FAR EASTERN UNIVERSITY

INSTITUTEOF ACCOUNTS, BUSINESS AND FINANCE

Department of Accountancy &Internal Auditing

ASSURANCE PRINCIPLES
2nd Semester AY 2017-2018
Quiz 5 – Setting Up and Maintaining Accounting Practice (CANVAS)

Name Date
(Family Name) (First Name) (Middle Name) Section
Professor Day/Time
Stud. No. Score
Room Rating

ANSWER SHEET

1. False 16. C 31. B

2. B 17. C 32. C
3. D 18. B 33. C
4. A 19. D 34. A
5. A 20. B 35. False
6. D 21. False 36. False
7. B 22. B 37. True
8. B 23. C 38. False
9. C 24. D 39. B
10. D 25. C 40. A
11. C 26. C 41. False
12. B 27. C 42. D
13. C 28. False 43. D
14. A 29. False 44. C
15. False 30. B 45. B
Part 1 (35 POINTS) c. Mabini, Bonifacio, Silang and Company,
Instructions: Choose the correct answer among the CPAs
given choices. Write the letter of your choice that d. Not among the given choices
corresponds to your answer on the Answer Sheet for
this part of the examination. Use CAPITAL LETTER. 4. Which of the following statements is incorrect?
Use only BLACK INK. There will be no credit for not a. Only the sole proprietor of Diego Silang and
following instructions. Associates must be accredited by the BOA to
practice public accountancy.
1. CPAs may practice public accountancy by forming b. Both the sole proprietor and staff members of
sole proprietorship, partnership or corporation. Melchora Aquino and Associates must be
a. True accredited by the BOA to practice public
b. False accountancy.
c. The partners and staff members of Aguinaldo,
Explanation: Quezon and Company must be accredited by
Only sole proprietorship or partnership. the BOA to practice public accountancy.
d. All choices are incorrect.
2. Which of the following can be formed by a CPA or
CPAs to practice his profession in public practice 5. Which of the following must be accredited by the
sector? PRC Board of Accountancy?
a. Closed Corporation a. CPAs in the academe sector
b. General Partnership b. CPAs in the government sector
c. Cooperative c. CPAs in commerce and industry sector
d. All of the given choices d. CPAs both in the academe sector and in
commerce and industry sector.
Explanation:
General partnership or Limited Liability 6. Proprietorships and partnership must obtain a
Partnership can be formed but not any form of Certificate of ______ from ______ before it can be
corporation and cooperatives. allowed to practice public accountancy.
a. Registration; PRC
3. The following must obtain first Certificate of b. Accreditation; PRC
Accreditation from the Board of Accountancy c. Registration; BOA
before being allowed to practice public d. Accreditation; BOA
accountancy, except:
a. Juan Luna, CPA 7. Only CPAs in public practice must be accredited
b. Jose Rizal and Associates, CPAs by PRC Board of Accountancy.

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 a. True
b. False
Explanation:
CPAs in the academe must also be accredited by
the PRC BOA.
8. The PRBOA shall require as a condition to
registration or any renewal thereof for the
Individual COA, firms or partnerships of CPAs to
undergo
a. Interview
b. Quality review
c. Written examination
d. All of the given choices
9. A minimum of three _____ years of meaningful
experience in any of the areas of public practice
including _____ is required before a Certificate of
______ can be obtained by practicing CPAs.
a. Three; internal auditing; accreditation
b. Two; taxation; registration
c. Three; taxation; accreditation
d. Two; management consultancy; registration
10. The meaningful experience for CPAs in public
sector includes which of the following?
a. General accounting, budgeting and tax
administration.
b. At least one year as audit assistant.
c. A least two years as auditor-in-charge of audit
engagements covering full audit functions of
significant clients.
d. Both B and C
CPAs should not commence public practice
unless his Certificate of Accreditation is already
issued by the BOA.
16. Which of the following will assist BOA in the
renewal of Certificate of Accreditation of CPAs in
public practice?
a. PRC CPD Council
b. ETC
c. QRC
d. PICPA
17. In the event the QRC cannot accomplish its
functions for any reason whatsoever, who will
conduct the required quality review of accredited
public practitioners?
a. The BOA itself
b. Any duly authorized BOA representatives
c. Either A or B
d. PICPA
18. A partner surviving the death or withdrawal of all
the other partners in a CPA partnership firm
a. Should not continue to practice under the
partnership name immediately.
b. May continue to practice under the
partnership name for a period of not more
than two (2) years after becoming a sole
proprietor.
c. May invite other CPAs to form a corporate
form of CPA firm.
d. May invite other CPAs to practice under the
partnership name for a period of not more
than one (1) year.

