AUDITING & ASSURANCE PRINCIPLES

AT.112-Code of Ethics – Part I NU SPORTS ACADEMY LAGUNA

LECTURE NOTES
Preface to the Code of Ethics current developments in practice, legislation and
techniques. A professional accountant should act
The code of ethics for professional accountants in the diligently and in accordance with applicable
Philippines is based on the revised Code of Ethics for technical and professional standards when
Professional Accountants developed by International providing professional services. In addition, they
Federation of Accountants (IFAC) (2006 revision). should conform with the technical and professional
standards of the following:
Composed of three parts: a) Board of Accountancy (BOA) / Professional
• Part A: General Application of the Code Regulation Commission (PRC)
• Part B: Professional Accountants in Public Practice b) Securities and Exchange Commission (SEC)
• Part C: Professional Accountants in Business c) Financial Reporting Standards Council (FRSC)
d) Auditing and Assurance Standards Council
The code of ethics was approved for adoption by the (AASC)
PICPA, BOA and PRC. e) Relevant legislation

The code generally took effect on or after June 30, 2008. Two Phases of Professional Competence
• Attainment –
Note: The International Ethics Standards Board of o High standard of general education
Accountants (IESBA) issued a revised Code of Ethics for o Specific education, training and
Professional Accountants, which is substantially the same examination in professionally relevant
as the currently existing code of ethics. The revised code subjects
of ethics was effective on January 1, 2011, but still being o A period of work experience
reviewed for use in the Philippines. • Maintenance –
o Continuing awareness of development in
Introduction and Fundamental Principles the accountancy profession

A distinguishing mark of the accountancy profession is its • Confidentiality - A professional accountant should
acceptance of the responsibility to act in the public respect the confidentiality of information acquired
interest. Therefore, a professional accountant’s as a result of professional and business
responsibility is not exclusively to satisfy the needs of an relationships and should not disclose any such
individual client or employer. In acting in the public information to third parties without proper and
interest a professional accountant should observe and specific authority unless there is a legal or
comply with the ethical requirements of this Code. professional right or duty to disclose. Confidential
information acquired as a result of professional and
A professional accountant is required to comply with the business relationships should not be used for the
following fundamental principles: personal advantage of the professional accountant
• Integrity - A professional accountant should be or third parties.
straightforward and honest in all professional and
business relationships. Confidentiality continues even after the end of
relationships between a professional accountant
The professional accountant should not (unless a and a client or employer.
modified report is provided) be associated with any
information if: The following are circumstances disclosure of
1. contains a materially false or misleading confidential information may be appropriate:
statement; • Permitted by law and is authorized by the
2. contains statements or information furnished client or the employer;
recklessly; or • Required by law, for example:
3. omits or obscures information required to be o Production of documents or evidence in the
included where such omission or obscurity course of legal proceedings; or
would be misleading. o Disclosure to the appropriate public
authorities of infringements of the law that
• Objectivity - A professional accountant should not come to light.
allow bias, conflict of interest or undue influence of • There is a professional duty or right to
others to override professional or business disclose:
judgments. o To comply with the quality review of a
member body or professional body;
Relationships that bias or unduly influence the o To respond to an inquiry or investigation
professional judgment of the professional by a member body or regulatory body;
accountant should be avoided. o To protect the professional interests in
legal proceedings; or
• Professional Competence and Due Care - A o To comply with technical standards and
professional accountant has a continuing duty to ethics requirements.
maintain professional knowledge and skill at the
level required to ensure that a client or employer • Professional Behavior - A professional accountant
receives competent professional service based on should comply with relevant laws and regulations

