Potential bias
Management has incentives to bias financial
information to convey a better impression of financial
data than real circumstances might merit

Remoteness
Organization and users of its financial information are
distant from each other in terms of either geographic
distance or the extent of information available to the
both parties
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NEED FOR UNBIASED REPORTING AND


INDEPENDENT ASSURANCE - FACTORS
Complexity
Difficulty in determining a proper presentation of
complex transactions, information, and processing
systems

Consequences
With unreliable information, investors lose a significant
source of information needed to make important
decisions

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OVERALL OBJECTIVES IN CONDUCTING


AN AUDIT
Obtaining assurance about financial statements
being free from material misstatement
Reporting on financial statements based on
auditors findings

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OVERALL OBJECTIVES IN CONDUCTING


AN AUDIT
In completing these objectives, the auditor:

Complies with relevant ethical requirements


Plans and performs an audit with professional skepticism
Exercises professional judgment
Obtains sufficient appropriate evidence on which to base
the auditors opinion
Conducts audit in accordance with professional auditing
standards

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EXHIBIT 1.3 - THE AUDIT OPINION


FORMULATION PROCESS

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EXHIBIT 1.4 - PARTIES INVOLVED IN PREPARING


AND AUDITING FINANCIAL STATEMENTS

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LEARNING OBJECTIVE 2

IDENTIFY PARTIES INVOLVED IN PREPARING


AUDITED FINANCIAL STATEMENTS AND BRIEFLY
DESCRIBE THEIR ROLES

Copyright 2014 South-Western/Cengage Learning

LEARNING OBJECTIVE 3

LIST THE TYPES OF AUDIT SERVICE PROVIDERS AND


THE SKILLS AND KNOWLEDGE NEEDED BY
PROFESSIONALS ENTERING THE EXTERNAL
AUDITING PROFESSION

Copyright 2014 South-Western/Cengage Learning

PROVIDERS OF EXTERNAL AUDITING


SERVICES
External auditing profession includes:
Sole-practitioner firms
Local and regional firms
Large multinational professional services firms

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PROVIDERS OF EXTERNAL AUDITING


SERVICES
Organizational hierarchy of audit firms
Partners/Owners
Managers
Seniors

Responsible for overall conduct of each audit


Responsible for many audit engagements
being conducted simultaneously
Review audit work of seniors and staff
Responsible for fewer audit engagements
being conducted simultaneously
Responsible for overseeing day-to-day
activities on a specific audit
Oversee performance of auditing procedures

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SKILLS AND KNOWLEDGE NEEDED FOR


EXTERNAL AUDITING PROFESSION
Technical knowledge and expertise
Auditors must:
Understand accounting and auditing authoritative
literature
Develop industry and client-specific knowledge
Develop and apply computer skills
Evaluate internal controls
Assess and respond to fraud risk

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SKILLS AND KNOWLEDGE NEEDED FOR


EXTERNAL AUDITING PROFESSION
Leadership, teamwork, and professional skills
Auditors:
Make presentations to management and audit
committee members
Exercise logical reasoning
Communicate decisions to users
Manage and supervise by providing meaningful feedback
Act with integrity and ethics and Interact in a team
environment
Collaborate and maintain a professional personal
presence
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AUDITING IN PRACTICE - SHOULD I WORK


FOR A LARGE OR A SMALL AUDIT FIRM?
Difference between large and small audit firms

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LEARNING OBJECTIVE 4

IDENTIFY ORGANIZATIONS THAT AFFECT THE


EXTERNAL AUDITING PROFESSION AND THE
NATURE OF THEIR EFFECTS

Copyright 2014 South-Western/Cengage Learning

CONGRESS
Due to various failures in auditing profession during
early 2000s Congress passed the Sarbanes-Oxley Act
of 2002
This legislation had an impact on audit firms through:
Increasing auditor independence
Enhancing the role and importance of audit committee
Requiring reporting on internal control over financial
reporting
Providing new oversight of external auditing profession
by Public Company Accounting Oversight Board
Copyright 2014 South-Western/Cengage Learning

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PUBLIC COMPANY ACCOUNTING


OVERSIGHT BOARD (PCAOB)
Private sector, nonprofit organization
Oversees auditors of public companies
Goal of the PCAOB
To protect the interests of investors and further the
public interest in the preparation of informative, fair,
and independent audit reports

Copyright 2014 South-Western/Cengage Learning

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PUBLIC COMPANY ACCOUNTING


OVERSIGHT BOARD (PCAOB)
Primary responsibilities related to auditors
Registration of audit firms that audit public companies
Periodic inspections of registered audit firms
Establishment of auditing and related standards for
registered audit firms
Investigation and discipline of registered audit firms for
violations of relevant laws or professional standards

Copyright 2014 South-Western/Cengage Learning

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SECURITIES AND EXCHANGE


COMMISSION (SEC)
Governmental body established by Congress in 1934
Regulates the capital market system
Has authority to establish GAAP for companies
whose stock is publicly traded
Responsible to prosecute public companies and their
auditors for violating SEC laws