11. The ______ shall promulgate rules and 19. First time registrants must submit the application
regulations for the implementation of the of registration to practice public accountancy with
accreditation registration requirements including the following, except:
fees and penalties for violations thereof. a. CPD Units earned as required.
a. PICPA b. Sworn affidavit stating the three (3) years
b. PRC meaningful experience as required.
c. BOA c. Certificate of Employment
d. BIR d. Curriculum Vitae

12. It assists the BOA in performing quality review on 20. Which of the following is one of the audit works
applicants for registration to practice public performed by a Senior Associate in an audit firm?
accountancy. a. Tracing postings to ledger.
a. Education Technical Council b. Address minor accounting and auditing
b. Quality Review Committee issues with clients.
c. Continuing Profession Development Council c. Preparing analyses and schedules of
d. PICPA accounts
d. Observing the physical count of inventories.
13. Which sector of accounting practice has the most
number of members in Education Technical 21. Foreign are not allowed to be an owner, sole
Council? proprietor, partner or to be a staff of an individual
a. ACPAPP CPA, firm or partnerships of CPAs.
b. ACPACI a. True
c. NACPAE b. False
d. GACPA
Explanation:
14. Which sector of accounting practice has the most It may also be allowed provided he or she qualifies
number of members in Quality Review to practice in the Philippines under Section 34 and
Committee? 35 of RA 9298 and/or other relevant laws and
a. ACPAPP bilateral and/or multilateral agreement or treaties.
b. ACPACI
c. NACPAE 22. Which is the major factor in deciding the location
d. GACPA of CPA firm?
a. Accessibility
15. CPAs may commence public practice until its b. Convenience
Certificate of Registration has been issued to such c. Within the City
CPAs. d. Populous location
a. True
b. False 23. The network firm of Navarro, Amper and
Company.
Explanation: a. Ernst and Young, LLP
b. PricewaterhouseCoopers, LLP