Page 1 of 8 AT.112
 and should avoid any action that discredits the 1. A financial interest in a client or jointly holding a
profession. financial interest with a client.
2. A loan to or from an assurance client or any of its
In marketing and promoting themselves and their directors or officers
work, professional accountants should not bring the 3. Undue dependence on total fees from a client.
profession into disrepute. Professional accountants 4. Having a close business relationship with a client.
should be honest and truthful and should not: 5. Concern about the possibility of losing a client.
1. Make exaggerated claims for the services they are 6. Potential employment with a client.
able to offer, the qualifications they possess, or 7. Contingent fees relating to an assurance engagement.
experience they have gained; or
2. Make disparaging references or unsubstantiated Self-review threats
comparisons to the work of others. 1. The discovery of a significant error during a re-
evaluation of the work of the professional accountant
Conceptual Framework Approach in public practice.
2. Reporting on the operation of financial systems after
The circumstances in which professional accountants being involved in their design or implementation.
operate may give rise to specific threats to compliance 3. Having prepared the original data used to generate
with the fundamental principles. A conceptual framework records that are the subject matter of the
that requires a professional accountant to identify, engagement.
evaluate and address threats to compliance with the 4. A member of the assurance team being, or having
fundamental principles, rather than merely comply with a recently been, a director or officer of that client.
set of specific rules which may be arbitrary, is, therefore, 5. A member of the assurance team being, or having
in the public interest. If identified threats are other than recently been, employed by the client in a position to
clearly insignificant, a professional accountant should, exert direct and significant influence over the subject
where appropriate, apply safeguards to eliminate the matter of the engagement.
threats or reduce them to an acceptable level, such that 6. Performing a service for a client that directly affects
compliance with the fundamental principles is not the subject matter of the assurance engagement.
compromised.
Advocacy threats
A professional accountant should take qualitative as well 1. Promoting shares in a listed entity when that entity is
as quantitative factors into account when considering the a financial statement audit client.
significance of a threat. If a professional accountant cannot 2. Acting as an advocate on behalf of an assurance client
implement appropriate safeguards, the professional in litigation or disputes with third parties.
accountant should decline or discontinue the specific
professional service involved, or where necessary resign Familiarity threats
from the client (in the case of a professional accountant in 1. A member of the engagement team having a close or
public practice) or the employing organization (in the case immediate family relationship with a director or officer
of a professional accountant in business). of the client.
2. A member of the engagement team having a close or
A professional accountant may inadvertently violate a immediate family relationship with an employee of the
provision of this Code. Such an inadvertent violation, client who is in a position to exert direct and significant
depending on the nature and significance of the matter, influence over the subject matter of the engagement.
may not compromise compliance with the fundamental 3. A former partner of the firm being a director or officer
principles provided, once the violation is discovered, the of the client or an employee in a position to exert
violation is corrected promptly and any necessary direct and significant influence over the subject matter
safeguards are applied. of the engagement.
4. Accepting gifts or preferential treatment from a client,
Threats and Safeguards unless the value is clearly insignificant.
5. Long association of senior personnel with the
Threat to Compliance with Fundamental Principles assurance client.

Many threats fall into the following categories: Intimidation threats

a) Self-interest threats – may occur as a result of the • Being threatened with dismissal or replacement in
financial or other interests of a professional accountant relation to a client engagement.
or of an immediate or close family member; • Being threatened with litigation.
b) Self-review threats – may occur when a previous • Being pressured to reduce inappropriately the
judgment needs to be re-evaluated by the professional extent of work performed in order to reduce fees.
accountant responsible for that judgment;
c) Advocacy threats – may occur when a professional Safeguards Against Threats to Compliance with
accountant promotes a position or opinion to the point Fundamental Principles
that subsequent objectivity may be compromised;
d) Familiarity threats – may occur when, because of a Safeguards that may eliminate or reduce such threats to
close relationship, a professional accountant becomes an acceptable level fall into two broad categories:
too sympathetic to the interests of others; and • Safeguards created by the profession, legislation or
e) Intimidation threats – may occur when a professional regulation; and
accountant may be deterred from acting objectively by • Safeguards in the work environment.
threats, actual or perceived. a) firm-wide safeguards; and
b) engagement specific safeguards.
Examples of circumstances that may create threats to
compliance with fundamental principles: Safeguards created by the profession, legislation or
regulation include, but are not restricted to:
Self-interest threats a) Educational, training and experience requirements
for entry into the profession.

