1.

Personnel issues that must be addressed by the system of quality control include the following, EXCEPT

a. Capabilities and competence

b. All of the answers

c. Compensation and estimation of personnel needs

d. Recruitment and performance evaluation

e. Career development and promotion

2. The normal retention period for audit engagement documentation is no shorter than from the date of the
audit report

a. Five years

b. Four years

c. Two years

d. Six years

3. A partner, other person in the firm, suitably qualified external person, or a team made up of such individuals,
with sufficient and appropriate experience and authority to objectively evaluate, before the report issued, the
significant judgments the engagement team made and the conclusions they reached in formulating the report

a. Suitably qualified external person

b. Engagement quality control reviewer

c. Personnel

d. Engagement partner

4. Regarding the assignment of engagement teams, which of the following statements is INCORRECT?

a. The firm should also assign appropriate staff with the necessary capabilities, competence and time to
perform engagements in accordance with professional standards and regulatory and legal requirements, and to
enable the firm or engagement partners to issue reports that are appropriate in the circumstances

b. The firm should assign responsibility for each engagement to the senior manager

c. Policies and procedures include systems to monitor the workload and availability of engagement partners
so as enable these individuals to have a sufficient time to adequately discharge their responsibilities

d. The identity and role of the engagement partner should be communicated to key members of client
management and those charged with governance
5. Where the engagement quality control reviewer makes recommendations that the engagement partner does
not accept and the matter is not resolved to the reviewer’s satisfaction, the report

a. Is issued with an emphasis of a matter paragraph highlighting the difference in opinion

b. Will not be issued

c. Is not issued until the matter is resolved by client management

d. Is not issued until the matter is resolved by following the firm’s procedures for dealing with differences of
opinion

6. Where internal technical and training resources are unavailable, the firm

a. May use a suitably qualified external person for that purpose

b. Must obtain, within two years, the necessary internal technical and training re-sources

c. Cannot adequately provide for the professional development needs of its members

d. Violates a basic tenet of quality control regarding capabilities and competency

7. Consultation usually undertaken for

a. Difficult or contentious matters

b. Matters for which the judgment of the engagement leader is deemed sufficient

c. Matters for which there is readily available support

d. Straightforward matters involving accounting and auditing

8. Which of the following best describes the word “personnel” in the context of PSQC No.1?

a. This refers to professionals, other than partners, including any experts the firm employs

b. All of these statements describe “personnel”

c. This refers to any individual with authority to bind the firm with respect to the performance of a
professional services engagement

d. This refers to partners and staff

9. Consultation may be obtained in the form of advisory services provided by

 a. Professional and regulatory bodies

b. Any of these

c. Commercial organizations that provide relevant quality control services

d. Other firms

10. A firm has obtained information that would have caused it to decline an engagement had the information
been available earlier. Actions available to the auditor include the following, EXCEPT

a. Withdraw from both the engagement and the client’s relationship

b. Continue the engagement, since the Code of Ethics requires started engagements to be finished regardless
to subsequent developments and information

c .Reporting the information and its implications to the person(s) who appointed the CPA

d. Withdraw from the engagement

11. By obtaining confirmation and taking appropriate action on information indicating noncompliance, the firm
demonstrates the importance that it attaches to independence and makes the issue current for, and visible
to, its personnel. Written confirmation

a. Is not required since oral confirmation will suffice per PSQC1

b. May be in electronic format only

c. May be in paper format only

d. May be in paper form or electronic form

12. The firms policies and procedures emphasize the fundamental principles, which are reinforced in particular by

a. All of these

b. Education and training

c. Monitoring and process for dealing with non-compliance

d. Leadership of the firm

13. An engagement quality control review for audits of financial statements of listed entities includes considering
the following, except

a. The engagement team’s evaluation of the firm’s independence in relation to the specific engagement
 b. Significant risks identified during the engagement and the responses to those risks

c. Whether working papers selected for review reflect the work performed in relation to the significant
judgments and support significant management assertions

d. Judgments made, particularly with respect to materiality and significant risks

