A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo CityTel. No.: (033) 320-2728; 09106547262Email Address: a1nursingreviewic@yahoo.com.ph

BOARD OF CERTIFIED PUBLIC ACCOUNTANT

CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A

THEORY OF ACCOUNTGeneral Instructions:1. This test booklet contains 100 test questions.2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate your answer.4. AVOID ERASURES.

INSTRUCTIONS: 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.2. Write the subject title THEORY OF ACCOUNT on the box provided.3. Shade Set Box A on your answer sheet if your test booklet is Set A; Set Box B if your test booklet is Set B.__________________________________________________________________________________________

1. General purpose financial statements are the product ofa. Financial accountingb. Managerial accountingc. Both financial and managerial accountingd. Neither financial accounting nor managerial accounting2. Which of the following statements is not an objective of financial reporting?a. To provide information that is useful in investment and credit decision.b. To provide information about resources claims against those resources and changes in them.c. To provide information on the liquidation value of an entity.d. To provide information that is useful in assessing cash flow prospects.3. The purpose of the International Accounting Standards Board is toa. Issue enforceable standard which regulate the financial reporting of multinationals.b. Develop a uniform currency in which the financial transactions of entities throughout the world would be measured.c. Develop a single set of high quality IFRS.d. Arbitrate accounting disputes between auditors and international entities.4. The underlying theme of the conceptual framework is

A1 PASSERS TRAINING, RESEARCH, REVIEW AND DEVELOPMENT COMPANY//

a. Decision usefulnessb. Understand abilityc. Reliabilityd. Comparability

5. The Conceptual Framework includes all of the following except

a. Objective of financial reporting b. Supplementary informationc. Elements of financial statementsd. Qualitative characteristics of accounting information6. 7. Which of the following is a fundamental quality of useful accounting information?

a. Conservatismb. Comparabilityc. Faithful representationd. Consistency8. In the Conceptual Framework an enhancing qualitative characteristic is

a. Predictive valueb. free from errorc. Timelinessd. Confirmatory value

9. Which of the following is not a basic element of financial statements?

a. Assetb. Statement of financial positionc. Equityd. Income

10. Which of the following is not a basic assumption underlying the financial accounting structure?

a. Economic entity assumptionb. Going concern assumptionc. Periodicity assumption d. Historical cost assumption11. 12. During the lifetime of an entity accountants produce statements at artificial points in time.

a. Objectivityb. Periodicityc. Economics entityd. Going concern

13. When revenue is generally recognized?

a. When cash is receivedb. When the warranty expirec. When production is completedd. When the sale occurs14. 15. Which of the following is not a required component of financial statements?

a. Presidents letter to shareholdersb. Statement of financial position c. Income statementd. Notes to financial statements16. 17. Under Philippine Financial Reporting Standards note to the financial statementsa. Must be quantifiable.b. Must qualify as an element.c. Amplify or explain items presented in the main body of the financial statements.d. All of the choice are correct regarding notes to the financial statements.18. Nominal accounts are also called

a. Temporary accountsb. Permanent accountsc. Real accountsd. Mixed account

19. A trial balance may prove that debits and credit are equal buta. An amount could be entered in the wrong account.b. A transaction could have been entered twicec. A Transaction could have been omitted.d. All of these.20. A journal entry to record a receipt of rent revenue in advance will include a

a. Debit to revenueb. Credit to rent revenuec. Credit to cash d. Credit to unearned rent

21. An Adjusting entry to record an receipt and accrued expense involves a debit toa. Expense account and a credit to an prepaid account.b. Expense account and a credit to cash.c. Expense account and a credit to a liability account.d. Liability account and a credit to an expense account.22. Reversing entries do not apply to which of the following items?

