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\ CPA PRACTICE SET 2017 SHAWN WEB BROADWAY·THURSDAY, SEPTEMBER 28, 2017·

PHILIPPINE ACCOUNTANCY ACT OF 2004 (RA9298) 1. The Professional Regulatory Board of Accountancy shall be composed of a chairman and (LIST A) members to be appointed by the President of the Phils. from a list of (LIST B) recommendees for each position and ranked by the Commission, from a list of five (5) nominees for each position submitted by . LIST A LIST B LIST C a. 6 5 BOA, b. 7 5 PRC c. 7 3 PICPA d. 6 3 APO Answer: d 2. The PICPA shall submit its nominations with supporting documentation a. Within 60 days prior to the expiry of the term of an incumbent member or chairman b. Within 90 days prior to the expiry of the term of an incumbent member or chairman c. Not later than 60 days prior to the expiry of the term of an incumbent member or chairman

d. Not later than 90 days prior to the expiry of the term of an incumbent member or chairman Answer: c 3. Which of the following statements about the composition of the Board of Accountancy is incorrect? a. The four sectors in the practice of accountancy shall as much as possible be equitably represented in the Board. b. The Board shall be composed of a chairman and six members. c. The rd shall be appointed by the President of the Philippines from a list of three recommendees for each position and ranked by the Commission, from a list of five nominees for each position submitted by Accredited Professional Organization (APO). d. d. The Board shall elect a vice- chairman from among its members to serve for a term of three years. Answer: d 4. The following statements relate to the term of office of the chairman and the members of the Board of Accountancy (BOA). I. No person who has served two (2) successive complete terms shall be eligible for reappointment until the lapse of one (1) year II. Appointment to fill up an unexpired term is not to be considered a complete term III. A person may serve in the Board of Accountancy for eight consecutive years. IV. A person may serve in the Board for more than 12 years. a. All statements are true c. Only IV is false

b. All statements are false d. Only I and II are true Answer: d 5. Which of the following is not among the qualifications of a member of the Board of Accountancy? a. He/ She must have at least 10 years of experience in the practice of accountancy b. He/ She must be a natural-born CPA and a resident; of the Philippines c. He/ She must not be a director or officer of the accredited national professional organization at the time of appointment. d. He/ She must not have any direct or indirect pecuniary interest in any school offering BS Accountancy degree Answer: b 6. Which of the following is not a valid ground for suspension or removal of a member of the Board. of Accountancy? a. Being investigated of a crime involving moral turpitude. b. Neglect of duty or incompetence c. Manipulating the CPA licensure examination results. d. Violating RA9298. Answer: a 7. The standard setting body created by the PRC to promulgate accounting standards that will be generally accepted in the Philippines is known as a. Financial Reporting Standards Council (FRSC)

b. Auditing Standards and Practices Council (ASPC) c. Accounting Standards Council (ASC) d. Auditing and Assurance Standards Council (AASC) Answer: a 8. The Financial Reporting Standards Council shall be composed of a chairman and a. 14 members b. 17 members c. 8 members d. 15 members Answer: a 9. The sector that is most represented in the Auditing and Assurance Standards Council is the a. Commerce and Industry c. Public Practice b. Academe d. Government Answer: c 10. Which of the following is not represented in the FRSC? a. ACPAPP b. FINER c. Commission on Audit d. Securities and Exchange Commission Answer: a 11. The term of office of each member of AASC and FRSC is a. 2 years, renewable c. 3 years, non renewable b. 4 years, non renewable d. 3 years, renewable Answer: d