14. The firm should communicate the results of the monitoring of its quality control system to engagement
partners and other appropriate individuals within the firm at least every

a. Six months

b. Three years

c. Twelve months

d. Two years

15. Responsibility for the monitoring process is entrusted to

a. Managers

b. Partners

c. Audit associates

d. Senior associates

16. This is a review that provides an objective evaluation of the significant judgements made by the engagement
team and the conclusions reached in formulating by the report

a. Engagement quality control review

b. System of quality control

c. Engagement judgment review procedures

d. Peer review

17. The firm’s business strategy is subject to the overriding requirement for the firm to achieve quality in all the
engagements that the firm performs. Accordingly, the firm (select the exception)

a. Designs policies and procedures addressing performance evaluation, compensation, and promotion to
demonstrate the firm’s overriding commitment to quality
 b. Devotes sufficient resources for the development, documentation and support of its quality control policies
and procedures

c. Assigns its management responsibilities so that commercial considerations may override the quality of work
performed

d. All of the answers

18. The engagement quality control reviewer (choose the INCORRECT one)

a. Does not make decisions for the engagement team

b. May be selected by the engagement partner

c. Is not subject to other considerations that would threaten the reviewer’s objectivity

d. Does not otherwise participate in the engagement during the period of review

19. Which of the following methods are least likely to develop capabilities and competence?

a. Continuing professional development including training

b. Self-study modules on professional accounting and auditing literature

c. Professional education

d. Work experience and coaching by less experienced staff

20. Compared to larger firms, smaller firms may use

a. More elaborate means of documenting the system of quality controls

b. Electronic databases to document the system of quality controls

c. More formal methods in documenting the system of quality controls

d. More informal methods in documenting the system of quality controls

21. The inspection of a selection of completed engagements is ordinarily performed on a cyclical basis.
Engagements selected for inspection include at least

a. One engagement for each engagement partner over an inspection cycle of 3 years

b. Two engagements for each engagement partner over an inspection cycle

c. Two engagements for each firm over an inspection cycle

 d. One engagement for each firm over an inspection cycle

22. The following statements pertain to quality control reviewers. Which statement is correct?

a. The engagement partner may consult the engagement quality control reviewer during the engagement

b. None of the above.

c. All are correct.

d. Where the nature and extent of the consultations become significant, care is taken by both the
engagement team and the reviewer to maintain the reviewer’s integrity

e. External persons may not be contracted as engagement quality control reviewers

23. Reviewers consider

a. The work has been performed in accordance with GAAP

b. The work performed supports the conclusions reached and is appropriately documented

c. Consultation with experts has been made for all phases of the engagement

d. Whether the system of quality control is operating effectively and adequately

24. In considering whether the firm has the capabilities, competence, time and resources to undertake a new
engagement from a new or an existing client, the firm reviews the specific requirements of the engagement
and existing partner and staff profiles at all relevant levels. Matters the firm considers include the following,
EXCEPT

a. Whether the firm is able to complete the engagement within the reporting deadline

b. Whether firm personnel have experience with relevant regulatory or reporting requirements, or the ability
to gain the necessary skills and knowledge effectively

c. Whether the client is aggressively concerned with maintaining the firm’s fees as low as possible

d. Whether firm personnel have knowledge of relevant industries or subject matters

25. In relation to completed engagements, these are procedures designed to provide evidence of compliance by
engagement teams with the firm’s quality control policies and procedures

a. Monitoring

b. Engagement quality control review

c. Inspection
 d. Quality Control

26. The firm should obtain written confirmation of compliance with its policies and procedures on independence
from all firm personnel required to be independent by the Code of Ethics

a. Monthly

b. Annually

c. Every 3 years

d. Quarterly

27. What aspects are most important in determining the eligibility of engagement quality control reviewer?

a. All of these

b. Competence and independence

c. Technical qualifications and objectivity

d. Integrity and objectivity

28. Monitoring of the firm’s system of quality control is performed by competent individuals and cover
(i)appropriateness of the design of quality controls; and (2)Effectiveness of the operation of quality controls.