a. Unearned revenue b. Accrued wagesc. Prepaid insuranced. Depreciation

23. The statement of financial position information is useful for all of the following except

a. To compute rates of returnb. to analyze cash inflows and outflow for the periodc. To evaluate capital structured. To assess future cash flow24. 25. A segment is to be reported separately when the segment revenue exceeds 10% ofa. Total combined revenue of all segments reporting profits.b. Total revenue of all the entitys industry segments.c. Total export and foreign sales.d. Combined net income of all segment reporting profits.26. All of the following statements are true regarding interim reporting, excepta. PFRS requires a complete set of financial statements at the interim reporting date.b. PFRS requires entities to expense interim amount like advertising expenditures that could Benefit later interim period.c. PFRS allows a condensed set or complete set of financial statements.d. No accruals or deferrals in anticipation of future events during the year should be reported.27. Which of the following would represent the least likely use of an income statement a. Use by customers to determine an entitys ability to provide needed goods and services.b. Use by labor union s to examine earnings closely as a basis for salary discussions.c. Use by government agencies to formulate tax and economic policy.d. Use by investors interested in the financial position of the entity.28. A change in accounting policy requires what kind of adjustment to the financial statements?

a. Current period adjustment b. Prospective adjustment c. Retrospective adjustmentd. Current and prospective adjustment29. Changes in accounting estimate affect report amounts

a. Retrospectively onlyb. Prospectively onlyc. Currently and prospectively d. Currently and retrospectively30. Which of the following does not appear in a statement of retained earnings?

a. Net lossb. Prior period adjustmentc. Preference share dividendsd. Other comprehensive income31. 32. Which is not acceptable in displaying the components of other comprehensive income?

a. Combined statement of retained earning b. Second income statementc. Combined statement of comprehensive incomed. All of the above are acceptable33. 34. Which of the following items should not be included in cash?a. Coins and currency in the cash registerb. Checks from other parties presently in the cash registerc. Amounts on deposit in checking account at the bankd. Postage stamps on hand35. A cash equivalent is a short-term highly liquid investment that is readily convertible into know amount of cash anda. Is acceptable as a means to pay current liabilities.b. Has a current market value that is greater than original cost c. Bears an interest rate that at least equal to the prime rate of interest.d. Is so near its maturity than it presents insignificant risk of changes in interest rates.36. All of the following are problems associated with the valuation of accounts receivable, except

a. Uncollectible accountsb. Returns c. Cash discounts under the net method d. Allowances granted

37. Which of the following methods of determining bad debt expense does not properly match expense and revenue?a. Charging bad debts with a percentage of sales under the allowance method.b. Charging bad debts with an amount derived from percentage of accounts receivable under the allowance method.c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method.d. Charging bad debts as accounts are written off as uncollectible.38. Which of the following statements best describes the term liabilities?a. An excess of equity over current assets b. Resources to meet financial commitment as they fall duec. The residual interest in the assets of the entity after deducting all of its liabilities d. A present obligation of the entity arising fro past events39. Which of the following statements best describes the term financial position?a. The net income and expenses of an entityb. The financial assets less financial liabilities of an entity c. The potential to contribute to the flow of cash and cash equivalents to the entity d. The assets liabilities and equity of an entity 40. Which of the following should not be taken into account when determining the cost of inventories?a. Storage cost of part-finished goodsb. Trade discounts Recoverable purchase taxes c. Recoverable purchase taxes d. Import duties on shipping of inventory inward41. Which of the following costs should be included in inventory valuation?

a. Administrative costsb. Abnormal material usage c. Storage costs relating to finish goodsd. Fixed production overheads 42. 43. Which classification of the cash flow arising from the proceeds from an earthquake disaster settlement would be most appropriate?

a. Cash flows from operating activities b. Cash flows from investing activities c. Cash flows from financing activitiesd. Does not appear in the statement of cash flows44. 45. Which of the following should be treated as a change in accounting policy?I. A new accounting policy of capitalizing development costs as a project has become eligible for capitalization for the first time.II. A new policy resulting from the requirements of a new PFRS.III. To provide more relevant information items of property, plant and equipment are now being measured at fair value, whereas they had previously been measured at cost.IV. An entity engaging in construction contract for the first time needs an accounting policy to deal with this.a. b. I, II, III and IVc. I, and II onlyd. II and III only e. I and IV only46. 47. Which of the following statements in relation to deferred tax is true?I. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.II. Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible permanent differences.a. b. I onlyc. II onlyd. Both I and IIe. Neither I nor II48. 49. Which term best describes the removal of an asset from the statement of financial position?

