CPA Review: Auditing Theory

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Questions and Answers

Which statement is incorrect regarding the Code of Ethics for Professional Accountants in the Philippines?

Where a national statutory requirement is in conflict with a provision of the IFAC Code, the IFAC Code requirement prevails.

The Code of Ethics for Professional Accountants in the Philippines is mandatory for all CPAs and is applicable to professional services performed in the Philippines on or after January 1, 2004.

Professional accountants should consider the ethical requirements as the basic principles which they should follow in performing their work. (correct)

Professional accountants refer to persons who are Certified Public Accountants (CPA) and who hold a valid certificate issued by the Board of Accountancy.

The following definitions from the IFAC Code were modified to consider Philippine regulatory requirements and circumstances, except

Professional accountants in public practice

Lead engagement partner (correct)

Professional accountants

Firm

The following are modifications to the IFAC Code to consider Philippine regulatory requirements and circumstances, except

The period for rotation of the lead engagement partner was changed from five to seven years.

Advertising and solicitation by individual professional accountants in public practice were not permitted in the Philippines. (correct)

Additional examples relating to anniversaries and websites wherein publicity is acceptable, as provided in BOA Resolution 19, Series of 2000, were included.

Payment and receipt of commissions were not permitted in the Philippines.

Assurance engagement include the following, except

An engagement to perform agreed-upon procedures. Signup and view all the answers

Close family include the following, except

Spouse Signup and view all the answers

Assurance team include

For the purposes of an audit client, all those within a network firm who can directly influence the outcome of the audit engagement Signup and view all the answers

Financial interest means

An interest in an equity or other security, debenture, loan or other debt instrument of an entity, including rights and obligations to acquire such an interest and derivatives directly related to such interest. Signup and view all the answers

Direct financial interest is a financial interest

beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has control Signup and view all the answers

Firm includes the following, except

A firm or network firm has a direct financial interest in an entity that has a controlling interest in an audit client. Signup and view all the answers

Which of the following is incorrect regarding independence?

Independence consists of independence of mind and independence in appearance. Signup and view all the answers

A financial interest beneficially owned through a collective investment vehicle, estate, trust or other intermediary over which the individual or entity has no control.

Indirect financial interest Signup and view all the answers

A combination of impartiality, intellectual honesty and a freedom from conflicts of interest.

Independence Signup and view all the answers

Lead engagement partner is

All of the above. Signup and view all the answers

A distinct sub-group, whether organized geographical or practice lines.

Firm Signup and view all the answers

The Code of Ethics for Professional Accountants in the Philippines defined "practice" as

Any service requiring accountancy or related skills performed by a professional accountant including accounting, auditing, taxation, management consulting and financial management services. Signup and view all the answers

The communication to the public of facts about a professional accountant which are not designed for the deliberate promotion of that professional accountant.

Publicity Signup and view all the answers

Advertising, as defined Code of Ethics, means

The communication to the public of information as to the services or skills provided by professional accountants in public practice with a view to procuring professional business. Signup and view all the answers

Existing accountant, as defined in the Code of Ethics, means

A professional accountant in public practice currently holding an audit appointment or carrying out accounting, taxation, consulting or similar professional services for a client. Signup and view all the answers

Study Notes

CPA Review School of the Philippines - Auditing Theory - Code of Ethics

The Code of Ethics for Professional Accountants in the Philippines is mandatory for all Certified Public Accountants (CPAs) and applicable to professional services performed in the Philippines on or after January 1, 2004.
Professional accountants are defined as Certified Public Accountants (CPAs) holding a valid certificate issued by the Board of Accountancy.
If a national statutory requirement conflicts with the IFAC Code, the national requirement prevails.
Professional Accountants should consider ethical requirements as the basic principles for their work. All CPAs should comply with ethical requirements, with failure potentially resulting in investigation.
The period for rotation of lead engagement partners was changed from five to seven years, to consider Philippine regulatory requirements.
Advertising and solicitation by individual professional accountants in public practice were not permitted in the Philippines. Examples for acceptable publicity related to anniversaries and websites were included (per BOA Resolution 19, Series of 2000).
Payment and receipt of commissions was not permitted in the Philippines.
Assurance engagements include providing high-level assurance that subject matter conforms to criteria, moderate assurance of plausibility, engagements following Philippine Standards on Assurance Engagement(s), and agreed-upon procedures.
Close family includes parents, siblings, and spouses but does not include non-dependent children.

Assurance Team/Financial Interest/Financial Interest

Assurance teams include all professionals participating directly in the assurance engagement, along with firm personnel with direct influence on the engagement outcome (within the network firm).
Financial interest includes bank accounts used solely for client monies, monies held on behalf of another, financial interests through collective investment vehicles, and interests in securities, loans, etc. (including derivative interests).
Direct financial interest is owned and controlled by the individual or entity (including those managed on a discretionary basis by other). Also includes collective investment vehicles, estates, trusts, and other intermediaries over which the individual or entity has control.

Modifications to the IFAC Code(s)

The IFAC Code modifications are based on Philippine regulatory requirements and circumstances.
Professional accountants in public practice were among significant modifications to the IFAC Code. Modifications that did not apply in the Philippines include those related to firms and lead engagement partners.

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Description

This quiz focuses on the Code of Ethics for Professional Accountants in the Philippines, which is essential for all Certified Public Accountants (CPAs). It covers the key ethical requirements and changes in regulations since January 1, 2004. Understanding these principles is crucial for maintaining professional integrity and compliance.

CPA Review: Auditing Theory - Code of Ethics

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