a. Yes, yes

b. Yes, no

c. No, yes

d. No, no

29. PSQC No. 1 applies to _____________, while PSA 220 applies to ____________.

a. Audit, reviews

b. Assurance engagements, audits

c. Audits, assurance engagements

d. Assurance engagements, related services

30. The firm should obtain such acceptance and continuance information as it considers necessary in the
circumstances such as when

a. All of the answers

b. Accepting an engagement with a new client

c. Accepting a new engagement with an existing client

d. Deciding whether to continue an existing engagement

31. Which of the following statements in incorrect?

a. An engagement quality control review is always conducted at the end of the engagement

b. The extent of the review depends on the complexity of the engagement and the risk that the report might
not be appropriate in the circumstances

c. The review does not reduce the responsibilities of the engagement partner

d. An engagement quality control review ordinarily involves discussion with the engagement partner, a review
of the financial statements or other subject matter information and the report, and, in particular, consideration of
whether the report is appropriate

32. All personnel performing an engagement, excluding experts contracted by the firm in connection with that
engagement

a. Professionals

b. Personnel

c. Staff

d. Engagement team

33. In the case of an audit, final engagement files should be completely assem-bled not more than ___ days after
the date of the audit report

a. 5

b. 30

c. 60

d. 10
34. An inspection cycle ordinarily spans no more than

a. Four Years

b. One Year

c. Three Years

d. Two Years

35. Ethical requirements to which the engagement team and engagement quality control reviewer are subject,
which ordinarily comprise Parts A and B of the Code of Ethics, together with national requirements that are
more restrictive

a. Pre- conditions to an audit

b. Fundamental principles

c. Relevant ethical requirements

d. Client screening criteria

36. A process comprising an ongoing consideration and evaluation of the firm’s system of quality control, including
a periodic inspection of a selection of completed engagements, designed to enable the firm to obtain
reasonable assurance that its system of quality control is operating effectively

a. Monitoring

b. Engagement quality control review

c. Quality review

d. Inspection

37. With regard to the integrity of a client, matters that the firm considers include the following

a. The nature of the client’s operations, including its business practices

b. Information concerning the attitude of the client’s principal owners, key management and those charged
with its governance towards such matters as aggressive interpretation of accounting standards and the internal
control environment

c. All of the answers

 d. The identity and business reputation of the client’s principal owners, key management, related parties and
those charged with its governance

38. An engagement quality control review is required to be performed

a. At engagement complexion after the report is issued

b. Immediately after the re-assessment of control risk

c. For all audits of financial statements of listed entities

d. For all types of audits, regardless of the subject matter of the engagement

39. Deficiencies notes as result of the monitoring process may indicate

a. Systematic, repetitive or other significant deficiencies that require prompt corrective action

b. Instances that so not necessarily indicate an insufficiency in the quality control system

c. Both a and b

d. Neither a nor b

40. Through its policies and procedures, the firm seeks to establish consistency in the quality of engagement
performance. This is often accomplished through (select the INCORRECT ITEM)

a. Software tools or other forms of standardized documentation

b. Written or electronic manuals

c. Industry or subject-matter-specific guidance materials

d. Written confirmation of compliance with independence requirements

41. The firm should establish policies and procedures requiring appropriate documentation to provide evidence of
the operation of each element of its system of quality control. How such matters are documented is based on

a. The firm’s decision

b. Philippine Audit Practice Statements

c. PSQC No. 1
 d. PSA 220

42. The following are the fundamental principles of professional ethics, EXCEPT

a. Professional competence and due care

b. Independence

c. Objectivity

d. Integrity

43. Information on matters regarding integrity of the client may come from

a. Communication with existing or previous providers of CPA services to the client

b. Inquiry of other firm personnel or third parties such as (bankers, legal counsel and industry peers)

c. Background searchers of relevant databases

d. All of these

44. Original paper documentation may be scanned and stored electronically for practical reasons. After scanning,
the original paper document

a. Shall be considered for retention or disposal depending on legal or regulatory requirements and other
factors