a. De recognition b. Impairmentc. Write offd. Depreciation50. 51. Which of the following statements is correct?a. Assets are depreciated even if their fair value exceeds carrying amountb. Land and buildings are not accounted separately when acquired togetherc. A noncurrent asset acquired as the result of an exchange of assets is not recognized d. A gain .on disposal of a noncurrent asset is classified as revenue52. Which should not be capitalized a cost of properly plant and equipment?a. Cost of excess materials resulting from a purchasing error b. Cost of testing whether the asset works correctlyc. Initial delivery and handling costd. Cost of preparing the site for installation53. Which should be included in the cost of an item of properly plant and equipment?

a. Initial operating losses while demand builds upb. Apportioned general overhead costc. Costs of training staff on the new assetd. Installation and assembly costs54. 55. Which of the following conditions does not apply to the recognition of revenue for transactions involving the rendering of services?a. The amount of revenue can be measured reliablyb. It is probable that payment for the services shall be received by the relinquishedc. Ownership has been transferred to the buyerd. Significant risks and rewards of ownership have been transferred from the seller to the buyer56. Which must not be satisfied before revenue from the sale of goods should be recognized?a. Revenue can be reliably measured b. Managerial control over the goods sold has been relinquished c. Ownership has been transferred to the buyerd. Significant risks and rewards of ownership has been transferred from the seller to the buyer57. Which of the following statements best describes other lone-term employee benefits?a. Benefits not falling due wholly within twelve months of the end of the period in which the service is service is renderedb. Benefits which fall due within twelve months often end of the period in which the service is rendered c. Benefits payable as a result of an entitys decision to end an employees employment before the normal retirement dated. Benefits which are payable after completion of employment58. Which of the following statements is incorrect in relation to government grant?a. Any adjustment needed when a government grant becomes repayable is accounted for as a change in accounting estimate.b. In respect of loans from the government at an interests rate 0% an imputed interest charge is required.c. Where condition apply to a government grant it should only be recognized when there is reasonable assurance that the conditions will be met.d. A government grant that becomes receivable as compensation for losses already incurred should be recognized as income of the period in which it becomes receivable.59. Which statement about the capitalization of borrowing costs is true?a. If Funds come from general borrowings the amount to the capitalized is based on the weighted average cost of borrowing.b. Capitalization always continues until the asset is brought into use.c. Capitalization always commences as soon as expenditure f the asset is incurred.d. Capitalization always commences as soon as interest on relevant borrowing is being incurred.60. Which of the following treatments is required for borrowing costs incurred that are directly attributable to the construction of a qualifying asset?I. Recognize as an expense in the period incurred.II. Capitalize as a part of the cost of the asset.a. b. I only c. II only d. Either I or IIe. Neither I nor II61. 62. An entity completely the following transactions in the current year:I. Sold a car to the uncle of the entitys finance director.II. Sold goods to another entity owned by the daughter of the entitys managing director. Which transaction would require disclosure in the financial statements of the entity?

a. Neither I nor II b. I only c. II only d. Both I and II63.

64. Which of the following is not a related party of an entity?a. A shareholder of the entity owning 30% of the ordinary share capitalb. An entity providing banking facilities to the entityc. An associate of the entityd. Key management personnel of the entity65. Which of the following statements about dividends is true?I. Dividends in respect of ordinary shares are debited directly in equity.II. Dividends in respect of redeemable preferences shares are debited directly in equity.a. b. I only c. II onlyd. Both I and IIe. Neither I nor II66. 67. Which of the following statements with respect to interim reporting is true?I. It is necessary to count inventories in full at the end of each interim accounting period.II. The net realizable value is determined by reference to selling prices at the interim date.a. b. I onlyc. II onlyd. Both I and IIe. Neither I nor II68. 69. Which of the following terms best describes the higher of fair value less cost of disposal and value in use?

