ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 44  October 2022 CPA Licensure Examination AT- 04

AUDITING (Auditing Theory) J. IRENEO  E. ARAÑAS  F. TUGAS  C. ALLAUIGAN

PRACTICE & REGULATION OF THE PROFESSION

PRBOA Resolution No. 16 Series of 2021
The Philippine Accountancy Act of 2004 (RA 9298)
Objective 1: the standardization and regulation of accounting education
▪ The creation of Education Technical Council (Section 9 [B] of the IRR of RA 9298)
▪ The Philippine Institute of Certified Public Accountants (PICPA) as member of the International Federation
of Accountants (IFAC) is expected to comply with the Statement of Membership Obligations (SMOs).
▪ One of the regulators is the Commission on Higher Education (CHED)
Objective 2: the examination for registration of certified public accountants
▪ The Professional Regulatory Board of Accountancy (PRBOA)
o Composition of PRBOA
o Qualifications of Members of the Professional Regulatory Board
✓ Must be a natural-born citizen and a resident of the Philippines
✓ Must be a duly registered Certified Public Accountant with a least ten (10) years of work
experience in any scope of practice of accountancy
✓ Must be of good moral character and must not have been convicted of crimes involving
moral turpitude
✓ Must not have any pecuniary interest, directly or indirectly, in any school, college,
university or institution conferring an academic degree necessary for admission to the
practice of accountancy or where review classes in preparation for the licensure
examination are being offered or conducted, nor shall he/she be a member of the faculty
or administration thereof at the time of his/her appointment to the Board
✓ Must not be a Director or Officer of the APO (or PICPA) at the time of appointment
o Powers and Functions of the Board
o Grounds for Suspension or Removal of Members of the Board
▪ Qualifications of Applicants of Examinations
✓ is a Filipino citizen
✓ is of good moral character
✓ is a holder of the degree of Bachelor of Science in Accountancy conferred by a school,
college, academy or institute duly recognized and/or accredited by the CHED or other
authorized government offices
✓ has not been convicted of any criminal offense involving moral turpitude
▪ Scope of Examination
▪ Rating in the Licensure Examination
▪ Failing Candidates to Take Refresher Course
▪ Oath, Issuance of Certificates of Registration, and Professional Identification Card
Objective 3: the supervision, control, and regulation of the practice of accountancy in the Philippines
▪ The entire Rule IV (Practice of Accountancy) of the IRR of RA 9298
▪ The entire Rule V (Penal and Final Provisions) of the IRR of RA 9298
▪ All the annexes of the IRR of RA 9298
▪ Practice sectors are public practice, commerce and industry, government, and academe/education.
▪ The creation of Auditing and Assurance Standard Council (AASC), Financial Reporting and Standards
Council (FRSC), Quality Review Committee (QRC), and CPE Council
Scope of Practice
Organizations (Regulatory, Government, and Professional) Related to the Profession
RA 10912: Continuing Professional Development Act of 2016
▪ International Education Standard (IES) 7
▪ PRC and PRBOA resolutions and issuances
Managing Public Accounting Practice and Other Considerations
▪ PRBOA accreditation
▪ SEC Code of Corporate Governance (Accreditation: Groups A to D)
▪ Audit fees and billing

1. Which of the following statements regarding PRBOA Resolution No. 16 Series of 2021 is/are CORRECT?
A. November 17, 2023 will mark the 100th anniversary of the establishment of the accountancy
profession in the Philippines and the creation of the Board of Accountancy.
B. The pre-centenary activities of the Centenary Year of the Accountancy Profession and the Board of
Accountancy were officially launched on November 17, 2021.
C. The centennial theme is “Celebrating the Past, Transforming the Present, and Shaping the Future.”
D. All of the statements are correct.
2. Why should CPAs in the Philippines adhere to the SMOs of the International Federation of Accountants (IFAC)?
A. because of globalization and ASEAN integration
B. because the Philippine Institute of Certified Public Accountants (PICPA) is a member-professional
organization of IFAC
C. because it is required by the Code of Ethics
D. because it is required by the CPD Act of 2016

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
PRACTICE & REGULATION of the PROFESSION AT-04

3. Which of the following is/are included among the fundamental objectives of the Statement of Membership
Obligations (SMOs)?
A. to provide clear benchmarks to current IFAC member bodies only.
B. to support the adoption and implementation of international standards and other pronouncements
issued by the International Auditing and Assurance Standards Board (IAASB), International
Accounting Education Standards Board (IAESB), International Ethics Standards Board for
Accountants (IESBA), International Public Sector Accounting Standards Board (IPSASB), and
International Accounting Standards Board (IASB).
C. Both A and B
D. Neither A nor B