b. None of these

c. Shall be kept on file for future reference

d. Shall be discarded following established principles on waste disposal

45. Review responsibilities are determined on the basis that _____ experienced team members review the work
of _______ experienced team members

a. More, less

b. More, more

c. Less, more

d. Less, less
46. An entity whose shares, stock or debt are quoted or listed on a recognized stock exchange, or are marketed
under the regulations of a recognized stock exchange or other equivalent body

a. Listed entity

b. Public sector entity

c. Quoted entity

d. Recognized entity

47. Criteria for determining whether an engagement quality control review should be performed include the
following

a. All of these

b. The nature of the engagement, including extent of involvement of the public interest

c. Laws and regulations that may require an engagement quality control review

d. Unusual circumstances or risks in an engagement or class of engagements

48. Supervision includes

a. Considering the capabilities and competence of individual members of client personnel

b. Tracking the progress of the engagement

c. Addressing all issues arising during the engagement and modifying the planned approach appropriately

d. Identifying matters for consultation or consideration by less experienced engagement team members
during the engagement

49. Actions and messages that encourage a culture of quality are communicated through

a. All of these

b. Partners and staff appraisal procedures

c. Newsletters and briefing memoranda, internal documentation and training materials

d. Training seminars, meeting, formal or informal dialogue, mission statement

50. Regarding identified threats to independence, appropriate action by the firm and the relevant engagement
partner includes the following, EXCEPT

a. Expression of a qualified or adverse opinion on the subject matter under audit

b. Application to safeguards to reduce threats to independence to an acceptable level

c. Withdrawal from the engagement

d. Application of safeguards to eliminate threats to independence

51. Unless otherwise specified by law, engagement documentation is owned by

a. The firm

b. The client and the firm

c. The Board of Accountancy

d. The client

52. Quality control policies and procedures are designed to promote an internal culture recognizing that

a. The promotion of a quality-oriented internal culture depends on clear, consistent and frequent actions and
messages from all levels of the firm’s management

b. The firm should always move towards the elimination of audit risk

c. Reasonable, and not absolute, assurance can be provided by all CPA engagements

d. Quality is essential in performing engagements

53. Controls that the firm may design and implement to maintain the confidentiality, safe custody, integrity,
accessibility and retrievability of engagement documentation include the following except

a. Procedures for properly distributing engagement documentation to the team members at the start of
engagement, processing it during engagement, and collating it at the end of engagement

b. Procedures for restricting access to, and enabling proper distribution and confidential storage of, hardcopy
engagement documentation

c. Appropriate back-up routines for electronic engagement documentation (always done at the end of the
engagement)
 d. The use of a password among engagement team members to restrict access to electronic engagement
documentation to authorized users

54. The firm should establish policies and procedures designed to provide it with reasonable assurance those
individuals and firms maintain independence (where required by the Code of Ethics). Such policies and
procedures should enable the firm to (select the exception):

a. Take appropriate action to eliminate or reduce threats

b. Override independence requirements of PSQC1

c. Identify and evaluate circumstances and relationships that create threats to in-dependence

d. Communicate independence requirements

55. In a certain audit engagement, several key members of the engagement team had differences of opinion
regarding a certain matter. In this case

a. The engagement partner shall issue a disclaimer of opinion due to a scope limitation

b. The report shall not be issued until the matter is resolved

c. An increase in the audit fee will be requested due to the extension of the time required to complete the
engagements

d. Documentation will be made regarding the unsolved matter, and the auditor will withdraw from the
engagement altogether

