1.

The creation of FRSC and AASC is intended to assist the BOA in carrying out its function to
a. To monitor the conditions affecting the practice of accountancy and adopt such measures, rules and regulations and best
practices as may be deemed proper for the enhancement and maintenance of high professional, ethical, accounting and
auditing standards.
b. To supervise the registration, licensure and practice of accountancy in the Philippines.
c. To prescribe and adopt the rules and regulations necessary for carrying out the provisions of RA 9298
d. To prepare, adopt, issue or amend the syllabi of the subjects for examinations.

2.

Any person who shall violate any of the provisions of RA 9298 or any of its implementing rules and regulations as
promulgated by the Board subject to the approval of the Commission, shall, upon conviction, be punished by
a. A fine of not less than fifty thousand pesos (P 50,000.00) or by imprisonment for a period not exceeding two (2) years
or both.
b. A fine of not less than one hundred thousand pesos (P 100,000.00) or by imprisonment for a period not exceeding two
(2) years or both.
c. A fine of not less than fifty thousand pesos (P 50,000.00) or by imprisonment for a period not exceeding three (3) years
or both.
d. A fine of not less than one hundred thousand pesos (P 100,000.00) or by imprisonment for a period not exceeding three
(3) years or both.

3.

According to PSA 400 Risk Assessments and Internal Control, audit risk means
a. The susceptibility of an account balance or class of transactions to misstatement that could be material, individually or
when aggregated with misstatements in other balances or classes, assuming that there were no related internal controls.
b. The risk that a misstatement, that could occur in an account balance or class of transactions and that could be material,
individually or when aggregated with misstatements in other balances or classes, will not be prevented or detected and
corrected on a timely basis by the accounting and internal control systems.
c. The risk that an auditors substantive procedures will not detect a misstatement that exists in an account balance or
class of transactions that could be material, individually or when aggregated with misstatements in other balances or
classes.
d. The risk that the auditor gives an inappropriate audit opinion when the financial statements are materially misstated.

4.

The auditors assessment of the identified risks at the assertion level provides a basis for considering the appropriate audit
approach for designing and performing further audit procedures. Which of the following is incorrect?
a. The auditor may determine that only by performing tests of controls may the auditor achieve an effective response to
the assessed risk of material misstatement for a particular assertion.
b. The auditor may determine that performing only substantive procedures is appropriate for specific assertions and,
therefore, the auditor excludes the effect of controls from the relevant risk assessment.
c. The auditor needs to be satisfied that performing only substantive procedures for the relevant assertion would be
effective in reducing the risk of material misstatement to an acceptably low level.
d. The auditor designs and performs substantive procedures for each material class of transactions, account balance, and
disclosure only when the auditor uses the substantive approach.

5.

Which statement is incorrect regarding significant risks that require special audit consideration?
a. The auditor should determine which of the risks identified are, in the auditors judgment, risks that require special audit
consideration
b. The auditor excludes the effect of identified controls related to the risk to determine whether the nature of the risk, the
likely magnitude of the potential misstatement including the possibility that the risk may give rise to multiple
misstatements, and the likelihood of the risk occurring are such that they require special audit consideration.
c. Routine, non-complex transactions that are subject to systematic processing are more likely to give rise to significant
risks because they have higher inherent risks.
d. Significant risks are often derived from business risks that may result in a material misstatement.

6.

Which statement is incorrect regarding obtaining an understanding of the entity and its environment?
a. Obtaining an understanding of the entity and its environment is an essential aspect of performing an audit in accordance
with PSAs.
b. That understanding establishes a frame of reference within which the auditor plans the audit and exercises professional
judgment about assessing risks of material misstatement of the financial statements and responding to those risks
throughout the audit.
c. The auditors primary consideration is whether the understanding that has been obtained is sufficient to assess the risks
of material misstatement of the financial statements and to design and perform further audit procedures.
d. The depth of the overall understanding that is required by the auditor in performing the audit is equal to that possessed
by management in managing the entity

7.

Which of the following control procedures could prevent or detect errors or frauds arising from shipments made to
unauthorized parties?
a. Document policies and procedures for scheduling shipments.
b. Establish procedures for reviewing and approving prices and sales terms before sale.
c. Prenumber bills of lading and assure that related billings are made on a periodic basis.
d. Prepare and periodically update lists of authorized customers.

8.

The use of fidelity bonds protects a company from embezzlement losses and also
a. Minimizes the possibility of employing persons with dubious records in positions of trust.
b. Protects employees who make unintentional errors form possible monetary damages resulting from such errors.
c. Allows the company to substitute the fidelity bonds for various parts of internal control.
d. Reduces the companys need to obtain expensive business interruption insurance.

9.

Which of the following questions would an auditor most likely include on an internal control questionnaire for notes
payable?
a. Are assets that collateralize note payable critically needed for the entitys continued existence?
b. Are two or more authorized signatures required on checks that repay notes payable?
c. Are the proceeds from notes payable used for the purchase of noncurrent assets?
d. Are direct borrowings on notes payable authorized by the board of directors?

10. Which of the following is correct statement?

a. The auditor should use professional judgment to assess audit risk and to design audit procedures to ensure it is
eliminated.
b. The auditor is an insurer, and his or her report constitutes a guarantee.
c. The subsequent discovery that a material misstatement exists in the financial statements is evidence of inadequate
planning, performance, or judgment on the part of the auditor.
d. The auditor should obtain an understanding of the accounting and internal control systems sufficient to plan the audit
and develop an effective audit approach.