4. This SMO is issued by the IFAC Board and sets out requirements for IFAC member bodies with respect to
international standards issued by the International Accounting Education Standards Board (IAESB), an
independent standard-setting body supported by IFAC.
A. SMO 1 – Quality Assurance
B. SMO 2 – International Education Standards for Professional Accountants and Other Pronouncements
Issued by the IAESB
C. SMO 4 – IESBA Code of Ethics for Professional Accountants
D. SMO 6 – Investigation and Discipline

5. Emma Jean, a Filipino certified public accountant (CPA), is an accounting teacher in a higher education
institution in Davao City. She plans to become an ASEAN Chartered Professional Accountant (ACPA). For this
purpose, which of the following is/are among the requirements?
I. NBI clearance
II. Photocopies of CPD certificates of credit units earned
III. Certificate for ACPA Registration from nACPAE since she is a CPA in the education sector
IV. Registration Fee of ₱1,500

A. I only C. IV only
B. I, II, and IV only D. I, II, III and IV

6. The receipt and processing of ASEAN Chartered Professional Accountant (ACPA) applications is under the
jurisdiction of which PRC division?
A. Professional Regulatory Boards (PRBs) Secretariat Division.
B. Continuing Professional Development Division.
C. Professional Registry Division.
D. International Affairs Division.

7. Which of the following statements about the Philippine Accountancy Act of 2004 is LEAST LIKELY CORRECT?
A. It shall provide for and govern the standardization and regulation of accounting education and the
examination for registration of certified public accountants.
B. It shall provide for and govern the supervision, control, and regulation of the practice of Filipino
professional accountants in the Philippines and abroad.
C. It is aligned with the policy of the State to recognize accountants in nation building and
development.
D. It aims to develop and nurture professional accountants whose standards of practice and service
shall be excellent, qualitative, world class, and globally competitive.

8. A person is deemed to be in practice of the accounting profession in commerce and industry when he/she:
A. Holds, or is appointed to a position in an accounting professional group in government or in a
government-owned and/or controlled corporation, where decision-making requires professional
knowledge in the science of accounting.
B. Is involved in decision-making requiring professional knowledge in the science of accounting, as well
as the accounting aspects of finance and taxation, or is employed in a position that requires a CPA.
C. Is in an educational institution which involves teaching of accounting, auditing, management advisory
services, accounting aspect of finance, business law, taxation, and other technically-related subjects.
D. Holds out himself/herself as one skilled in the knowledge, science and practice of accounting, and as
someone qualified to render professional services as a CPA.

9. According to the IRR of RA 9298, the following can teach business law:
CPAs Members of the IBP
A. Yes Yes
B. Yes No
C. No Yes
D. No No

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10. The following first-time candidates had these CPALE ratings:

Examinees CPALE Ratings
Subject 1 Subject 2 Subject 3 Subject 4 Subject 5 Subject 6
Berlin 90 88 95 74 74 64
Manila 87 68 65 75 81 76
Nairobi 94 71 61 73 86 84
Rio 89 78 64 74 85 82
Tokyo 81 89 73 65 65 77
Statement 1: Only two candidates failed.
Statement 2: One candidate had to retake only one subject.
Statement 3: Two candidates would receive conditional credits.
Statement 4: Only two candidates passed.

A. Only one statement is correct. C. Only three statements are correct.

B. Only two statements are correct. D. All statements are correct.

11. Any candidate who fails in _____ complete CPA Board Examinations shall be disqualified from taking another
set of examinations unless he/she submits evidence to the satisfaction of the BOA that he/she enrolled in and
completed at least _____ of subjects given in the licensure examination.
A. 3, 15 units per year for a total of 60 units C. 2, 15 units/year, total of 60 units
B. 2, 24 units D. 3, 24 units

12. Any candidate who fails in two (2) complete CPA Board Examinations shall be disqualified from taking another
set of examinations unless he/she submits certificate of completion of refresher course to the satisfaction of
the PRBOA that he/she enrolled in and completed at least twenty-four (24) units of subjects given in the
licensure examination. Such a certificate shall be valid for ___ years from the date of completion.
A. One C. Three
B. Two D. Four

13. The PRBOA, subject to the approval of the PRC, may revise or exclude any of the subjects and their syllabi,
and add new ones as the need arises, provided that the change shall not be more often than:
A. Every two years. C. Every four years.
B. Every three years. D. Every five years.

