STRICTLY CORRECT ANSWERS ONLY

11. A professional accountant who does not consider and apply the guidance included in a relevant practice statement should be prepared to

a. Explain how the basic principles and essential procedures in the engagement standards addressed by the practice statements have been complied with

b. Explain to the Board of Accountancy why the practice statement was not complied with

c. Bear the consequences of such non-compliance, such as suspension or revocation of license plus imprisonment of jot more than two (2) years

d. Face the stockholders of the entity and explain in the meeting why such practice statement was not complied with provided that the explanation is also put in writing, and signed in the presence of the Chairperson of AASC.

Quality Control

12. A basic objective of a CPA firm is to provide professional services that conform or comply with professional standards and regulatory and legal requirements so that the reports issued by the firm are appropriate in the circumstances. Reasonable assurance of achieving this basic objective is provided through policies and procedures on:

a. continuing professional education.

b. compliance with generally accepted reporting standards.

c. a system of quality control.

d. a system of peer review.

13. Statement 1: PSQC 1 deals with a firm's responsibilities for its system of quality control and applies to all firms of professional accountants in respect of audit of historical financial information only.

Statement 2: PSA 220 deals with the specific responsibilities of the auditor regarding quality control procedures and engagement quality control reviewer (EQCR) for all assurance engagements and related services.

a. True, true

b. True, false

c. False, true

d. False, false

14. The nature and extent of a CPA firm's quality control policies and procedures depend on

The CPA firm's size The nature of the CPA firm's practice Cost-benefit considerations

a. Yes Yes Yes

b. Yes Yes No

c. Yes No Yes

d. No No Yes

15. Control policies and procedures designed to ensure that all audits are conducted in accordance with PSA's 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. Either at the audit firm level or on individual audits.

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

Elements of a System of Quality Control

16. Which of the following is not an element of quality control as defined by Philippine Standards on Quality Control 1?

a. Leadership responsibility for quality

b. Independence

c. Human resources

d. Acceptance and continuance of engagement and client relationship

17. Which of the following is not an essential component or element of a system of quality control?

a. Policies and procedures to ensure that the work performed by firm personnel meet applicable professional standards.

b. Policies to ensure that personnel maintain their independence in fact and in appearance.

c. Policies that ensure that monitoring activities are effectively applied.

d. Policies and procedures to ensure that firm personnel are actively engaged in marketing strategies.

18. The firm 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. Ethical requirements

b. Monitoring

c. Human resources

d. Leadership responsibilities for quality within the firm

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

a. Engagement quality control review

b. Engagement partner

c. Engagement team

d. CEO of the firm or managing board of partners

20. The implementation of quality control procedures that are applicable to the individual audit engagement is the responsibility of the

a. CPA firm

b. Engagement quality control review

c. Engagement team

d. Expert contracted by the firm in connection with the audit engagement