Page 2 of 8 AT.112
 b) Continuing professional development
requirements. The professional accountant shall observe independence
c) Corporate governance regulations. requirement, in addition to compliance with fundamental
d) Professional standards. principles, when performing assurance engagements.
e) Professional or regulatory monitoring and
disciplinary procedures. Consists of:
f) External review by a legally empowered third party a. independence of mind – state of mind that
of the reports, returns, communications or permits the provision of an opinion without being
information produced by a professional accountant. affected by influences that compromise
professional judgment, allowing an individual to act
Ethical Conflict Resolution with integrity, and exercise objectivity and
professional skepticism.
In evaluating compliance with the fundamental principles, b. independence in appearance – avoidance of facts
a professional accountant may be required to resolve a and circumstances that are so significant a
conflict in the application of fundamental principles. reasonable and informed third party, having
knowledge of all relevant information, including
When initiating either a formal or informal conflict any safeguards applied, would reasonably conclude
resolution process, a professional accountant should a firm’s or a member of the assurance team’s
consider the following, either individually or together with integrity, objectivity or professional skepticism had
others, as part of the resolution process: been compromised.
• Relevant facts;
• Ethical issues involved; The conceptual framework approach shall be applied by
• Fundamental principles related to the matter in professional accountants to:
question; a. Identify threats to independence;
• Established internal procedures; and b. Evaluate the significance of the threats identified; and
• Alternative courses of action. c. Apply safeguards, when necessary, to eliminate the
threats or reduce them to an acceptable level.
Having considered these issues, a professional accountant
should determine the appropriate course of action that is When the professional accountant determines that
consistent with the fundamental principles identified. The appropriate safeguards are not available or cannot be
professional accountant should also weigh the applied to eliminate the threats or reduce them to an
consequences of each possible course of action. acceptable level, the professional accountant shall
eliminate the circumstance or relationship creating the
If the matter remains unresolved, the professional threats or decline or terminate the audit engagement.
accountant should:
a. Consult with appropriate persons within the firm or A professional accountant shall use professional judgment
employing organization. in applying this conceptual framework.
b. If involves a conflict with, or within, an organization,
consider consulting with those charged with The following table summarizes independence
governance (Board of Directors and Audit Committee) requirements in relation to assurance engagements:
of the organization.
c. Obtaining professional advice from the relevant Audit Non-audit Non-audit
professional body or legal advisors, and guidance on (Unrestricted (Restricted
ethical issues without breaching confidentiality. report) report)
d. If, after exhausting all relevant possibilities, the ethical The members of the Yes Yes Yes
conflict remains unresolved, refuse to remain assurance team
associated with the matter creating the conflict or The firm Yes Yes No
withdraw from the engagement team or specific Network firms Yes No No
assignment, or to resign.

- done -

Page 3 of 8 AT.112
 MULTIPLE CHOICE
Preface b. Should not consult with those charged with
1. Which statement is incorrect regarding the Revised governance of the organization, such as the board
Code of Ethics for Professional Accountants in the of directors or the audit committee.
Philippines? c. If a significant conflict cannot be resolved, a
a. Professional accountants refer to persons who are professional accountant may wish to obtain
Certified Public Accountants (CPA) and who hold a professional advice from the relevant professional
valid certificate issued by the Board of body or legal advisors, and thereby obtain
Accountancy. guidance on ethical issues without breaching
b. Where a local law is in conflict with a provision of confidentiality
the IFAC Code, the IFAC Code requirement d. If, after exhausting all relevant possibilities, the
prevails. ethical conflict remains unresolved, a professional
c. The Revised Code of Ethics for Professional accountant should, where possible, refuse to
Accountants in the Philippines is mandatory for all remain associated with the matter creating the
CPA’s and is applicable to professional services conflict.
performed in the Philippines on or after June 30,
2008. 7. Fundamental principles are potentially affected by
d. All of the above I. Self-interest threat IV. Familiarity threat
II. Self review threat V. Intimidation threat
2. Which of the following statements best describes why III. Advocacy threat
the profession of CPAs has deemed it essential to a. I, II, III, IV and V c. I, II and III
promulgate a code of ethics and to establish a b. I, II, III and IV d. I only
mechanism for enforcing observance of the code?
a. A distinguishing mark of a profession is its 8. Occurs as a result of the financial and other interests
acceptance of responsibility to the public of a professional accountant or of an immediate or
b. A prerequisite to success is the establishment of an close family member
ethical code that stresses primarily the a. Self- interest threat c. Advocacy threat
professional’s responsibility to client’s and b. Self-review threat d. Familiarity threat
colleagues
c. A requirement of most state laws calls for the 9. Occurs when a professional judgment needs to be re-
profession to establish a code of ethics evaluated by the professional accountant responsible
d. An essential means of self-protection for the for that judgment
profession is the establishment of flexible ethical a. Self-interest threat c. Advocacy threat
standards by the profession b. Self-review threat d. Familiarity threat