a. Recoverable amountb. Revalued amountc. Depreciable amount d. Carrying amount70. 71. Which of the following statements in relation to a contingent liability is true?I. An obligation as a result of the entity creating a valid expectation that it will discharge its responsibilities is a contingent liability.II. A present obligation that arises from past events but cannot be reliably measured is a contingent liability.a. b. I only c. II only d. Both I and IIe. Neither I nor II72. 73. A provision should be recognized for which of the following?a. Future operating lossesb. Obligations under insurance contracts c. Reductions in fair value of financial instrumentsd. Obligations for plant decommissioning costs74. Which of the following is not relevant in determining the useful life of an intangible asset?

a. Obsolescenceb. Expected action of competitorc. The expected usage of the asset d. The residual value of the asset75. 76. A brand name that was acquired separately should initially be recognized at

a. Recoverable amountb. Either cost or fair value at the choice of the acquirerc. Fair valued. Cost77. Which of the following statements is true?I. Intangible assets cannot be treated as having an indefinite useful life.II. Intangible assets with a finite useful life should be measured at cost and tested annually for impairment.a. b. I onlyc. II onlyd. Both I and IIe. Neither I nor II78. 79. Which of the following additional disclosures must be made when an entity chooses the cost model as its accounting policy for investment properly?

a. The fair value of the propertyb. The present value of the propertyc. The value in use of the propertyd. The net realizable value of the property80. 81. Which of the following disclosures should be made when the fair value model has been adopted for investment property?

a. Depreciation method used b. The amount of impairment loss recognized c. Useful life or depreciation rate used d. Net gains or losses from fair value adjustments82. 83. Where should changes in the fair value of a herd of cattle be recognized in the financial statements?

a. In profit or lossb. In other comprehensive income c .In profit or loss or other comprehensive income d. In the statement of cash flows84. 85. Which of the following reports is not a component of the financial statement?

a. Statement of financial position b. Statement of changes in equity c. Directors reportd. Notes to the financial statements86.

87. Which of the following information is not specifically a required disclosure?a. Name of the reporting entity or other means of identification, and any change in that information from the previous year.b. Names of major shareholders of the entity.c. Level of rounding used in presenting the financial statements.d. Whether the financial statements cover the individual entity or a ground of entities.88. Which one of the following is not required to be presented as minimum information on the face of the statement of financial position?

a. Investment property b. Investments accounted under the equity method c. Biological assetsd. Contingent liability89. Inventories are defined by all of the following excepta. Used in the production or supply of goods and services for administrative purposes.b. Held for sale in the ordinary course of business.c. In the process of production for such sale.d. In the form of materials or supplies to be consumed in the production process or the rendering of services.90. How should an entity disclose the dividends received in the statement of cash flows?a. Operating cash inflowb. Either as operating cash inflow or as financing cash inflow c. Either as operating cash inflow or as financing cash inflow d. As an adjustment in the operating activities section91. At the end of the current reporting period an entity carried a receivable from a major customer. The customer declared bankruptcy after the end of reporting period but prior to authorization of financial statements. How should the entity account for this event?a. Disclose in the notes the fact that the customer declared bankruptcy.b. Make a provision for this post-reporting period eventc. Ignore the eventd. Reverse the sale pertaining to the receivable and treat it as an error.92. The initial operating losses should bea. Deferred and authorized over a reasonable period of time.b. Expensed and charged to the income statement.c. Capitalized as part of the cost of plant as a directly attributable cost.d. Charged to retain earning.93. An entity owns a fleet of cars and ships. The entity decided to revalue its property, plant and equipment. Which option should be selected in relation to the revaluation?a. Revalue only one-half of each class of property, plant and equipment.b. Revalue an entire class of property, plant and equipment.c. Revalue one ship at a time as it is easier than revaluing all ships altogether.d. Since assets are being revalue regularly, here is no need to depreciate.94. The classification of a lease as either an operating or finance lease is based on a. The length of the lease.b. The transfer of the risks and rewards of ownership.c. The minimum lease payments being at least 50% of the fair value.d. The economic life of the asset.95. The accounting concept that is principally used to classify leases into operating and finance is