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 c. Deloitte Touche Tohmatsu
d. KMPG, LLP
24. Who approves the billings for fees to be given to
clients?
a. Associate Auditor
b. Senior Associate
c. Audit Manager
d. Partner
25. Which of the following must not be included in
advertising by professional accountants?
a. Name and address
b. Telephone number or any contact number
c. Expertise
d. Membership in professional organization
26. Advertising beyond what is normally required is
unethical in the accountancy profession because
of the following reasons except:
a. It can lead to undue competition between and
among practitioners.
b. Its cost would outweigh any savings which
may result from competition.
c. Its cost would be borne ultimately by audit
firm.
d. It decreases the client’s trusts in CPAs and
the likelihood of CPAs neglecting their ethical
duties.
27. Which of the following advertising by a CPA is
acceptable?
a. Crisostomo Ibarra, CPA, expert in financial
statement audit.
b. Maya, Bang and Company, CPAs. Your
professional accountant with lowest rate but
with high quality output of professional
services than others.
c. Maria Clara, CPA. Address – 4/F Mabuhay
Building, N. Reyes St., Sampaloc, Manila.
Contact Number – (02) 143-5254.
d. TV Advertisement promoting Perfecto D.
Maculangan, CPA in which the client is giving
testimony about the benefits his business
received after getting the professional
services of Perfecto D. Maculangan.
28. Publishing in a telephone directory using two-lines
paid advertisement of small size indicating the
CPA’s name, office address, and contact number
is not an acceptable advertisement for CPAs in
public practice.
a. True
b. False
Explanation:
This nature and content of advertisement is
acceptable. It will become unacceptable if it
exceeds the normal requirements in terms of
contents and size.
29. In a CPA partnership firm, all advertisements must
have prior review and approval in writing by the
Risk Manager or Managing partner.
a. True
b. False
Explanation:
Should be the risk manager and the managing
partner of the auditing firm.
30. Which of the following publicity for CPAs is not
acceptable?
a. Mentioning the awards of any distinction
received from a professional body during
introduction as key speaker in PICPA
Convention.
b. Publishing the CPA firm in a one whole page
newspaper of regular circulation.
c. Stating the name and personal qualifications
of a CPA in his textbook in Financial
Accounting.
d. Publishing in a newspaper the changes in
composition of a partnership of professional
accountants in public practice.
31. Which of the following is not a factor in determining
fees to be charged by CPAs for assurance
engagements?
a. The skill and knowledge required for the type
of work involved.
b. Competency of the audit personnel involved
to perform the audit.
c. The level of training and experience of the
persons necessarily engaged in the work.
d. The degree of responsibility and urgency that
the work entails.
32. This is a billing method by CPAs wherein there is
an agreement that the total charges will not
exceed a certain maximum amount.
a. Flat fee basis
b. Actual time charges basis
c. Maximum fee basis
d. Retainer fee basis
33. JC Araza, a CPA, billed his client with a fixed
amount of P 7,500 on a monthly basis which is
inclusive of all services rendered. This billing
method is called
a. Maximum fee basis
b. Flat fee basis
c. Retainer fee basis
d. Actual time charges basis
34. Lee Mon Lim, a CPA, received his firm’s
professional fees from a certain client which is
broken down as follows: Junior Associate – 10
hours x P 800 per hour = P 8,000; Senior
Associate – P 1,200 x 4 hours = P 4,800. The
billing method applied by Lee Mom Lim is called
a. Actual time charges basis
b. Retainer Fee basis
c. Maximum fee basis
d. Flat fee basis
35. The amount of audit fee depends largely on the
volume of audit work regardless of competence
and responsibility involved.
a. True
b. False
Explanation:
Including among the factors in determining audit
fee is the competence and responsibility involved.
36. The most satisfactory method of determining audit
fees is to set them at an agreed percentage of net
profit.
a. True
b. False
Explanation:
The above statement refers to contingent fee
which is not acceptable way of billing clients.
37. CPA credit units can be earned by completing a
master’s and doctoral degrees.
a. True
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 b. False

38. Aside from BOA accreditation, CPAs in public

practice must have BIR and SEC accreditations.
a. True
b. False

Explanation:
BIR accreditation is necessary but SEC
accreditation will depend if the client is registered
with SEC.

39. Professional Tax Receipts (PTR) for CPAs are

issued by which of the following after payment of
the necessary fee?
a. Barangay where the CPA resides
b. City Hall where the CPA resides or where his
place of work is located.
c. Bureau of Internal Revenue
d. Securities and Exchange Commission

40. Who prepares the audit program and supervises

audit associates?
a. Senior Associate
b. Audit Manager
c. Partner
d. The Associate himself

41. CPA firms must always use the surname of the

professional accountant.
a. True
b. False

Explanation:
The name of the CPA firm may also contain the
first name of the proprietors or partners.

42. Regarding seminars provided by CPAs, the

following may be invited to attend except:
a. Existing Clients
b. Staff
c. Other professional accountants
d. Potential Clients

43. Who signed the independent audit report?

a. Associate
b. Senior Associate
c. Audit Manager
d. Partner

44. Mario Luigee, CPA, act as liaison between

partners and other team members of the auditing
firm where he works for almost seven years. What
is the position of Mario Luigee?
a. Associate Auditor
b. Senior Associate Auditor
c. Audit Manager
d. Partner

45. The Auditing Firm of Alex includes in its

advertising materials fees of various professional
services it can offer to clients. Which of the
following statements is incorrect?
a. This is a violation of BOA 126 Series of 2008
because it gives too much emphasis on
competitive differences.
b. There is no violation in the advertisement
made by the auditing firm because comparing
prices is a normal content of an advertising
material.
c. The advertisement is a sort of self-laudatory
statement.
d. The action taken by the auditing firm of Alex
is unethical even if the competitors it
mentioned react or not react negatively
against the contents of the advertisement.