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AUDITING IN PRACTICE - LOCATING


ENFORCEMENT ACTIONS ON THE SEC WEB SITE
SEC issues enforcement actions:
To penalize individuals and firms for wrongdoings in
auditing professions
To have a deterrence effect

Steps to see what enforcement releases have been


made recently:
Go to www.sec.gov.
Go to the Divisions and Offices section and click
Enforcement
Copyright 2014 South-Western/Cengage Learning

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AUDITING IN PRACTICE - LOCATING


ENFORCEMENT ACTIONS ON THE SEC WEB SITE
Click Accounting and Auditing Enforcement Releases
Click the appropriate year
Click the enforcement release that you wish to read

Copyright 2014 South-Western/Cengage Learning

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AMERICAN INSTITUTE OF CERTIFIED


PUBLIC ACCOUNTANTS (AICPA)
Primary governing organization of the public
accounting profession
Develops standards for audits of nonpublic
companies
Responsible for a peer review program
Provides continuing education programs
Prepares and administers the Uniform CPA
Examination - through its Board of Examiners

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CENTER FOR AUDIT QUALITY (CAQ)


Organization affiliated with AICPA
Dedicated to enhance investor confidence and trust
in financial markets
A thought leader in:
Fostering audit quality
Collaborating with auditors and financial statement
users about emerging issues
Advocating for accounting and auditing standards that
promote auditors effectiveness
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INTERNATIONAL AUDITING AND


ASSURANCE STANDARDS BOARD (IAASB)
Part of the International Federation of Accountants
(IFAC)
A global organization for the accounting profession

Sets International Standards on Auditing (ISAs)


Facilitates convergence of national and international
auditing standards

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COMMITTEE OF SPONSORING ORGANIZATIONS


OF THE TREADWAY COMMISSION (COSO)
Provider of thought leadership and guidance on:
Internal control
Enterprise risk management
Fraudulent deterrence

Provides the internal control framework


Serves as benchmark for auditors

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COMMITTEE OF SPONSORING ORGANIZATIONS


OF THE TREADWAY COMMISSION (COSO)
Sponsored by the following organizations:

Financial Executives International


The American Institute of Certified Public Accountants
The American Accounting Association
The Institute of Internal Auditors
The Association of Accountants and Financial
Professionals in Business (IMA)

Copyright 2014 South-Western/Cengage Learning

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ACCOUNTING STANDARD SETTERS


Generally accepted accounting principles (GAAP)
Has general acceptance and provides criteria by which
to assess the fairness of a financial statement
presentation
GAAP traditionally been set by FASB, with approval by
the SEC in the United States

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ACCOUNTING STANDARD SETTERS


International accounting standards (IFRS International Financial Reporting Standards)
Set by the IFRS Foundation of IASB
Their goal is to develop a single set of international
financial reporting standards that is:
Understandable
Enforceable
Globally accepted

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STATE BOARDS OF ACCOUNTANCY


Certified Public Accountants (CPAs)
Licensed by state boards of accountancy which are
charged with regulating the profession at the state
level
Required by all state boards for passage of Uniform
CPA Examination as one criterion for licensure

Copyright 2014 South-Western/Cengage Learning

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THE COURT SYSTEM


Acts as a quality-control mechanism for the auditing
profession
Third parties may sue CPAs under federal securities
laws, various state statutes, and common law for
substandard audit work

Copyright 2014 South-Western/Cengage Learning

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LEARNING OBJECTIVE 5
DEFINE AUDIT QUALITY AND IDENTIFY DRIVERS OF AUDIT
QUALITY AS SPECIFIED BY THE FINANCIAL REPORTING
COUNCILS AUDIT QUALITY FRAMEWORK

Copyright 2014 South-Western/Cengage Learning

AUDIT QUALITY
Performing an audit in accordance with accepted
auditing standards (GAAS)
Providing assurance that audited financial statements
and disclosures are presented in accordance with
GAAP
Providing assurance that those financial statements are
not materially misstated whether due to errors or
fraud

Copyright 2014 South-Western/Cengage Learning

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EXHIBIT 1.5 - DRIVERS OF AUDIT


QUALITY
Primary drivers of audit quality included in Audit
Quality Framework developed by Financial Reporting
Council (FRC)

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DRIVERS OF AUDIT QUALITY


Audit firm culture contributes to audit quality when
leadership:
Creates work culture where audit quality is valued and
rewarded
Emphasizes that doing the right thing is appropriate
from a public interest perspective
Ensures that employees have time and resources to
address difficult issues
Ensures that monetary considerations do not adversely
affect audit quality
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DRIVERS OF AUDIT QUALITY


Promotes benefits of audit partners seeking guidance
on difficult issues
Ensures that audit firm has quality systems in place
Fosters evaluation and compensation practices
Ensures that audit quality is monitored within audit
firm with appropriate consequences in case of
loopholes