12. Which of the following statements about Accounting Standard Setting Council is correct? a. The accounting standard setting body is known as Accounting Standards Council (ASC). b. The accounting standard setting body is composed of a chairman and fifteen members. c. The chairman and members of the standard setting council shall be appointed by the Commission upon the recommendation of the Board in coordination with the accredited national professional organization. d. The public accounting practice is the sector that is most represented in the accounting standard setting council. Answer: c 13. Which of the following best describes the function of Auditing and Assurance Standards Council? a. To monitor full compliance by auditors to PSAs b. To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting profession in the Philippines c. To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs in public practice d. To undertake continuing research on both auditing and financial accounting in order to make them responsive to the needs of the public Answer: b 14. The following are represented both to the Financial Reporting Standards Council (FRSC) and Auditing and Assurance Standards Council (AASC), except

a. Commission on Audit b. Bureau of Internal Revenue c. Securities and Exchange Commission d. Board of Accountancy Answer: b 15. The following statements relate to the RA9298. Which statement is true? a. Within two years, subject to certain conditions, the Board of Accountancy may order the reinstatement of a CPA whose certificate of registration has been revoked. b. The Professional Regulation Commission has the authority to remove any member of the Board of Accountancy for negligence, incompetence, or any other just cause. c. Insanity is not a ground for proceeding against a CPA. d. No person shall be appointed as a member of the Board of Accountancy unless he has been in the practice of accountancy for at least 10 years, among others. Answer: d 16. The following are the qualifications of applicants for CPA Examinations; except I. Must be a natural born Filipino citizen II. Must be a BS Accountancy degree holder III. Must be of good moral character IV. Must be at least 21 years old

a. I only b. II and TV c. IV only d. I and IV Answer: d 17. Which of the following statements is correct? a. Any candidate who fails in two (2) complete CPA board examinations will no longer be allowed to take another set of examination. b. Any candidate who fails in two (2) complete CPA board examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the Board that he/she enrolled in and completed at least 21 units of subjects given in the licensure examination. c. The examination in which the candidate was conditioned and the removal examination on the subject in which he/she failed shall be counted as one complete examinations. d. The refresher course should be completed within two (2) years from the preceding examination. Answer: c 18. The Board of Accountancy shall submit to the PRC the ratings obtained by each candidate within days after the examination, unless extended for just cause. a. 10 b. 5 c. 2 d. 3 Answer: a 19. Which of the following shall be issued to a candidate who passes the CPA licensure examination? a. Certificate of accreditation to practice public accountancy and PRC ID:

b. Personal identification card and a certificate of accreditation to practice public accountancy c. Certificate of registration and professional identification card d. Certificate of full compliance and PRC ID. Answer: c 20. The Board of Accountancy may issue certificate of registration and professional identification card to any successful examinee: a. Of unsound mind b. Convicted by a court of political offense. c. Guilty of immoral or dishonorable conduct. d. Who has falsely represented himself/ herself in his /her application for , examination. Answer: b 21. The following statements relate to roster of CPAs. Identify the incorrect statement. a. A roster showing the names and place of business of all registered CPAs shall be prepared and updated by the Board. b. Copies of the roster shall be made available to any party as may be deemed necessary. c. The Board, upon approval of the Commission, may delegate the preparation of this roster to the APO. d. The publication of the roster in the official gazette or in any major newspaper of public circulation shall be deemed compliance with the requirement of RA 9298. Answer: d

22. Any person who shall violate any of the provisions of the Accountancy Act or any of its implementing rules and regulations promulgated by the Board of Accountancy subject to the approval of the PRC, shall upon conviction , be punished by a. Lethal injection b. A fame of not more than P50,000 c. An imprisonment for a period not exceeding two years d. Both b and c. Answer: c 23. PRC- CPE Council differs from AASC and FRSC in that a. PRC-CPE Council members are appointed by the Commission. b. PRC-CPE Council is composed of a chairman and 14 members c. The chairperson of PRC-CPE Council is elected by the members of the Board from among themselves. d. PRC-CPE Council members are co-terminus with the President of the Philippines. Answer: c 24. Which of the following statements is correct about the PRC-CPE Council? a. The Council shall be composed of six members and a chairperson. b. The Council shall be composed of two members and a chairperson. c. The members of the Council shall be appointed by the Commission upon recommendation of the Board in coordination with APO.

