AUDITING THEORY

AT.0102-Code of Ethics – Part I MAY 2020

LECTURE NOTES
Preface to the Code of Ethics  Professional Competence and Due Care - A
professional accountant has a continuing duty to
The code of ethics for professional accountants in the maintain professional knowledge and skill at the
Philippines is based on the revised Code of Ethics for level required to ensure that a client or employer
Professional Accountants developed by International receives competent professional service based on
Federation of Accountants (IFAC) (2006 revision). current developments in practice, legislation and
techniques. A professional accountant should act
Composed of three parts: diligently and in accordance with applicable
 Part A: General Application of the Code technical and professional standards when
 Part B: Professional Accountants in Public Practice providing professional services. In addition, they
 Part C: Professional Accountants in Business should conform with the technical and professional
standards of the following:
The code of ethics was approved for adoption by the a) Board of Accountancy (BOA) / Professional
PICPA, BOA and PRC. Regulation Commission (PRC)
b) Securities and Exchange Commission (SEC)
The code generally took effect on or after June 30, 2008. c) Financial Reporting Standards Council (FRSC)
d) Auditing and Assurance Standards Council
Note: The International Ethics Standards Board of (AASC)
Accountants (IESBA) issued a revised Code of Ethics for e) Relevant legislation
Professional Accountants, which is substantially the same
as the currently existing code of ethics. The revised code Two Phases of Professional Competence
of ethics was effective on January 1, 2011, but still being  Attainment –
reviewed for use in the Philippines. o High standard of general education
o Specific education, training and
Introduction and Fundamental Principles examination in professionally relevant
subjects
A distinguishing mark of the accountancy profession is its o A period of work experience
acceptance of the responsibility to act in the public  Maintenance –
interest. Therefore, a professional accountant’s o Continuing awareness of development in
responsibility is not exclusively to satisfy the needs of an the accountancy profession
individual client or employer. In acting in the public
interest a professional accountant should observe and  Confidentiality - A professional accountant should
comply with the ethical requirements of this Code. respect the confidentiality of information acquired
as a result of professional and business
A professional accountant is required to comply with the relationships and should not disclose any such
following fundamental principles: information to third parties without proper and
 Integrity - A professional accountant should be specific authority unless there is a legal or
straightforward and honest in all professional and professional right or duty to disclose. Confidential
business relationships. information acquired as a result of professional and
business relationships should not be used for the
The professional accountant should not (unless a personal advantage of the professional accountant
modified report is provided) be associated with any or third parties.
information if:
1. contains a materially false or misleading Confidentiality continues even after the end of
statement; relationships between a professional accountant
2. contains statements or information furnished and a client or employer.
recklessly; or
3. omits or obscures information required to be The following are circumstances disclosure of
included where such omission or obscurity confidential information may be appropriate:
would be misleading.  Permitted by law and is authorized by the
client or the employer;
 Objectivity - A professional accountant should not  Required by law, for example:
allow bias, conflict of interest or undue influence of o Production of documents or evidence in the
others to override professional or business course of legal proceedings; or
judgments. o Disclosure to the appropriate public
authorities of infringements of the law that
Relationships that bias or unduly influence the come to light.
professional judgment of the professional  There is a professional duty or right to
accountant should be avoided. disclose:

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o To comply with the quality review of a d) Familiarity threats – may occur when, because of a
member body or professional body; close relationship, a professional accountant becomes
o To respond to an inquiry or investigation too sympathetic to the interests of others; and
by a member body or regulatory body; e) Intimidation threats – may occur when a professional
o To protect the professional interests in accountant may be deterred from acting objectively by
legal proceedings; or threats, actual or perceived.
o To comply with technical standards and
ethics requirements. Examples of circumstances that may create threats to
compliance with fundamental principles:
 Professional Behavior - A professional accountant
should comply with relevant laws and regulations Self-interest threats
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;