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DRIVERS OF AUDIT QUALITY


Skills and qualities required of engagement team
Understanding clients business and adhering to
auditing and ethical standards
Exhibiting professional skepticism and addressing
issues identified during audit
Ensuring that staff has appropriate experience and is
properly supervised
Ensuring that lower level staff is provided with
mentoring and on the job training opportunities
Attending to and learning during training
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DRIVERS OF AUDIT QUALITY


There is effectiveness of the audit process when:
Audit methodology is well structured and:
Encourages partners and managers to work diligently in
planning the audit
Provides a framework and procedures to obtain sufficient
appropriate audit evidence in an effective and efficient
manner
Requires appropriate audit documentation
Provides for complying with auditing standards, but does
not inhibit professional judgment
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DRIVERS OF AUDIT QUALITY


Ensuring that audit work is effectively reviewed
Audit quality control procedures are effective,
understood, and applied

Quality technical support is available when auditors


encounter unfamiliar situations
Ethical standards are communicated and achieved
Auditors evidence collection not constrained by
financial pressures

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DRIVERS OF AUDIT QUALITY


Reliability and usefulness of audit reporting include:
Audit reports
Auditors appropriately concluding as to the truth and
fairness of financial statements

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DRIVERS OF AUDIT QUALITY


Auditors communicating with audit committee about
the following:
Audit scope
Threats to auditor objectivity
Important risks identified and judgments made in
reaching audit opinion
Qualitative aspects of clients accounting and possible
ways of improving financial reporting

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FACTORS OUTSIDE THE CONTROL OF


AUDITORS
Client corporate governance
Regulatory environment

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LEARNING OBJECTIVE 6

IDENTIFY PROFESSIONAL REQUIREMENTS THAT


HELP TO ACHIEVE AUDIT QUALITY AND
MINIMIZE AUDITOR EXPOSURE TO LAWSUITS

Copyright 2014 South-Western/Cengage Learning

ACHIEVING AUDIT QUALITY AND


MINIMIZING LAWSUITS
Professional requirements that help to achieve audit
quality

Maintaining auditor independence


Participating in review programs
Issuing engagement letters
Making appropriate client acceptance
Evaluating the audit firms limitations
Maintaining quality audit documentation

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PCAOB INDEPENDENCE
REQUIREMENTS
Applicable to auditors of public companies
Designed to address requirements in Sarbanes-Oxley
Act of 2002

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SEC INDEPENDENCE REQUIREMENTS


Taking principles-based approach
Applicable to auditors of public companies
Principles dictate that auditor independence is
impaired when:
Mutual or conflicting interest between accountant and
audit client
Accountant auditing own work
Accountant acting as management or employee of
audit client
Accountant being an advocate for audit client
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AICPA INDEPENDENCE REQUIREMENTS


Threats to independence

Self-review threat
Advocacy threat
Adverse interest threat
Familiarity threat
Undue influence threat
Financial self-interest threat
Management participation threat

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AICPA INDEPENDENCE REQUIREMENTS


Safeguards to avoid independence problems include:
Safeguards created by profession or regulation
Safeguards created by audit client
Safeguards created by audit firm

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REVIEW PROGRAMS
External inspections/peer reviews

Engagement quality reviews

Interoffice reviews

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ENGAGEMENT LETTER
States scope of work to be done on audit
There should be no doubt in the mind of client,
external auditor, or court system - regarding
expectations agreed to by external auditor and client
Includes:
Audit fee
Timing description of external auditors work
Documentation that client is expected to provide to
external auditor
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CLIENT ACCEPTANCE/CONTINUANCE
DECISIONS
Guidelines established to screen out:
Clients in financial and/or organizational difficulty
Clients constituting a disproportionate percentage of
firms total practice
Disreputable clients
Clients offering an unreasonably low fee for auditors
services

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AUDIT FIRM LIMITATIONS


An external audit firm should not undertake
engagement that it is not qualified to handle
Important for smaller and growing firms

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AUDIT DOCUMENTATION
Document everything done on audit
Documentation should clearly show evidence of
supervisory review
Documentation should indicate:
What tests were performed
Who performed them
Any significant judgments made

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A brief history of money and


Banking

Where all begins

1792 - 1750 BC: Money and banking originates in Babylonia out of


the activities of temples and palaces which provided safe places for
the storage of valuables. Initially deposits of grain are accepted and
later other goods including cattle, agricultural implements, and
precious metals.

The Code of Hammurabi includes laws governing banking operations - all


carved in stone!

640 - 630 BC The earliest coins made in Lydia, Asia Minor, consisted of
electrum, a naturally occurring amalgam of gold and silver.

640 - 630 BC: Athens issues bronze and silver coins.


The Athenian public hoards silver coins which, as a result, quickly
disappear from circulation, leaving only the inferior bronze ones

According to Demosthenes 10% is the normal rate of interest for run-ofthe-mill business. For risky business such as lending for shipping rates
of between 20% and 30% are normal.