The Code 10. Occurs when a professional accountant promotes a

3. Which statement is incorrect regarding the Code of position or opinion to the point that subsequent
Ethics for Professional Accountants in the Philippines? objectivity may be compromised
a. The code is divided into two parts, part A and part a. Self-interest threat c. Advocacy threat
B b. Self-review threat d. Familiarity threat
b. Part A refers to general application of the code
c. Part B applies only to those professional 11. Occurs when, by virtue of a close relationship, a
accountants in public practice professional accountant becomes too sympathetic to
d. Part C applies to professional accountants in the client’s interests.
business a. Self-interest threat c. Advocacy threat
b. Self-review threat d. Familiarity threat
Part A: General Application
Section 100 – Introduction and Fundamental Principles 12. Intimidation threat
4. In order to achieve the objectives of the accountancy a. is not a threat to independence
profession, professional accountants have to observe a b. Occurs when a professional accountant may be
number of prerequisites or fundamental principles. deterred from acting objectively and exercising
The fundamental principles include the following, professional skepticism by threats, actual or
except perceived
a. Objectivity c. Occurs when, by virtue of a close relationship, a
b. Professional Competence and Due care professional accountant becomes too sympathetic
c. Confidentiality to the client’s interests.
d. Confidence d. Occurs when a professional accountant promotes a
position or opinion to the point that subsequent
5. Which of the following is not explicitly referred to in objectivity may be compromised
the Code of Ethics as source of technical standards?
a. Commission of Audit (COA) Section 110 – Integrity and Section 120 – Objectivity
b. Auditing standards and Assurance Council (AASC) 13. Which of the following statements is (are) correct
c. Securities and exchange Commission (SEC) about objectivity and integrity?
d. Relevant legislation a. The principle of integrity imposes the obligation on
all professional accountants to be straightforward
6. Professional accountants may encounter problems in and honest in professional and business
identifying unethical behavior or in resolving an ethical relationships. Integrity also implies fair dealing
conflict. When faced with significant ethical issues, and truthfulness.
professional accountants should do the following, b. The principle of objectivity imposes an obligation
except on all professional accountants not to compromise
a. Follow the established policies of the employing their professional or business judgment because of
organization to seek a resolution of such conflict.