d. The chairperson and members of the Council shall have a term of three years renewable for another term. Answer: b 25. Which statement is correct regarding CPF, requirements for renewal of professional license? a. The total CPE credit units required for CPAs shall be sixty (60) units for three (3) years, provided that a minimum of twenty (20) credit units shall be earned in each year. b. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of 60 years old. c. A registered professional who is working abroad shall be temporarily exempted from compliance with CPE requirement during his/her stay abroad, provided that he/she is has been out of the country for at least one year immediately prior to the date of renewal. d. Those who failed to renew professional licenses for a period of five (5) continuous years from initial registration, or from last renewal shall be declared delinquent. Answer: d 26. Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed the CPE requirements shall a. Be dropped from the roster of CPAs. b. Not be allowed to renew their professional licenses. c. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills and experience to discharge their professional responsibility.

d. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE requirements. Answer: b 27. How many credit units per hour will be earned by a participant in a CPE seminar? a. 1 CU per hour c. 3 CU per hour b. 5 CU per hour d. 2 CU per hour Answer: a 28. Who is not permitted by RA 9298 to practice public accountancy? a. A general partnership. b. A limited liability partnership. c. A sole proprietorship. d. A corporation, whose stockholders are all CPAs. Answer: d 29. According to RA 9298, if a partner in a two-member partnership dies, the surviving partner may continue to practice as an individual under the existing firm title which includes the deceased partner's name. a. For a period of time not to exceed five years. b. For a period of time not to exceed two years. c. Indefinitely. d. Until the partnership pay-out to the deceased partner's estate is terminated. Answer: d

30: A CPA shall not practice under a full name that includes or indicates the following, except a. Fictitious name b. Specialization c. Misleading as to the type of organization d. Name(s) of past partner(s) in the firm name of the successor partnership. Answer: d 31. Below are names of four CPA firms and pertinent facts relating to them. Unless otherwise indicated, the individuals named are CPAs and partners and there are no other partners. Which firm name and related facts indicate a violation of the Philippine Accountancy Act of 2004? a. Binhi, Binti and Bigti, CPAs (Bigti died about 5 years ago; Binhi and Binti are continuing the firm.) b. Tiu and Ramos, CPAs ( The name of R. Hermosilla, CPA, a third partner is omitted from the firm name.) c. Bitay and Bigo, CPAs (Bitay died about three years ago; Bigo is continuing the firm as a sole practitioner.) d. R. Hermosilla and Co., CPAs (R. Hermosa'a has ten other partners who are all CPAs) Answer: c 32. CPAs, firms and partnerships of CPAs engaged in the practice of public accountancy including partners and staff members thereof, shall register with the Commission and the Board, such registration to be renewed every three years on or before

a. April 15 c. December 31 b. September 30 d. May 31 Answer: b 33. Which of the following is not one of the functions of the Board of Accountancy? a. To supervise the registration, licensure and practice of accountancy in the Philippines b. To issue, suspend, revoke, or reinstate the certificate of registration for the practice of the accountancy profession c. To prescribe and/or adopt a code of ethics for the practice of accountancy d. To adopt an official seal of the Commission. Answer: d 34. The letters "CPA" shall be engraved in what part of the CPA's seal? a. Upper portion of the space between the bigger and smaller circle. b. Lower portion of the space between the bigger and smaller circle. c. Left and right portion of the space between the bigger and smaller circle and in the middle of the smaller circle. d. Middle of the smaller circle. Answer: d 35.Which of the following is not one of the functions of the Board of Accountancy as specified in the RA 9298?

a. To look from time to time into the conditions affecting the practice of the accountancy profession. b. To appoint members of the AASC r c c. To investigate violations of RA 9298 and its IRRs. d. To determine and prescribe minimum requirements leading to the admission of candidates to the CPA examination. Answer: b 36. A CPA certificate is evidence of a. Independence as a professional. b. Basic competence at the time of certification. c. Membership in the accredited association. d. Completion of continuing professional education program. Answer: b 37. A certificate of accreditation shall be issued to certified public accountants in public practice only upon showing, in accordance with rules and regulations promulgated by the Board and approved by the Commission, that such registrant has acquired how many years of meaningful experience in any of the areas of public practice? a. One b. Two c. Three d. Four Answer: c 38 and 39 are based on the following information: 38. and Co. CPAs, was approved on April 30, 2016; the registration shall expire on a. September 30, 2018. c. April 30, 2019.