390 BC The Gauls attack Rome

The cackling of geese in the capitol, where the city's reserves of money
are kept, alerts the defenders. The grateful Romans build a shrine to
Moneta, the goddess of warning, and from Moneta the words money
and mint are derived.

1095-1270: The Crusades

The need to transfer large sums of money to finance the Crusades


provides a stimulus to the re-emergence of banking in western
Europe.

The functions of money

measure of value
medium of exchange
store of value

Money throughout the history of the world


Shells
Live stock
Precious stones
Skulls
Pearls
Wheat
Feathers
Brass
Silver
Gold
Paper money

Gold !

Gold as money

widely accepted
divisible
easy to measure
easy to carry
non-perishable (although it wears out)
impossible to forge

Macro-economic equilibrium

Requires that the demand for money equals the supply of


money

Demand for monetary gold

is a function of economic needs

an expanding economy needs extra money


the demand for monetary gold competes with the
demand from the industry (i.e., electronics, medical
equipment, space research etc.)

Supply of gold

Is a function of natural resources


Nature doesnt care if the People wants to increase the
money supply

Why would governments want to issue


more and more money?

To keep up with demand


Seignorage means more wealth for the issuer
Seignorage = face value of money - cost of issuing money

250 AD: Nero debases the gold and silver coinages.Twenty years
later, the silver content of Roman coins has fallen to only 4%

270 AD: Aurelian issues new, nearly pure coins, using


gold from his eastern conquests

He raises the coins nominal value by 2 times hoping in this


way to stay ahead of inflation.
This "reform" sends inflation soaring.

1542-1551 The Great Debasement

Henry VIII debases the coinage of England as a means of raising

revenue.

1560 Elizabeth I begins the reform of England's debased coinage

Thomas Gresham, after whom Gresham's law ("bad money drives out
good") is named, is an influential adviser.

The debased coins are recalled and melted down and the base and
precious metals separated.

Gold as money: A summary

When debasing of coins is prohibited:

Very little incentive for governments to "fudge" with


the money supply

Gold is even deflationary

Paper money

c. 960- Issues of Chinese paper money start to become regular

Paper money
1659 The earliest British cheque is issued This is an order to the
London goldsmiths Morris and Clayton to pay a Mr Delboe 400.

Because notes are accepted as evidence of ability to pay they are


a convenient alternative to handling coins or bullion.

1690 - The Massachusetts Bay Colony issued the first


paper money in the colonies which would later form the
United States.

Paper money
1698 Coins form less than half the English money supply
Davenant, a contemporary writer, estimates that the total value of coins
in circulation is less than that of tallies, bills, banknotes etc. Increasingly
the power of money creation is passing from the King, in charge of the
mint, to the London money market and provincial banks. Political and
constitutional power is also affected by this transfer of financial power.
1704 Promissory Notes Act
This confirms the legality in England of goldsmith's notes as negotiable,
i.e. payable to the bearer rather than to a named person.

Paper money
1832 Capital punishment for forging banknotes abolished in Britain
The maximum penalty for forgery is reduced from death to
transportation for life (e.g. exile to Australia).

1848 Bank of France is given a nationwide monopoly of note


issues
The national bank is given a monopoly of note issuing to fill the gap
left by the failure of numerous local banks. The Bank of France also
begins to develop a large network of branches in different parts of
the country.

Paper money

was initially a claim on gold

has no natural (intrinsic value), hence acceptance is


backed by guarantees from a central authority
during tumultuous economic periods, drove gold out
of circulation

Key Terms
Monetary Policy measures or actions taken
by the Central Bank to regulate the supply of
money in the economy.
Inflation Targeting focuses mainly on
achieving price stability as the ultimate
objective of monetary policy.
Rural Banks specialize in the extension of

small loans for agricultural purposes as well


as retail traders.

Saving Banks serve primarily as


thrift institutions drawing funds from
households and individual savers and
investing such funds, together with its
capital, in bonds, or in loans secured by
bonds, real estate mortgages and other
forms of security.
Offshore Banking Units this are
branches subsidiaries or affiliates of
foreign banks which are authorize to
transport offshore banking business in
the country.

Trading terminals also known

as MarketWorks terminals, which


are computer-based and run the
MarketWorks program.
Investment House exclusively
vested with the guaranteed
underwriting function and also
offers a wide array of financial
services.

INTRODUCTION
The evolution of the Philippine Financial
System in the Philippines can be viewed
from the major political milestone of the
country namely: 1) the Spanish period; 2)
the American period; 3) the Japanese
occupation; 4) the Post-War and
Independence period; 5) the New society
period; 6) the Post-Marcos era; and 7) The
Ramos, Estrada, and Macapagal- Arroyo
adminisrations.

The Spanish Period


1594 Obras Pias was established and represented

the first organized financial institution in the


Philippines.
August 2, 1882 the first savings bank in the country
was founded by Father Felix Huertas and named
Monte de Piedad y Caja de Ahorros de Manila.
Within a short span of four years a branch of Banco
Peninsula Ultramarino of Madrid was also opened.
1898 the end of Spanish regime , four banks three
commercial and one savings were doing business in
the Philippines.