Page 4 of 8 AT.112
 bias, conflict of interest or the undue influence of 19. A professional accountant has a professional duty or
others. right to disclose confidential information in each of the
c. Both a and b following, except
d. Neither a nor b a. To comply with technical standards and ethics
requirements
14. A professional accountant should not be associated b. To disclose to BIR fraudulent scheme committed by
with reports, returns, communications or other the client on payment of income tax.
information that c. To comply with the quality review of a member
a. Contains a false or misleading statement body or professional body
b. Contains statements or information furnished d. To respond to an inquiry or investigation by a
recklessly or without any real knowledge of member body or regulatory body.
whether they are true or false.
c. Omits or obscures information required to be Section 150 –Professional Behavior
submitted and such omission or obscurity would be 20. The principle of professional behavior imposes an
misleading. obligation on professional accountants to
d. All of the above a. Comply with relevant laws and regulations
b. Avoid any action that may bring discredit to the
Section 130 – Professional competence and due care profession
15. Which of the following is incorrect regarding c. Both a and b
professional competence and due care? d. Neither a nor b
a. Professional competence may be divided into three
separate phases. 21. In marketing and promoting themselves and their
b. The attainment of professional competence work, professional accountants should
requires initially a high standard of general a. Not use means which brings the profession into
education. disrepute
c. The maintenance of professional competence b. Not make exaggerated claims for the services they
requires a continuing awareness of development in are able to offer, the qualifications they possess, or
the accountancy profession. experience they have gained.
d. Due care encompasses the responsibility to act in c. Not make disparaging references or
accordance with the requirements of an unsubstantiated comparisons to the work of others
assignment, carefully, thoroughly and on a timely d. All of the above.
basis
Part B: Rules Applicable to CPAs in Public Practice
16. Indicate the normal pattern of development for a (Sections 200 and 290 only)
professional accountant. Section 200 –Introduction
I. A period of work experience. 22. Which of the following least likely create “self-interest
II. High standard of general education. threat”
III. Specific education, training and examination in a. Contingent fees relating to assurance engagements
professionally relevant subjects b. A financial interest in a client or jointly holding a
a. I, II, III c. III, II, I financial interest with a client
b. II, III, I d. II, I, III c. A loan to or from an assurance client or any of its
directors or officers
17. Which of the following is the least required in attaining d. Being pressured with litigation
professional competence?
a. High standard of general education. 23. Which of the following least likely create “self-interest
b. Specific education, training and examination in threat”
professionally relevant subjects. a. Undue dependence on total fees from a client.
c. Period of meaningful work experience. b. Concern about the possibility of losing the
d. Continuing awareness of development in the engagement.
accountancy profession. c. Having a close business relationship with a client.
d. Being pressured to reduce inappropriately the
Section 140 –Confidentiality extent of work performed in order to reduce the
18. Which of the following is incorrect regarding fees
confidentiality?
a. Professional accountants have an obligation to 24. Examples of circumstances that may create self-review
respect the confidentiality of information about a threat least likely include
client’s or employer’s affairs acquired in the course a. Having prepared the original data used to generate
of professional services. records that are the subject matter of the
b. The duty of confidentiality ceases after the end of engagement
the relationship between the professional b. A member of the assurance team being, or having
accountant and the client or employer. recently been, an employee of the assurance client
c. Confidentiality should always be observed by a in a position to exert direct and significant
professional accountant unless specific authority influence over the subject matter of the assurance
has been given to disclose information or there is a engagement.
legal or professional duty to disclose. c. Performing services for an assurance client that
d. Confidentiality requires that a professional directly affect the subject matter of the assurance
accountant acquiring information in the course of engagement.
performing professional services neither uses nor d. Potential employment with a client.
appear to use that information for personal
advantage or for the advantage of a third party. 25. Examples of circumstances that may create self-review
threat least likely include
a. A member of the assurance team being or having
recently been a director of officer of that client.

Page 5 of 8 AT.112
 b. The discovery of significant error during a re- d. Policies and procedures that will enable the
evaluation of the work of the professional identification of interests or relationships between
accountant in public practice. the firm or members of the assurance team and
c. Reporting on the operation of financial systems assurance clients.
after being involved in their design or
implementation. Section 290– Independence – Assurance
d. Accepting gifts or preferential treatment from a Engagements
client, unless the value is clearly insignificant. 31. The following statements are correct regarding
independence, except
26. Examples of circumstances that may create familiarity a. Independence consists of independence of mind
threat least likely include and independence in appearance.
a. A member of the assurance team having an b. Independence of mind is the state of mind that
immediate family member or close family member permits the provision of an opinion without being
who is a director or officer of the assurance client. affected by influences that compromise
b. A member of the assurance team having an professional judgment, allowing an individual to act
immediate family member or close family member with integrity, and exercise objectivity and
who, as an employee of the assurance client, is in professional skepticism.
a position to exert direct and significant influence c. Independence in appearance is the avoidance of
over the subject matter of the assurance facts and circumstances that are so significant a
engagement. reasonable and informed third party, having
c. A former partner of the firm being a director, knowledge of all relevant information, including
officer of the assurance client or an employee in a any safeguards applied, would reasonably conclude
position to exert direct and significant influence a firm’s or a member of the assurance team’s
over the subject matter of the assurance integrity, objectivity or professional skepticism had
engagement. been compromised.
d. Promoting shares in a listed entity when that entity d. All of the above are correct statements regarding
is a financial statement audit client independence