14. Evaluate the following statements:

I. In a year, the Professional Regulatory Board of Accountancy (PRBOA) ordinarily administers three (3)
CPA licensure examinations in the Philippines.
II. As of the most recent update, a professional identification card has a validity of five (5) years.
A. True, True C. False, True
B. True, False D. False, False

15. A certificate under seal, bearing a registration number, issued to an individual, by the PRC, upon
recommendation by the Board of Accountancy, signifying that the individual has complied with all the legal
and procedural requirements for such issuance, including, in appropriate cases, having successfully passed
the CPA licensure examinations.
A. Certificate of registration. C. Certificate of identification.
B. Certificate of accreditation. D. Certificate of quality review.

16. The Continuing Professional Development (CPD) programs for accountancy shall have these objectives:
A B C D
• To raise and maintain the professional’s capability for delivering
professional services Yes Yes No Yes
• To attain and maintain the minimum standards and quality in
the practice of the profession No Yes Yes No
• To make the profession financially rewarding Yes No Yes No

17. CPD competence areas include:

A. technical skills. C. professional values, ethics, and attitudes.
B. professional competence. D. All of the above.

18. With reference to membership to IFAC, aspiring professional accountants are required to complete practical
experience by the end of initial professional development as compliance to:
A. International Education Standard (IES) 3
B. International Education Standard (IES) 5
C. International Education Standard (IES) 6
D. International Education Standard (IES) 7

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
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19. Per PRBOA Resolution 254 Series of 2017, which of the following statements is INCORRECT?
A. The following can be a CPD provider: sole proprietor, partnership, corporation, government
institutions, and foreign entities.
B. Members of PRBOA are disqualified to be a CPD provider during their incumbency.
C. Application for CPD program accreditation should be filed 60 days before the offering of the program.
D. The CPD monitor should submit the monitoring report to PRC within 15 working days after the conduct
of the program.

20. With respect to the most recent IRR (PRC Resolution 1146 Series of 2019) for CPD Law, which of the following
statements is INCORRECT?
A. The new provisions would take effect by March 1, 2019.
B. It would refer to CPD Law of 2016.
C. 15 CPD credit units would be required for the renewal of the PRC ID.
D. 120 CPD credit units would be required for the accreditation of CPAs in government.

21. What is the minimum number of CPD credit units that a registered professional accountant in public practice
should accumulate for accreditation within the three-year period starting 2019?
A. 15 credit units C. 100 credit units
B. 45 credit units D. 120 credit units

22. Which of the following is NOT a ground for the suspension or revocation of certificate of registration and
professional identification card?
A. Possession of an unsound mind
B. Practice in more than one field of accountancy
C. Conviction of a criminal offense involving moral turpitude
D. Unprofessional or unethical conduct, malpractice, or violation of RA 9298.

23. The punishment, upon conviction, for any person who has violated any of the provisions of the Accountancy
Act of 2004, or any of its Implementing Rules and Regulations as promulgated by the Board of Accountancy:
A. A fine of not less than fifty thousand pesos (₱50,000.00) and imprisonment for a period not exceeding
two (2) years.
B. A fine of not less than fifty thousand pesos (₱50,000.00) but not an imprisonment.
C. No fine but an imprisonment for a period not exceeding two (2) years.
D. A fine of not less than fifty thousand pesos (₱50,000.00) or imprisonment for a period not exceeding
two (2) years, or both.

24. A CPA whose certificate has been revoked:

A. Is required to take the CPA Board Licensure examinations before reinstatement
B. May be reinstated by the PRBOA after the expiration of two (2) years from the date of revocation

C. Can no longer be reinstated as a Certified Public Accountant

D. Has committed a crime involving moral turpitude

25. Evaluate the following statements:

I. A BSA graduate is NOT allowed to practice public accountancy under his or her own name immediately
upon passing the CPA Board Exams.
II. The certificate of accreditation for CPAs in education is granted only once and remains in effect until
withdrawn, suspended, or revoked in accordance with RA 9298.
A. True, True C. False, True
B. True, False D. False, False