The American Period


1901 Other foreign and domestics banks

were opened during the American era


including American Bank which operated for
four years.
1902 - the Wai Hung Bank and the Abrue,
Newberry and Reyes Bank both founded
1904- 1906 - the first provincial banks , Bank
of Pangasinan.
1904-1908 Bank of Zamboanga .

1906 The S. Misaka Bank was opened to

serve the local Japanese community.


The Postal Saving Bank was created as a
division of the Bureau of Post to promote the
habit of thrift among the people and to bring
banking to the rural areas.
Act No. 2612, funds were transferred to the
Philippine National Bank.

1916 - called for the establishment of the

PNB.
1900 the first Philippine Commission pass
Act No. 52 providing for the regular
examination and inspection of banks of the
Bureau of Treasury.
1929 the Bureau of banking was created
assuming the power of supervision over this
institutions from the Bureau of Treasury.

The Japanese Occupation


January 2, 1942 - the entry of the

Japanese Imperial forces in Manila,


place the operation of the 17 existing
banks at a standstill.

The Eighties: Universal


Banking
1980 effected a revision in the Philippine

Banking structure including administrative


regulations.
Universal Banking is the conduct of variety
of financial services such as trading of
financial instruments; foreign exchange
activities; underwriting new debt and equity
issues; investment management, insurance;
as well as extension of credit and deposit
gathering.

Advantages of Universal Banking:


Risk Diversification and Expanded
Business Opportunities
Universal Bank it can spread its costs over a
broader base of activities and generate more
revenues by offering bundle of products.
Diversification in turn, reduces risk.
Insurance companies, investment banks and
other suppliers of financial services are moving
toward building financial conglomerates;
Technology firms (such as Microsoft) are

hammering away at banks network-building the


electronic gateways into financial services.

Post-Marcos Era
1986 Mrs. Corazon C. Aquino assumed
presidency after a successful People Power
that ended 2 decades of the Marcos rule.
1991-the asset sold resulted to proceeds of
P14.3 billion, and another P16 billion worth of
assets were added to the net total.

The Nineties: The New Central Bank


(Banko Sentral Ng Pilipinas)
On June 14, 1993 President Ramos signed

into law R.A


3 entitled The New Central
Bank Act, pursuant to the requirements of
the 1987 Constitution for the establishment
of an independent Central Monetary
Authority. Among the major changes
incorporated in the law are the following:

1. A change in the composition of the

Monetary Board: two (2) members from the


government and five (5) full-time members
from the private sector.
2. The adoption of price stability, conducive
to a balanced sustained growth of the
economy and the maintenance of monetary
stability and the convertibility of the peso is
its primary objectives.

3. Strengthening of the regulations and


supervision framework for banks and quasi-

banks through, among others, indemnification


of Monetary Board members and other officials
of Bangko Sentral, including personnel in
departments performing supervisions and
examination functions.
Abolition of two suspense accounts, the
Monetary Adjustment Accounts(MAA) and the
(ESAA).

5. The phase-out of regulatory functions,

e.g., issuing and servicing of government


securities,w/n the period of five years, the
same to be transferred to the Securities and
Exchange Commission.
6. The phase-out of regulatory functions
over finance companies without quasibanking functions..
7. Additional mandatory reports to assure
accountability.

8. Financial Restructing of the CB upon

effectivity of the law.


9. The imposition of requirements on trust
accounts by the Monetary Board are
authorized under the new law.
10. The imposition of interest on loans and
advances made by the CB to any bank w/c has
been placed under receivership, even after
the bank is closed.

Overview of the BSP


Bangko Sentral ng Pilipinas was established on

July 3, 1993 pursuant to the provisions of the


1987 Philippine Constitution and the New
Central Bank Act of 1993.BSP is autonomous in
its fiscal and administrative functions from the
National Government as it pursues its mandated
responsibilities. As its primary objective, BSPs
monetary policy is to promote a low and stable
inflation conducive to a balance and sustainable
economic growth.

Functions of the BSP


a. Liquidity management
b. Currency issue

c. Lender of last resort


d. Financial Supervision
e. Management of foreign currency reserves
f. Determination of exchange rate policy
g. Other activities

The BSP Organization


The Monetary exercises the powers and
functions of the BSP, such as the conduct of
monetary policy and supervision of the
financial system. Its chairman is the BSP
Governors, with five full-time members from
the private sector and one member from
Cabinet.

A deputy governor heads each of the BSPs


operating sector as follows:
Banking Services serves the banking needs of all
banks such as accepting deposits, servicing
withdrawals, and extending credit through the

rediscounting facility.
Supervision and Examination Sector enforces
and monitors compliance to banking laws to
promote a sound and healthy banking system.
Resource Management Sector serves the
human, financial, and physical resource needs of
the BSP.

Monetary Policy
Measures or actions taken by the Central

Bank to regulate the supply of money in the


economy constitute what is called monetary
policy.