56. AASC Engagement Standards as defined in the “Preface to the Philippines Standards on Quality Control,
Auditing Assurance and Related Services,” and relevant ethical requirements, which ordinarily comprise Parts
A and B of the IFAC Code and relevant national requirements

a. Philippine Standards on Auditing

b. Standards of Quality Control

c. Professional Standards

d. Philippine Standards on Assurance

57. The capabilities and competence considered when assigning engagement teams, and in determining the level
of supervision required, include the following

a. An understanding of and practical experience with engagements of a similar nature and complexity through
appropriate training and participation

b. Ability to apply professional skepticism

c. An understanding of professional and standards and regulatory and legal requirements

d. An understanding of the firm’s quality control policies and procedures

58. An individual outside the firm with the capabilities and competence to act as an engagement partner, for
example of a partner of another firm, or an employee (with appropriate experience) of either a professional
accountancy body whose members may perform audits and reviews of historical financial information, or
other assurance or related services engagements, or of an organization that provides relevant quality control
services

a. Engagement partner

b. Partner

c. Suitably qualified external person

d. Engagement quality control reviewer

59. The familiarity threat maybe created by using the same senior personnel on an assurance engagement over a
long period of time and the safeguards that might be appropriate to address such a threat. Accordingly,
safeguards may include

a. Neither rotation of senior personnel and engagement quality control review

b. Engagement quality control review

c. Both rotation of senior personnel and engagement quality control review

d. Rotation of senior personnel

60. The policies and procedures adopted by a firm designed to proved it with reasonable assurance regarding
compliance with professional standards and regulatory and legal requirements, and appropriateness of
reports issued by the firm

a. Internal controls

b. Monitoring

c. Quality Controls

d. Code of Ethics

61. An entity under common control, ownership or management with the firm or any entity that a reasonable and
informed third party having knowledge of all relevant information would reasonably conclude as being part of
the firm nationally or internationally

a. Engagement team

b. Network firm

c. Listed entity

d. Firm
62. The partner or other person in the firm who is responsible for the engagement and its performance, and for
the report that is issued on behalf of the firm, and who, where required, has the appropriate authority from
the professional, legal or regulatory body

a. Engagement quality control reviewer

b. Engagement partner

c. Suitably qualified external person

d. Personnel

63. Controls that the firm may design and implement to maintain the confidentiality, safe custody, integrity,
accessibility and retrievability of engagement documentation include the following except

a. Procedures for restricting access to, and enabling proper distribution and confidential storage of, hardcopy
engagement documentation

b. Procedures for properly distributing engagement documentation to the team members at the start of
engagement, processing it during engagement, and collating it at the end of engagement

c. Appropriate back-up routines for electronic engagement documentation (always done at the end of the
engagement)

d. The use of a password among engagement team members to restrict access to electronic engagement
documentation to authorized users

64. An engagement quality control review for audits of financial statements of listed entities includes considering
the following, except

a. Significant risks identified during the engagement and the responses to those risks

b. Judgments made, particularly with respect to materiality and significant risks

c. Whether working papers selected for review reflect the work performed in relation to the significant
judgments and support significant management assertions

d. The engagement team’s evaluation of the firm’s independence in relation to the specific engagement
65. PSQC 1 applies to

a. all firms of professional accountants in respect of audits and reviews of financial statements

b. all firms of professional accountants in respect of audits and reviews of financial statements, and other
assurance service engagements

c. all firms of professional accountants in respect of audits and reviews of financial statements, and other
assurance and related services engagements
 d. all firms of professional accountants in respect of audits

66. In pursuing its quality control objective with respect to assigning personnel to engagements, a CPA firm may
use policies and procedures such as

a. requiring timely identification of the staffing requirements of specific engagements so that enough qualified
personnel can be made available

b. rotating employees from assignment to assignment on a random basis to aid in the staff training effort

c. assigning a number of employees to each engagement in excess of the number required so as not to
overburden the staff and interfere with the quality of the audit work performed

d. allowing staff to select the assignments of their choice to promote better client relationship