b. September 30, 2019. d. December 31, 2018 Answer: d 39. Which of the following is one of the reasons for not issuing a certificate of registration to a successful examinee? The individual: a. Is of unsold mind. b. Had been guilty of immoral and dishonorable conduct. c. Had been convicted by a court of a criminal offense involving moral turpitude. d. All of the given choices. Answer: a 40. A CPA whose certificate of registration has been revoked: a. Can no longer be reinstated. b. Is automatically reinstated as a CPA by the PRC after two years if he has acted in an exemplary manner. c. May be reinstated by the Professional Regulation Commission after two years if he has acted in an exemplary manner. d. May be reinstated as a CPA by the Board of Accountancy after two years if he has acted in an exemplary manner. Answer: d 41. A Professional Identification Card bearing the registration number, date of issuance, expiry date, duly signed by the chairperson of the Commission, shall be issued to every registrant renewable every a. Two years b. Three years c. Four years d. Five years Answer: b

AUDIT RELATED SERVICES 1. The degree of certainty that the practitioner has attained and wishes to convey is called: a. Assurance c. Audit risk b. Precision d. Materiality Answer: a 2. Which of the following is not included among the Auditing and Assurance Standards Council (AASC) pronouncements? a. Philippine Standards on Auditing b. Philippine Standards on Review Engagements c. Philippine Standards on Compilation Engagements d. Philippine Standards on Related Services Answer: c 3. According to AASC pronouncements, audit related services include: a. Review c. Examination b. Consultancy d. Compilation Answer: d 4. Which of the following services is covered by AASC pronouncements? a. Taxation c. Management Advisory b. Consultancy d. Agreed-upon procedures Answer: d

5. Which of the following services provides the highest level of assurance? a. Audit c. Review b. Agreed-upon procedures d. Compilation Answer: a 6. When performing a review of financial statements, a CPA is required to a. Apply analytical procedures and make inquiries from third by sending confirmation letters. b. Assess the effectiveness of the client's accounting and internal control systems. c. Obtain corroborative evidence to support management's responses to inquiries. d. Obtain understanding of the client's business and industry. Answer: d 7. Which of the following procedures is not included in a review engagement of . a non-public entity? a. inquiries of management b. inquiries regarding subsequent events c. procedures designed to identify unusual fluctuations d. studying and evaluating the client's internal control Answer: d 8. The objective of an agreed upon-procedures engagement is for the auditor to:

a. 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. b. Carry out procedures of a review nature to which the auditor and the entity and any appropriate third parties have agreed and to report on factual findings. c. Carry out procedures of a review nature and to express limited assurance based on those agreed procedures. d. Carry out procedures of an audit nature and is express limited assurance. Answer: a 9. A report on factual findings is the end product of the auditor when performing a. Examination c. Review b. Audit d. Agreed-upon procedures Answer: d 10. Engagement to apply agreed-upon procedures on certain accounts within a financial statement may be-accepted provided a. The CPA has expressed opinion on the financial statements taken as a whole. b. The CPA takes full responsibility for the adequacy of the procedures to be performed. c. The CPA provides only a limited assurance about the reliability of the financial statements.

d. The distribution of the report is limited only to specified parties involved. Answer: d 11. A CPA may accept an engagement to apply agreed-upon procedures on specified element of financial statements provided a. An audit of the financial statements taken as a whole is also performed. b. The CPA will issue an opinion on the specified element. c. An examination of the-specified element is also conducted. d. The client takes full responsibility for the procedures to be performed. Answer: d 12. 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. Answer: a 13. What level of assurance does an accountant give on a compilation report? a. None c. Low b. Moderate d. High Answer: a

14. Which of the following procedures would an accountant most likely perform in a compilation engagement? a. assemble financial information b. apply analytical procedures c. assess risk components d. test the accounting records Answer: a 15. The procedures employed in doing compilation are: a. Designed ...