Reforming the Banking Law


The opening of the Philippine

economy further saw light under


Joseph Estradas abbreviated
presidency.
The securities regulation code aims at
strengthening the regulation and
supervision of securities market.

Inflation Targeting
The BSP formally adopted inflation
targetting as the framework for monetary
policy at the beginning of 2002.
January 24, 2000 - BSPs policy-making

body, the Monetary Board, approved in


principle, the shift to inflation targeting as a
framework for conducting monetary policy.
It focuses mainly on achieving price stability
as the ultimate objective of monetary policy.

Advantages of the Establishment of


the New Central Bank/Bangko
Sentral ng Pilipinas
The governments assumption of certain
liabilities of the old CB will lower inflation
and interest rates and will result to higher
economic growth, since the BSP will be
relieved of the burden of servicing these
liabilities,, w/c in the past, resulted in large
CB deficit and exerted expansionary
influences on money, and, consequently, on
prices.

Focusing on the Challenges of


Globalization
The world is definitely changing, and with

it are challenges that face present


businesses, financial institutions and the
economy as a whole.
The GFI participants include: the
Development Bank of the Philippines,
LBP,PEICA,SSS,QRCGC, NLSF, and PCFC.
The DTI will serve as the lead agency for the
entire project.

The SULONG program will

provide a faster way for


companies to obtain short-andlong term funds by simplifying
and standardizing lending
procedures and regulations
implemented by the government
financial institution.

Classification of Financial
System
The Banking Sector
For purposes of uniformity, and simplicity,
and equality of treatment, R.A. 7653 entitled
the New Central Bank Act, classified bank
institution into the following categories
a. An expanded commercial bank or a
universal bank and commercial bank;
b. Thrift banks, composed of savings and loan
associations;

C. Private development banks;


D. Regional unit banks,

composed of rural banks.

Strengthening the Banking


System
Some of the steps to ensure that the banking
system will grow stronger are:
a. Changes in the regulatory framework for banks.
b. General guidelines for those banks planning to
offer e-banking services to ensure that banks
have rigorous internal controls and

comprehensive risk management systems that


can adequately take into account the risk
involved in these new banking activities.
c. Mergers and acquisitions and through greater
participation of foreign financial institutions.

The Social Security System


(SSS)
The SSS administers social security protection

to workers in private sector. On the other hand,


the Government Service Insurance System (GSIS)
take care of workers in the public sector.
The SSS administers two programs namely:
1. The Social Security Program; and
2. The Employees Compensation EC Program.
SS provides replacement income for workers in times of
death, disability, sickness, maternity, and old age.

Philippine Stock Exchange


Towards a World-Class
Equity Market
The PSE is a private organization
that provides and ensures a fair,

efficient, transparent and orderly


market for the buying and selling
of securities.

Listed Companies and Trading


Participants
a. Banks and Financial Services-include

companies who provide banking, investment


and financial services.
b. Commercial and Industrial Sector- are
those categorized as holding firms,
telecommunications, food beverage and
tobacco, constructions, power and energy,
transportation services, manufacturing,
distribution and trading, ,hotel, recreation
and other related services.

Land Property Sector


Mining Sector- consist of companies

involved in the extractions of


minerals.
Oil Sector- composed of companies
engaged in the exploration,
extraction production of oil.

Trading Mechanism
MakTrade system- is composed of

hardware, software and network that allow


the trading of securities in a broker to broker
market.
Center Order Bank- the center of the
network, connected to four trading hub
servers.
Trading Terminals- also known as
MarketWorks terminals , which are PC-based
and run the MarketWorks program

Central Clearing and


Depository
The Philippine Central Depositary(PCD)- is

primarily a provider of depository and


settlement system for securities.
The Securities Clearing Corporation of the
Philippines- is the private institutions that
acts as a clearance and settlement agency of
eligible trades executed in the PSE. On
January 17, 2002, SCCP received a
permanent license to operate, and since then
has been responsible for:

Establishing the liabilities between

trading participants of the PSE


Synchronizing the settlement of
funds and transfer of securities.
Guaranteeing the settlement of
trades in the event of trading
participant default and administering
the appropriate risk management
functions in order ensure settlement.

Small and Medium Enterprises


In support of SMEs the
Philippine Stock Exchange opened a
fourth board of SME companies who
wish to enter the equity market, as
they have grown exponentially and
now play an import role in the
economy. This gives them the chance
to acquire their capital requirements
of debt financing.

PSE Dollar Board


Philippine Long Distant Telephone

Co.(PLDT)- is the first listed company


that trades its shares in the dollar
board.
The Central Bank approved the
dollar board under the conditions that
the PSE and its designated cash
settlements.