a. Substance over form b. Prudencec. Neutralityd. Completeness96. 97. Which situation would prima facie lead to a lease being classified as an operating lease?a. Transfer of ownership to the lessee at the end of the lease term.b. Option to purchase at a value below the fair value of the asset.c. The lease term is for a major part of the assets life.d. The present value of the minimum lease payments is 50% of the fair value of the asset.98. Revenue from an artistic performance is recognized once

a. The audience register for the event online b. The tickets for the concert are sold.c. Cash has been received from the ticket sales.d. The event takes place.99. 100. In the case of a nonmonetary grant, which of the following is prescribed?a. Record the asset at replacement cost and the grant at a nominal value.b. Record the grant at a value estimate by management.c. Record both the grant and the asset at fair value of the nonmonetary asset.d. Record only the asset at fair value and not recognize the fair value of the grant.101. Which of the following should not be considered a qualifying asset in relation to capitalization of borrowing cost?a. A power generation plant that normally takes two years to construct.b. An expensive private jet that can be purchased from a local vendor.c. A toll bridge that usually takes more than a year to build.d. A ship that normally takes one to two years to complete.102. The equity method is not required to be applied when the associate has been acquired and held with a view to its disposal within what time period?

a. Six monthsb. Twelve monthsc. Two yearsd. In the near future103. 104. How is goodwill arising on the acquisition of an associate dealt with in the financial statements?a. It is amortized.b. It is impairment tested individually.c. It is written off against profit or loss.d. Good its not recognized separately within the carrying amount of the investment.105. Which of the following assets or liabilities should be considered nonmonetary?

a. Trade receivablesb. Deferred tax liabilitiesc. Accrued expense and other payablesd. Taxes payable 106. 107. Which of the following assets is not a financial asset?a. Cash b. An equity instrument of other entityc. A contract that may or will be settled in the entitys own instrument and is not classified as an equity instrument of the period.d. Prepaid expense108. Earnings per share are calculated before accounting for which items?

a. Preference dividend for the periodb. Ordinary dividendc. Taxation d. Minority109. 110. If a bonus issue occurs between the year-end and the date financial statements are authorizeda. EPS both for the current and the previous year are adjusted.b. EPS for the current year only is adjusted.c. No adjustment is made to EPS.d. Dilute EPS only is adjusted.111. Publicly traded entities are encourage to provide interim financial reportsa. At least at the half year and within 60 days of the end of interim period.b. Within a month of the half year-end.c. On a quarterly basis.d. Whenever the entity wishes.112. If an entity does not prepare interim financial reportsa. The year-end financial statements are deemed not to comply with FRRS.b. The year-end financial statements compliance with PFRS is not affected.c. The year-end financial statements will not be acceptable under local legislation.d. Interim financial reports should be included in the year-end financial statements.113. Value in use isa. The market value.b. The discounted present value of future cash flows arising from use the asset and from its disposal. c. The higher of fair value the asset is recognized in the statement of financial position.d. The amount at which the asset is recognized in the statement of financial position.114. Estimate of future cash flows in determining value in use normally would cover projections over maximum of

a. Five yearsb. Ten yearsc. Fifteen years d. Twenty years115. 116. Which of the following cash flows should not be included in calculating value in use?a. Cash flows from disposal.b. Income tax payment.c. Cash flows from the sale of assets produced by the asset.d. Cash outflows incurred to generate the cash inflows the continuing use of the asset.117. A cash-generating unit isa. The smallest business segment.b. Any grouping of assets that generates cash flows.c. Any group of assets that are reported separately to management.d. The smallest group of assets that generates independent cash flows from continuing use.118. When allocating impairment loss such a loss should reduce the carrying amount of which asset first?