26. Evaluate the following statements:

I. Single practitioners and partnerships for the practice of public accountancy shall be registered certified
public accountants in the Philippines.
II. A certificate of accreditation shall be issued to certified public accountants in public practice only upon
showing, that such registrant has acquired a minimum of three (3) years meaningful experience in
any of the areas of public practice including taxation.
A. True, True C. False, True
B. True, False D. False, False

27. Which of the following functions would usually be performed by a senior (experienced) associate?
A. Signs the audit report.
B. Performs detailed audit procedures.
C. Prepares the audit program and performs more complex audit procedures
D. Tasked with liaison work between partners and other team members

28. The amount of professional fees depend largely on the:

A. Size and capitalization of the company under audit.
B. Amount of profit for the year.
C. Availability of cash.
D. Volume of audit work and degree of competence and responsibilities involved.

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29. Under this method of billing a client, billing is done on the basis of actual time spent by the staff multiplied by the hourly
rates agreed upon.
A. Per diem basis C. Flat or fixed fee basis
B. Retainer fee basis D. Maximum fee basis

30. Which of the following cannot be mentioned by an author in publicizing a book in accounting?
A. Name C. Membership in professional organization
B. Qualifications D. Services that the author’s firm provides

31. May a CPA give a brochure to a non-client?

A. No, because this is a violation of the revised rules on advertising
B. Yes, since this is acceptable under the revised rules on advertising
C. No, unless the non-client becomes a client within ten (10) days from receipt of the brochure
D. Yes, if the non-client has made an unsolicited request

32. Subjects or citizens of foreign countries:

A. May be allowed to practice accountancy in the Philippines, regardless of the provisions of existing laws and
international treaty obligations, including mutual recognition agreements entered into by the Philippine
government with other countries.
B. Are not allowed to practice accountancy in the Philippines, unless they take, and pass, the certified public
accountant licensure examination given by the Board of Accountancy
C. May be allowed to practice accountancy in the Philippines, subject to the provisions of existing laws and
international treaty obligations, including mutual recognition agreements entered into by the Philippine
government with other countries.
D. Are never allowed to practice accountancy in the Philippines because they will jeopardize the interests of Filipino
certified public accountants.

33. RA 9298 provides that temporary or special permits may be issued to Foreign CPAs in the following situations:
A. A foreign CPA was called for consultation which, in the judgment of the Board of Accountancy, is essential for the
development of the Philippines. The permit restricts the foreign CPA’s practice to the particular consultation work
being performed. No Filipino CPA was qualified for such consultation.
B. A foreign CPA was engaged to lecture on fields essential to accountancy education in the Philippines. The permit
restricts the CPA to teaching only, and limited public practice provided such practice is conducted outside class
hours.
C. A foreign CPA, an IFRS expert, is engaged for services deemed essential for the advancement of accountancy in
the Philippines which can also be performed by Filipino CPAs
D. All of the above situations do not justify the issuance of a temporary or special permit.

34. Violations of the IRR shall subject the CPA to fines and penalties as provided for in RA 9298, including its IRR. Such
violations include:
I. Engaging in public accounting practice without first registering with the PRBOA and the SEC
II. Continuing to engage in the practice of public accountancy after the expiration of the registration/accreditation
III. Continuing to engage in the practice of public accountancy after suspension, revocation or withdrawal of
registration
IV. Giving any false information, data, statistics, reports or other statement which tend to mislead, obstruct, or
obscure the registration of an Individual CPA, Firm or Partnership of CPAs under the IRR.
V. Giving any misrepresentation to the effect that registration was secured in truth when in fact, it was not secured
VI. Failure or refusal to undergo quality review

A. I, II, III, IV, V, and VI C. I, II, III, IV, and VI

B. I, II, III, IV, and V D. I, II, IV, V, and VI

35. Fill out the table below to summarize pointers on the PRBOA:
Composition 1 Chairman, 6 Members
Nominations 5 PICPA – 3 PRC – 1 President
One (1) complete term 3 Years
Maximum no. of years 12 years
Vice Chairman (term) 1 Year
Two (2) consecutive complete terms 1 Year Lapse

36. The following are qualifications of the members of the Board of Accountancy, EXCEPT:
A. Natural-born citizen and resident of the Philippines.
B. Duly registered CPA with at least five (5) years of work experience in any scope of practice of accountancy.
C. Good moral character, not convicted of crimes involving moral turpitude.
D. No direct, or indirect pecuniary interest in any school, college, university or institution conferring the B.S.
Accountancy degree or providing CPA Review classes.