Private Non Financial


Intermediaries
o
o
o
o
o
o
o
o
o
o
o

Investment house
investment Companies
Finance Companies
Securities Dealers
Securities Brokers
Private insurance companies
Pawnshops or Pawnbrokers
Nonstock saving and loan associations
Mutual and Building loan associations
Credit unions
Trust and pension fund managers

Central Bank/BSP Governors


Name
Miguel Cuaderno, Sr.
Andres V. Castillo
Alfonso Calalang
Gregorio S. Licaros
Jaime C. Laya a
Jose B. Fernandez, Jr.
Gabriel C. Singson
Rafael B. Buenaventura
Amando M. Tetangco, Jr.

Tenure
1949-1960
1961-1967
1968-1970
1970-1981
1981-1984
1984-1990
1993-1999
1999-2005
2005-Present

1. Republic Act No. ________, also known as the


___________ , shall pro ide for a d go er the
standardization and regulation of accounting education;
the examination for registration of CPAs; and the
supervision, control, and regulation of the practice of
accountancy.
2. Which of the following is not an objective of the
Philippine Accountancy Act of 2004?
3. The practice of accountancy includes:
4. A CPA is a public accounting practice when he/she:

5. Section 4 of the Rules and Regulations


Implementing RA 9298 (IRR) provides that any
position in any business or company in the
private sector which requires supervising the
recording of financial transaction preparation of
financial statements, coordinating with the
external auditors for the audit of such financial
statements, and other related functions should
be occupied by a duly registered CPA. It provides
further that the business or company where
such position exist has a:

6. Which of the following statements concerning


the practice of accountancy in the academe/
education is incorrect?
7. A CPA is in the practice of accountancy in
commerce and industry when he/she:
8. The Board of Accountancy shall be composed of
a chairman and ___________ members to be
appointed by the ___________.
9. The Board of Accountancy shall be under the
supervision and administrative control of the ___

10. If the PICPA fails to submit to the PRC its own


nominees within 60 days prior to the expiry of the
terms of an incumbent chairman or member of the
Board of Accountancy (BOA), the PRC in
consultation with the BOA shall submit to the
President a list of how many nominees for each
vacant position?
11. A member of the BOA shall, at the time of
his/her appointment, possess which of the
following qualifications?
12. The chairman and members of the Board of
Accountancy shall hold office for a term of

13. According to Section 7 of the IRR, no person who has


served two successive complete terms as chairman or
member of the BOARD of Accountancy shall be eligible
for reappointment as chairman or member until the lapse
of
14. According to Section 7 of the IRR, no person shall
serve in the Board of Accountancy for more than
15. Which of the following is a function of the Board of
Accountancy?
16. The Board of Accountancy shall elect a vice-chairman
from among its members for a term of

17. According to Section 9(A) of the IRR, the Commission,


upon the recommendation of the Board, shall create an
accounting standard setting body to be known as the
18. According to Section 9(A) of the IRR, the Commission,
upon the recommendation of the Board, shall create an
auditing standard setting body to be known as the
19. The standard setting body shall have a chairman who
had been or presently a senior accounting practitioner in
any of the scope of accounting practice.
20. The standard setting body shall have a chairman who
had been or presently a senior accounting practitioner in
public accountancy

21. The Chairman and the members of the FRSC,


and AASC shall have a terms of
22. Which of the following is not represented in
the AASC?
23. Who has the power to suspend or remove
any member of the Board of Accountancy?
24. An applicant for the CPA licensure
examination should be:

25. The following documents shall be submitted by


the applicants for the CPA licensure examination,
Except
26. Section 16 of the IRR states that to be qualified
as having passed the licensure examination for
accountants, a candidate must obtain a
27. A candidate who obtains the rating of seventyfive percent (75%) and above in at least a majority
of the subjects shall receive a conditional credit for
the subjects passed. He/she shall take an
examination in the remaining subjects within how
many years from the preceding examination?

28. any candidate who fails in two (2) complete CPA


board examination shall be disqualified from taking
another set of examinations unless he/she has
completed at least how many units of subjects
given in the licensure examination?
29. The Board of Accountancy shall submit to the
PRC the ratings obtained by each candidate within
how many calendar days after the examination?

30. The Certificate of Registration issued to


successful examinees.

31. The Professional Identification Card issued to


successful examinees
32. The Board of Accountancy may reinstate the
validity of a revoked Certificate of Registration after
the expiration of how many years from the date of
revocation?
33. The following statement relate to the practice of
public accountancy. Which is incorrect?
35. Which of the following statements concerning
ownership of working papers is incorrect?

35. All registered CPAs shall obtain and use a seal


which shall be circular in form with a smaller circle
ithi eari g the registra ts a e, registratio
number and title. Which of the following is correct?
36. Section 36 (Penal Provision) of RA 9298 states
that any person who shall violate any of the
provisions of the Act or any of its implementing
rules and regulations shall, upon conviction, to be
punished by
37. Which of the following is the accredited
national professional organization of CPAs (APO)?

38. Tanya, Sam, and Jevi, CPAs, a newly formed


partnership, applied for registration with the
Commission and the Board which was approved on
June 30, 2012. The partnership should apply for
renewal of its registration on or before
39. Which of the following statements concerning
the use of firms or partnership name is incorrect?
40. A partner surviving the death or withdrawal of
all the other partners in a partnership may continue
to practice under the partnership name for a period
of not more than ______ years after becoming a
sole proprietor.