a. Property, plant, and equipmentb. Intangible assetsc. Goodwilld. Current assets

119. An investment property should be measured initially ata. Cost b. Cost less accumulated impairment losses.c. Depreciable cost less accumulated impairment losses.d. Fair value less accumulated impairment losses.120. A gain arising from change in fair value of an investment property for which an entity has opted to use the fair value model is recognized in

a. Net profit for the yearb. General reverses in the shareholders equityc. Valuation reverses in the shareholders equityd. Retained earning121. 122. Generally speaking biological assets relating to agricultural activity should be measured using

a. Historical costb .Historical cost less depreciation less impairmentc. A fair value approachd. Net realizable value123. 124. Where there is a production cycle of more than one year for a biological asset, separate disclosure is encouraged for

a. Physical change onlyb. Price change onlyc. Total change in valued. Physical change and price change 125. 126. How should the income from discontinued operation be presented in the income statement?a. The entity should disclose a single amount on the face of the income statement below the income from continuing operation.b. The amounts from discontinued operation should be broken down over each category of revenue and expense.c. Discontinued operation should be shown as a movement on retained earning.d. discontinued operation should be shown as a line item after gross profit.127. Which of the following criteria does not have be met in order for an operation to be classified as discontinued?a. The operation should represent a separate major line of business or geographical area.b. The operation is part of a single plan to dispose of a separate major line of business or geographical.c. The operation is a subsidiary acquired exclusively with a view to resale.d. The operation must be sold within three months of the year-end.128. How should the assets and liabilities of a disposal group classified as held for sale be shown in the statement of financial position?a. The assets and liabilities should be offset and presented as a single amount.b. The assets of the disposal group should be shown separately from other assets and the liabilities should be shown separately from other liabilities.c. The assets and liabilities of the disposal group should not be presented.d. There should be no separate disclosure of assets and liabilities that form part of a disposal group. 95. Which is not a characteristic of the full cost method of accounting in the oil and gas industry?a. All costs incurred in acquiring exploring and developing within a defined cost center are capitalization and amortized.b. Costs are capitalized even if a specific project in a cost center was a failure.c. Costs of unsuccessful acquisition and exploration activities are charged to expense.d. Exploration and evaluation asset is classified either as tangible asset or an intangible asset according to the nature of the asset.96. Which expenditures would never qualify as an exploration and evaluation asset?a. Expenditures for acquisition of right to explore.b. Expenditures for exploratory drilling.c. Expenditures related to the development of mineral resources.d. Expenditures for activities in relation to evaluating the technical feasibility and commercial viability of extracting a mineral resource.97. The accounting for a fair value hedge records the derivative at

a. Amortized costb. Carrying amount c. Fair valued. Historical cost98. 99. Which of the following represents the total number of shares that a corporation may issue under the terms of its charter?

a. Authorized sharesb. Issued sharesc. Unissued sharesd. Outstanding shares100. 101. Shares that have a fixed per-share amount printed on each share certified are called

a. Stated value sharesb. Fixed value sharesc. Uniform value sharesd. Par value shares

100.Cash dividends are paid on the basis of the number of sharesa. Authorized b. Issuedc. Outstandingd. Outstanding less the number of treasury sharesA1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo CityTel. No.: (033) 320-2728; 09106547262Email Address: a1nursingreviewic@yahoo.com.ph

BOARD OF CERTIFIED PUBLIC ACCOUNTANT

CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET B

AUDITING THEORYGeneral Instructions:1. This test booklet contains 80 test questions.2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate your answer.4. AVOID ERASURES.

INSTRUCTIONS: 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.2. Write the subject title AUDITING THEORY on the box provided.3. Shade Set Box A on your answer sheet if your test booklet is Set A; Set Box B if your test booklet is Set B.__________________________________________________________________________________________1. An Exception in a test of control provides only an indication of the likelihood of monetary misstatements in the financial statements because test of controls do not reveal whether monetary misstatements have actually occurred.