27. Which of the following is (are) threats to CPAs in Public 32. A CPA, while performing an audit, strives to achieve
Practice? independence in appearance in order to
a. Acting as an advocate on behalf of an assurance a. Reduce risk and liability
client in litigation or in resolving disputes with third b. Maintain public confidence in the profession
parties. c. Become independent in fact
b. Long association of a senior member of the d. Comply with PSAs
assurance team with the assurance client.
c. Threat of replacement over a disagreement with 33. For assurance engagements provided to an audit
the application of an accounting principle. client, the following should be independent of the client
d. All of the above
a. b. c. d.
28. Safeguards created by the profession, legislation or The members of the Yes Yes Yes Yes
regulation, include the following, except assurance team
a. Educational, training and experience requirements The firm Yes Yes No No
for entry into the profession Network firms Yes No No Yes
b. Continuing education requirements
c. Legislation governing the independence 34. For assurance engagements provided to clients that
requirements of the firm. are not audit clients, when the report is not expressly
d. Policies and procedures that emphasize the restricted for use by identified users, the following
assurance client’s commitment to fair financial should be independent of the client
reporting
a. b. c. d.
29. Safeguards in the work environment, include the The members of the Yes Yes Yes Yes
following, except assurance team
a. Professional standards and monitoring and The firm Yes Yes No No
disciplinary processes. Network firms Yes No No Yes
b. The assurance client has competent employees to
make managerial decision.
35. For assurance engagements provided to clients that
c. Internal procedures that ensure objective choices
are not audit clients, when the assurance report is
in commissioning non-assurance engagements.
expressly restricted for use by identified users, the
d. A corporate governance structure, such as an audit
following should be independent of the client
committee, that provides appropriate oversight
and communications regarding a firm’s services.
a. b. c. d.
The members of the Yes Yes Yes Yes
30. Safeguards in the work environment, include the
assurance team
following except
a. Firm leadership that stresses the importance of The firm Yes Yes No No
independence and the expectation that members Network firms Yes No No Yes
of assurance teams will act in the public interest.
b. External review of the firm’s quality control
system. - now do the DIY drill -
c. Policies and procedures to implement and monitor
quality control of assurance engagements.

Page 6 of 8 AT.112
 DO-IT-YOURSELF (DIY) DRILL
1. In order to achieve the objectives of the accountancy a. An unusual practice which should have voided the
profession, professional accountants have to observe a audit engagement.
number of prerequisites or fundamental principles. b. Lack of competence on the part of the CPA.
The fundamental principles include the following, c. An appropriate part of the professional conduct of
except the audit engagement.
a. Professional behavior c. Independence d. Undertaken as a responsibility of management.
b. Confidentiality d. Objectivity
8. Occurs when a professional accountant promotes a
2. There are fundamental principles that the professional position or opinion to the point that subsequent
accountant has to observe when performing assurance objectivity may be compromised
engagements. The requirement of which principle is of a. Self-interest threat c. Advocacy threat
particular importance in an assurance engagement in b. Self-review threat d. Familiarity threat
ensuring that the conclusion of the professional
accountant has value to the intended user? 9. A CPA shall not disclose confidential information
a. Integrity c. Confidentiality obtained during an audit engagement in which one of
b. Professional competence d. Objectivity the following situations?
a. When the security of the State so requires
3. The principle of integrity imposes an obligation on b. With the consent of the client
professional accountants to c. In defense of himself when sued by the client
a. Comply with relevant laws and regulations d. Under the rule against disclosing information
b. Avoid any action that may bring discredit to the
profession 10. In which of the following may confidential information
c. Both a and b not be disclosed?
d. Neither a nor b a. To comply with the quality review of a member
body or professional body
4. The principle of objectivity imposes which of the b. To submit evidence in the course of legal
following obligations on professional accountants? proceedings
a. To maintain professional knowledge and skill at the c. Acquiring information in the course performing
level required to ensure that clients or employers professional services and use that information for
receive competent professional advice personal advantages
b. To refrain from disclosing confidential information d. When consent to disclose information is given by
obtained as a result of professional and business the client
relationships
c. To comply with relevant laws and regulations and 11. Occurs when a professional judgment needs to be re-
avoid any situation that may bring discredit to the evaluated by the professional accountant responsible
profession for that judgment
d. Not to compromise professional or business a. Self-interest threat c. Advocacy threat
judgment because of bias, conflict of interest or b. Self-review threat d. Familiarity threat
undue influence of others
12. Immediate family includes
5. Confidential client information may be disclosed in the a. Parent c. Non-dependent child
following circumstances, except b. Sibling d. Spouse
a. When disclosure is authorized.
b. When disclosure is required by law. 13. Using the same lead engagement partner on an audit
c. When the relationship between the client and the over a prolonged period may most likely create
auditor ceases. a. Self-interest threat c. Intimidation threat
d. When there is a professional duty or right to b. Self-review threat d. Familiarity threat
disclose.
14. Examples of circumstances that may create familiarity
6. The rules of professional conduct states that a CPA threat include
shall not disclose any confidential information obtained I. A member of the assurance team having an
in the course of a professional engagement with immediate family member or close family member
certain exceptions. In which of the situations given who is a director or officer of the assurance client.
below would disclosure by the CPA be in violation of II. Dealing in, or being a promoter of, share or other
the rules of professional conduct? securities in an assurance client.
a. Disclosing confidential information in order to III. Threat of replacement over a disagreement with
properly discharge the CPAs responsibilities in the application of an accounting principle.
accordance with his professional standards IV. Potential employment with an assurance client.
b. Disclosing confidential information in compliance V. Long association of a senior member of the
with a subpoena by a court assurance team with the assurance client.
c. Disclosing confidential information to another a. I, IV and V only
accountant interested in purchasing the CPAs b. II and V only
practice c. II, III and IV only
d. Disclosing confidential information in an d. I and V only
investigation conducted by the PRC thru the Board
of Accountancy 15. Safeguards created by the profession, legislation or
regulation, include the following
7. During the course of an audit engagement, the CPA I. Educational, training and experience requirements
needed additional studies and consultation with for entry into the profession
experts. This additional study and consultation is II. Continuing education requirements
deemed to be