41. The death or disability of an individual CPA


and/or the dissolution and liquidation of a firm or
partnership of CPAs shall be reported to the BOA
not later than ___ days from the date of such
death, dissolution or liquidation.
42. As defi ed i A ex C of the IRR, this refers to
the inculcation, assimilation and acquisition of
knowledge, skills, proficiency and ethical and moral
values, after the initial registration of a professional
that raise a d e ha e the professio als te h i al
skills and competence.

43, the PRC CPE Council shall assist the BOA in


implementing its CPE program. WHICH of the
following statements is incorrect concerning the
Cou ils o positio ?
44. The following statement relate to CPE credit
units, which is incorrect?
45. The following statements relate to the
exemption from CPE requirements. Which is false?
46. Which of the following statements concerning a
CPAs dis losure of o fide tial lie t i for atio is
ordinarily correct?

47. Listed below are names of four CPA firms


and pertinent facts relative to each firm. Unless
otherwise indicated, the individuals named are
CPAs a d part ers, a d there are o other
partners. Which is a violation of the
Implementing Rules and Regulations of RA
9298?
48. Which of the following has the power to
conduct an over-sight into the quality of audits
of financial statements through the review of
quality control measures instituted by auditors?

49. In the exercise of its power to conduct an


oversight into the quality of the audits, the BOA
organized the _______ Department of the
Philippine Institute of Certified Public
Accountants (PICPA) to conduct an independent
study, appraisal, or review of the quality of audit
of financial statements.
50. The operation of the Quality Assurance
Review Department (QARD) of the PICPA shall
be supervised by a/an

51. Which of the following is not a responsibility of the


Executive Committee?
52. Which of the following is an incorrect statement
concerning the term of office of the Executive Committee
members?
53. The Head of the QARD who will be appointed by the
Executive Committee is the
54. Which of the following is an incorrect qualifications of
the Chief Inspector of the QARD?
55. Who is responsible for the non-technical aspect of the
QAR program?

56. The QAR program covers all CPAs in


57. Which of the following statement
concerning enrollment in QAR program is/are
correct?
58. CPAs in public practice are required to
register with the QAR program under the
prescribed category. Those whose clients are
public-interest entities (listed and not-listed but
with public accountability) should register under

59. Public-interest entities include publicity-listed


entities and not-listed entitles but with public
accountability. The following are examples of notlisted public-interest entitles, except
60. There are rules to observe in connection with
the registration of CPA practitioners with the QAR
program. Which is incorrect?
61. What is the effectivity date of the BOA
Resolution No.88 (Series of 2008) prescribing the
rules and regulations for the accreditation of
accounting teachers.

62. Which of the following requirements for the


accreditation of accounting teachers shall not apply
to those CPAs already engage in teaching as of the
effectivity date of the Rules and Regulations?
63. The statements relates to the requirement to
complete 12 units of relevant education subjects for
the accreditation of accounting teachers. Which is
correct?

64. Which of the following shall be considered


proof of compliance with the CPE requirement for
accreditation of accounting teachers?

65. What is the required minimum number of CPE


credit units that an accounting teacher shall earn in
each year prior to renewal of accreditation?
66. The certificate of Accreditation issued by the
PRC to an accounting teacher shall:
67. According to the Transitory Provisions of the
BOA Resolution No.88, any tenured/ full-time/ full
load faculty member who does not meet the
accreditation requirements as of the effectivity date
of the Rules and Regulations may be issued a
Provisional Accreditation. Choose the correct
statement

68. Which of the following is responsible for the


registration of corporations and partnerships, as
well as monitoring of compliance with the
Corporation Code, Civil Code provisions on
partnerships, Foreign Investments Act, and other
related laws?

69. Which of the following laws/ regulations govern


the registration of corporations and partnerships
with the SEC?
70. Which of the following entities need not to be
registered with the SEC?

71. The SEC composed of a chairperson and four (4)


commissioners appointed by the President of the
Philippines for a terms of
72. The following statement relate to the
qualifications of the SEC commissioners. Which is
incorrect?
73. Subsection 8.1 of the Securities Regualtion Code
(SRC) providing that securities shall not be sold or
offered for sale or distribution within the
Philippines without a

74. The following securities are exempted from the


registration requirement under Subsection 8.1 of
the Securities Regulation Code (SRC), except
75. The following transactions are exempted from
the registration requirement under Subsection 8.1
of the Securities Regulation Code (SRC), except
76. Rule 68 of the Securities Regulation Code (SRC)
prescribes the requirements applicable to the form
and content of financial statements to be filed by
stock corporations excepts those whose paid-up
capital is less than

77. The audited financial statement to be filed


with the SEC shall be accompanied by a
. The state e t of Ma age e ts
Responsibility to accompany the financial
statement to be filed with the SEC shall be
signed by the.
79. In addition to the requirements precribed
under Part I