An Exception in a substantive test of transactions provides an indication of the likelihood of monetary misstatements in the financial statements because substantive tests of transaction do reveal whether monetary misstatements have actually occurred.

A. True; FalseC. False; TrueB. false; FalseD. True; True2. Which of the following services provides the lowest level of assurance on a financial statement?A. An auditB. A review C. Neither service provides assurance on financial statements.D. Each service provides the same level of assurance on financial statements.3. Which one of the following is more difficult to evaluate objectively?A. Presentation of financial statements in accordance with PFRS.B. Compliance with government regulation.C. Efficiency and effectiveness of operations.D. All three of the above are equally difficult.4. If the auditor believes that the financial statements are not fairy state or is unable to reach a conclusion because of insufficient evidence, the auditorA. Should withdraw from the engagement.B. Should request an increase in audit fees so that more resources can be used to conduct the audit.C. Has the responsibility of notifying financial statement users through the auditors report.D. Should notify regulators of the circumstances.5. In comparing management fraud with employee fraud, the auditors risk of falling to discover the fraud isA. Greater for management fraud because mangers are inherently more deceptive than employees.B. Greater for management fraud because of managements ability to override exiting internal controls.C. Greater for employee fraud because of the higher crime rate among blue collar workers.D. Greater for employee fraud because of the larger number of employees in the organization.6. Which of the following statements best describe the auditors responsibility regarding the detection of fraud?A. The auditor is responsible for the failure to detect fraud only when such failure clearly results from non- performance of audit procedures specifically described in the engagement letter.B. The auditor is required to provide reasonable assurance that the financial statements are free of the both material errors and fraud.C. The auditor may extend auditing procedures to actively search for evidence of fraud where examination indicates that fraud may exits.D. The auditor is responsible for the failure to detect fraud only when an unmodified opinion is issued.