67. Who should take responsibility for the overall quality on each audit engagement?

a. Engagement partner

b. CPA firm

c. Engagement team

d. Engagement quality control reviewer

68. Professionals, other than partners, including any experts the firm employs.

a. Engagement team

b. Staff

c. Employees

d. Personnel

69. ISA (International Standards on Auditing) 220, Quality Control for Audits of Financial Information (Revised),
states, in part, that for audits of financial statements of listed entities, the engagement partner should not
issue the auditor’s report until the completion of the

a. Engagement Partner Review

b. Engagement Team Review

c. Management Review

d. Engagement Quality Control Review

70. The nature, timing, and extent of an audit firm’s quality control policies and procedures depend on:
i. The CPA firm’s size;
 ii. The nature of the CPA firm’s practice
 iii. Appropriate cost- benefit considerations

a. Yes, Yes, Yes

b. Yes, Yes, No

c. No, No, No

d. Yes, No, Yes

71. An engagement team includes:

(i)all partners and staff performing the engagement
(ii)any individuals engaged by the firm or a network firm who perform procedures on the engagement
(iii)external experts engaged by the firm or a network firm

a. yes, yes, yes

b. yes, no, no

c. yes, no, yes

d. yes, yes, no

72. Which of the following statements regarding quality control policies and procedures is incorrect?

a. Quality control policies are objectives and goals while quality control procedures are steps to be taken to
accomplish the policies adopted

b. The policies and procedures adopted by the individual audit firms should not vary since PSA 220 prescribed
quality control policies and procedures that must be adopted by all auditing firms

c. Quality control policies and procedures should be implemented at both the level of the audit firm and on an
individual audits
 d. The audit firm should implement quality control policies and procedures designed to ensure that all audits
are conducted in accordance with PSAs or relevant national standards and practices

73. An audit firm should implement quality control policies and procedures designed to ensure that all audits are
conducted in accordance with PSAs or relevant national standards or practices. These policies and procedures
should be implemented

a. At the audit firm level only

b. On individual audits only

c. Both at the audit firm level and on individual audits

d. Either at the audit firm level or on individual audits

74. The engagement partner and, where appropriate, other members of the engagement team, shall document:
(a) Issues identified with respect to compliance with relevant ethical requirements and how they were
resolved;
(b) Conclusions on compliance with independence requirements that apply to the audit engagement, and any
relevant discussions with the firm that support these conclusions;
(c) The reviewer is not aware of any unresolved matters that would cause the reviewer to believe that the
significant judgments the engagement team made and the conclusions they reached were not appropriate

a. yes, yes, no

b. yes, no, no

c. yes, yes, yes

d. no, no, no

75. PSQC applies to ALL firms of professional accountants in respects of audits, reviews, and other assurance &
related engagements. Compliance with this PSQC depends on various factors relating to a particular firm.
Which of the following is not a factor?

a. Operating characteristics

b. Size

c. Whether it is part of a network

d. Geographical location
76.  Firm of CPAs may use policies and procedures such as notifying professional personnel as to the names of
audit clients having publicly held securities and confirming periodically with such personnel that prohibited
relations do not exist. This is done to achieve effective quality control in which of the following areas?

a. Assigning personnel to engagements

b. Independence.

c. Acceptance and continuance of client

d. Inspection

77. The extent of the engagement quality control review may depend on a number of factors. Which among the
following is not a factor?

a. whether the entity is a listed entity

b. the size of the audit client

c. the complexity of the audit engagement

d. risk that the auditor’s report might not be appropriate in the circumstances

78. The primary purpose of establishing quality control policies and procedures for deciding whether to accept a
new client is to

a. Minimize the likelihood of association with clients whose management lacks integrity

b. Anticipate before performing any fieldwork whether an unqualified opinion can be expressed

c. Enable the CPA firm to attest to the reliability of the client

d. Satisfy the CPA firm’s duty to the public concerning the acceptance of new clients

79. The firms should establish policies and procedures designed to promote an internal culture based on the
recognition that quality is essential in performing engagements. Such policies and procedures should require
the firm’s chief executive officer (or equivalent) or, if appropriate, the firm’s managing board of partners (or
equivalent), to assume ultimate responsibility for the firm’s system of quality control.

a. Leadership responsibilities for quality within the firm

b. Monitoring

c. Human resources

d. Ethical requirements
80. Communication of monitoring results should be done at least

a. once every year

b. for every engagement that has, for its client, a listed entity

c. once every three years

d. once every two years