37. The following qualifications are common to members of the PRBOA and the applicants for CPALE, EXCEPT:
A. good moral character. C. Both A and B.
B. natural-born Filipino citizen. D. Neither A nor B.

38. The Accredited Integrated Professional Organization (AIPO) shall submit its nominations for the PRBOA, with complete
documentation, to the Commission
A. Not later than sixty (60) days prior to the expiry of the term of an incumbent chairman or member.
B. On the date of expiry of the term of an incumbent chairman or member.
C. After the 60th day from the expiry of the term of an incumbent chairman or member.
D. Upon request by the Commission for the submission of nominations.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
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39. The following are among the powers and functions of the PRBOA, EXCEPT:
A. To prescribe and/or adopt a Code of Ethics for the practice of accountancy
B. To ensure, in coordination with DepEd and CHED that all senior high schools and higher education institutions
offering accountancy-related programs and strand comply with prescribed policies, standards and requirements
C. To conduct an oversight into the quality of audits of financial statements
D. None of the choices

40. The following are grounds for suspension or removal of members of the PRBOA, EXCEPT:
A. Neglect of duty or incompetence.
B. Violation or tolerance of any violation of RA 9298 and its IRR, or the Code of Ethics and technical and professional
standards of practice for CPAs.
C. Pending case on a crime involving moral turpitude.
D. Manipulation or rigging of the CPA licensure examination results.

41. According to the IRR of RA 9298, this group is tasked to assist the PRC in accepting, evaluating, and approving applications
for accreditation of CPE programs, activities or sources as to their relevance to the profession and determine the number
of CPE credit units to be earned on the basis of the contents of the programs, activity or source submitted by the CPE
providers.
A. PRC Quality Review Committee C. PRC CPE Council
B. PRC Education Technical Council D. PRC CPD Committee

42. The Quality Review Committee (QRC) shall have the following functions:
A. Conduct quality control review on applicants for registration to practice public accountancy and render a report
on such quality review
B. Revoke the certificate of registration and professional ID of an individual CPA, firm, or partnership of CPAs who
have not observed quality control measures.
C. Both A and B
D. Neither A nor B

43. Which of the following is not represented in both AASC and FRSC?
A. SEC C. PRBOA
B. BSP D. BIR

44. Evaluate the following statements:

I. The Philippine Institute of Certified Public Accountants is registered with the SEC as a stock corporation and
recognized by the PRBOA, subject to the approval by the PRC. (False)
II. Membership in PICPA shall be a bar to membership in any other association of certified public accountants. (False)
A. True, True C. False, True
B. True, False D. False, False

45. Sectoral organizations have been established to promote the interests of groups of professional accountants. Which of the
following is the sectoral organization for CPAs employed under oil and gas companies?
A. GACPA B. ACPAPP C. ACPACI D. nACPAE

46. In compliance with the SEC, auditors accredited under this/these group/s are allowed to perform FS audit services to pre-
need companies.
A. Group A only C. Groups A, B, and C only
B. Groups A and B only D. All groups (A to D)

47. The Securities Exchange Commission restrict accredited auditors from providing many non-audit services to their audit
clients. Which of the following is true for SEC-accredited auditors?
I. They are restricted from providing internal audit outsourcing services to audit clients.
II. There is no restriction on providing non-audit services to audit clients.
A. I only C. Both I and II
B. II only D. Neither I nor II

48. Which of the following is a CORRECT qualification of the Chairman and two Commissioners of COA?
A. A naturalized citizen of the Philippines
B. At least forty (40) years of age upon appointment
C. CPAs with no less than five (5) years of auditing experience or members of the Philippine bar who have been
engaged in law practice for at least five (5) years
D. Must not have been candidates for any elective position preceding appointment

49. In the COA logo, the ___ silver stars on the blue background represent the national scope of jurisdiction of the Commission
and the ___ gold coins on red base represent the functions of the Commission.
A. 3; 6 C. 4; 6
B. 3; 7 D. 4: 7

50. Evaluate the following statements:

Statement 1: The vision of COA is to ensure accountability for public resources, promote transparency, and help improve
government operations, in partnership with stakeholders, for the benefit of the Filipino people.
Statement 2: The Commission on Audit can conduct special audits on NGOs upon request by proper authorities or as
determined by the Chairman.

a. Only statement 1 is correct. c. Only statement 2 is correct.

b. Both statements are correct. d. Both statements are incorrect.

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