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

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MULTIPLE CHOICE QUESTIONS

Preface a. Follow the established policies of the employing
1. Which statement is incorrect regarding the Revised organization to seek a resolution of such conflict.
Code of Ethics for Professional Accountants in the b. Should not consult with those charged with
Philippines? governance of the organization, such as the board
a. Professional accountants refer to persons who are of directors or the audit committee.
Certified Public Accountants (CPA) and who hold a c. If a significant conflict cannot be resolved, a
valid certificate issued by the Board of professional accountant may wish to obtain
Accountancy. professional advice from the relevant professional
b. Where a local law is in conflict with a provision of body or legal advisors, and thereby obtain
the IFAC Code, the IFAC Code requirement guidance on ethical issues without breaching
prevails. confidentiality
c. The Revised Code of Ethics for Professional d. If, after exhausting all relevant possibilities, the
Accountants in the Philippines is mandatory for all ethical conflict remains unresolved, a professional
CPA’s and is applicable to professional services accountant should, where possible, refuse to
performed in the Philippines on or after June 30, remain associated with the matter creating the
2008. conflict.
d. All of the above
7. Fundamental principles are potentially affected by
2. Which of the following statements best describes why I. Self-interest threat IV. Familiarity threat
the profession of CPAs has deemed it essential to II. Self review threat V. Intimidation threat
promulgate a code of ethics and to establish a III. Advocacy threat
mechanism for enforcing observance of the code? a. I, II, III, IV and V c. I, II and III
a. A distinguishing mark of a profession is its b. I, II, III and IV d. I only
acceptance of responsibility to the public
b. A prerequisite to success is the establishment of an 8. Occurs as a result of the financial and other interests
ethical code that stresses primarily the of a professional accountant or of an immediate or
professional’s responsibility to client’s and close family member
colleagues a. Self- interest threat c. Advocacy threat
c. A requirement of most state laws calls for the b. Self-review threat d. Familiarity threat
profession to establish a code of ethics
d. An essential means of self-protection for the 9. Occurs when a professional judgment needs to be re-
profession is the establishment of flexible ethical evaluated by the professional accountant responsible
standards by the profession for that judgment
a. Self-interest threat c. Advocacy threat
The Code b. Self-review threat d. Familiarity threat
3. Which statement is incorrect regarding the Code of
Ethics for Professional Accountants in the Philippines? 10. Occurs when a professional accountant promotes a
a. The code is divided into two parts, part A and part position or opinion to the point that subsequent
B objectivity may be compromised
b. Part A refers to general application of the code a. Self-interest threat c. Advocacy threat
c. Part B applies only to those professional b. Self-review threat d. Familiarity threat
accountants in public practice
d. Part C applies to professional accountants in 11. Occurs when, by virtue of a close relationship, a
business professional accountant becomes too sympathetic to
the client’s interests.
Part A: General Application a. Self-interest threat c. Advocacy threat
Section 100 – Introduction and Fundamental Principles b. Self-review threat d. Familiarity threat
4. In order to achieve the objectives of the accountancy
profession, professional accountants have to observe a 12. Intimidation threat
number of prerequisites or fundamental principles. a. is not a threat to independence
The fundamental principles include the following, b. Occurs when a professional accountant may be
except deterred from acting objectively and exercising
a. Objectivity professional skepticism by threats, actual or
b. Professional Competence and Due care perceived
c. Confidentiality c. Occurs when, by virtue of a close relationship, a
d. Confidence professional accountant becomes too sympathetic
to the client’s interests.
5. Which of the following is not explicitly referred to in d. Occurs when a professional accountant promotes a
the Code of Ethics as source of technical standards? position or opinion to the point that subsequent
a. Commission of Audit (COA) objectivity may be compromised
b. Auditing standards and Assurance Council (AASC)
c. Securities and exchange Commission (SEC) Section 110 – Integrity and Section 120 – Objectivity
d. Relevant legislation 13. Which of the following statements is (are) correct
about objectivity and integrity?
6. Professional accountants may encounter problems in a. The principle of integrity imposes the obligation on
identifying unethical behavior or in resolving an ethical all professional accountants to be straightforward
conflict. When faced with significant ethical issues, and honest in professional and business
professional accountants should do the following, relationships. Integrity also implies fair dealing
except and truthfulness.
b. The principle of objectivity imposes an obligation
on all professional accountants not to compromise

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

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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.

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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

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III. Legislation governing the independence 18. The following are not allowed form of advertising and
requirements of the firm. publicity
IV. Policies and procedures that emphasize the I. Self laudatory statements
assurance client’s commitment to fair financial II. Discrediting or attacking other firms or CPA
reporting practitioners
V. Policies and procedures to implement and monitor III. Giving too much emphasis on competitive
quality control of assurance engagements. differences
a. I, II, III and IV only c. I, II and III only IV. Publishing services in billboard advertisements
b. I, II and V only d. I and III only a. I, II and III only
b. I, III and IV only
16. A CPA, while performing an audit, strives to achieve c. II, III and IV only
independence in appearance in order to d. I, II, III and IV
a. Reduce risk and liability
b. Maintain public confidence in the profession 19. Occurs when a professional accountant promotes a
c. Become independent in fact position or opinion to the point that subsequent
d. Comply with PSAs objectivity may be compromised
a. Self-interest threat c. Advocacy threat
17. The network firms are required to be independent of b. Self-review threat d. Familiarity threat
the client
a. For assurance engagements provided to an audit 20. When performing a review engagement, the following
client. should be independent of the client
b. For assurance engagements provided to clients
that are not audit clients, when the report is not a. b. c. d.
expressly restricted for use by identified users. The members of the Yes Yes Yes Yes
c. For assurance engagements provided to clients assurance team
that are not audit clients, when the assurance The firm Yes Yes No No
report is expressly restricted for use by identified Network firms Yes No No Yes
users.
d. All of the above.  - end of AT.0102 - 

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