Page 7 of 8 AT.112
III. Legislation governing the independence I. Self laudatory statements
requirements of the firm. II. Discrediting or attacking other firms or CPA
IV. Policies and procedures that emphasize the practitioners
assurance client’s commitment to fair financial III. Giving too much emphasis on competitive
reporting differences
V. Policies and procedures to implement and monitor IV. Publishing services in billboard advertisements
quality control of assurance engagements. a. I, II and III only
a. I, II, III and IV only c. I, II and III only b. I, III and IV only
b. I, II and V only d. I and III only c. II, III and IV only
d. I, II, III and IV
16. A CPA, while performing an audit, strives to achieve
independence in appearance in order to 19. Occurs when a professional accountant promotes a
a. Reduce risk and liability position or opinion to the point that subsequent
b. Maintain public confidence in the profession objectivity may be compromised
c. Become independent in fact a. Self-interest threat c. Advocacy threat
d. Comply with PSAs b. Self-review threat d. Familiarity threat

17. The network firms are required to be independent of 20. When performing a review engagement, the following
the client should be independent of the client
a. For assurance engagements provided to an audit
client. a. b. c. d.
b. For assurance engagements provided to clients The members of the Yes Yes Yes Yes
that are not audit clients, when the report is not assurance team
expressly restricted for use by identified users. The firm Yes Yes No No
c. For assurance engagements provided to clients Network firms Yes No No Yes
that are not audit clients, when the assurance
report is expressly restricted for use by identified ☺ - end of AT.112 - ☺
users.
d. All of the above.

18. The following are not allowed form of advertising and

publicity

------------------------------------------------------------------------------------------------------------------------------------

ANSWER SHEET

NAME: _______________________________________________________________ SCORE: ____ RATING: ____%

MULTIPLE CHOICE QUESTIONS

01. 08. 15. 22. 29.

02. 09. 16. 23. 30.
03. 10. 17. 24. 31.
04. 11. 18. 25. 32.
05. 12. 19. 26. 33.
06. 13. 20. 27. 34.
07. 14. 21. 28. 35.

DO IT YOURSELF (DIY) DRILL

01. 06. 11. 16. 21.

02. 07. 12. 17. 22.
03. 08. 13. 18. 23.
04. 09. 14. 19. 24.
05. 10. 15. 20. 25.

Page 8 of 8 AT.112