7. Which of the following statements is not correct?A. It is possible to vary the sample size from one unit to 100% of the items in the population.B. The decision of how many items to test should not be influenced by the increase costs of performing the additional tests.C. The decision of how many items to test must be made by the auditor for each audit procedure.D. The sample size for any given procedure is likely to vary from audit to audit.8. For audit evidence to be compelling to the auditor it must be sufficient and appropriate.Which statement below is not correct regarding the appropriateness of audit evidence?A. The more effective the internal control system, the more assurance it provides the auditor about the reliability of financial reporting by the client.B. An auditors opinion to be economically useful and profitable to the auditing firm needs to be formed within a reasonable time and based on evidence obtain that assures profits for the auditing firm.C. Evidence obtained from independent sources outside the entity is generally more reliable than evidence secured solely within the entity.D. The independent auditors direct personal knowledge, obtained through inquiry, observation and inspection, is generally more persuasive than information obtained indirectly.9. Which of the following is not a correct use of the terminology in relation to audit evidence?A. Evidence obtained from an independent source outside the client organization is more reliable than obtained from within.B. Documentary evidence is more reliable when it is received by the auditor indirectly rather than directly.C. Documents that originate outside the company are considered more reliable than those that originate within the clients organization.D. External evidence, such as communications form banks is generally regarded as more reliable than answers obtained from inquires of the client.10. When making decisions about evidence for a given audit the auditors goal is to obtain a sufficient amount of timely reliable evidence that is relevant to the information being verified. In addition the goal of audit efficiency is to gather and evaluate the information A. No matter the cost involved in obtaining such evidence.B. Even if cost is irrelevant to the auditor because they bill the client for costs incurred.C. At the lowest possible total cost.D. At the cost suggested in the engagement letter.11. The auditor is concerned that a client is falling to bill customers for shipments. An audit procedure that would gather relevant evidence would be toA. Select a sample of duplicate sales invoices and trace each to related shipping documents.B. Trace a sample of shipping documents to related duplicate sales invoices.C. Trace a sample of sales Journal entries to the Accounts Receivable subsidiary ledger.D. Compare the total of the Schedule of Accounts Receivable with the balance of the Accounts Receivable account in the general ledger. 12. The purpose of an engagement letter is toA. Document the CPA firms responsibility to external users of the audited financial statements.B. Document the term of the engagement.C. Notify the audit staff of an upcoming engagement so that personnel scheduling can be facilitated.D. Emphasize managements responsibility for approving the audit program.13. The predecessor auditor is required to respond to the request of the successor auditor for information, but the response can be limited to stating that no information will be provided whenA. The predecessor auditor has poor relation with the successor auditor.B. The client is dissatisfied with the predecessors work.C. There are actual or potential legal problems between the client and the predecessor.D. The predecessor believes that the client lacks integrity.14. The audit team gather information about a new clients business and industry in order to obtainA. An understanding often clients internal control system for financial reporting.B. An understanding of how economic events and transactions have an effect on the companys financial statements.C. Information about engagement risk.D. Information regarding whether the company is engaging in financial statement fraud.15. During audit planning, the auditor uses analytical procedures primarily toA. Identify weakness in internal control.B. Determine if the companys financial statements appears reasonable and are free of material misstatement.C. Determine the correspondence of the companys financial statements to the valuation and accuracy audit objectives.D. Understand the clients business and industry and to indicate possible misstatements.16. When performing planning analytical procedures for a client, the auditor detected that the gross profit percentage had declined by 50% from the previous year to the year currently under audit. The auditor shouldA. Investigate the possibility the client may have made an error in their cost of goods sold computation.B. Asset management in developing greater cost efficiencies in their product line.C. Prepare a going concern opinion for the client.D. Advise the client to have extensive disclosure to alleviate investor concern.17. The auditors primary purpose in auditing the clients system of internal control over financial reporting isA. To prevent fraudulent financial statements from being issued to the public.B. To evaluate the effectiveness of the companys internal control over all relevant assertions in the financial statements.C. To report to management that the internal controls are effective in preventing misstatements from appearing on the financial statements.D. To efficiency conduct the audit of financial statements.18. Which of the following factors may increase risks to an organization? ABCD Geographic dispersion of company operationYesNoYesNo Presence of new information technologiesYesNoYesNo

19. Which of the following hest describes the purpose of control activities?A. The actions, policies and procedures that reflect the overall attitude management.B. The identification and analysis of risks relevant to the preparation of financial statements.C. The policies and procedures that help ensure that necessary actions are taken to address risk to the achievement of the entitys objectives.D. Activities that deal with ongoing assessment of the quality of internal control by management.20. A company is concerned with the theft of cash after the sale has been recorded. One way in which fraudsters conceal the theft is by a process called lapping. Which of the following best describes lapping?A. Reduce the customers account by recording a sales return.B. Write off the customers account C. Reduce the customers account by recording a sales allowance.D. Apply the payment from another customer to the customers account.21. An important characteristic of IT is uniformity of processing. Therefore, a risk exits that A. Auditors will not be able to access data quickly.B. Auditors will not be able to determine if data is processed consistently.C. Erroneous processing can result in the accumulation of a great number of misstatements in a short period of time.D. All of the above.22. Which of the following statements is not true?A. Analytical procedures emphasize the overall reasonableness of transactions and balances.B. Test of controls are concerned with evaluating whether controls are sufficiently effective to justify control risk and thereby reducing analytical procedures.C. Substantive tests of transactions emphasize the verification of transactions recorded in the journals and then posted in the general ledger.D. Tests of details of balances emphasize the ending balances in the general ledger.23. An examination of part of an organizations procedures and methods for the purpose of evaluating efficiency and effectiveness is what type of audit?

A. Production audit.B. Financial statement audit.C. Compliance audit.D. Operation audit.24. In many audits of the sales transactions, subtractive tests of transactions can be reduced in determining the completeness objective becauseA. Understatements of assets and income are a greater concern than overstatements.B. Overstatements of assets and income are a greater concern than understatements.C. It doesnt matter if income is understated because the savings on income tax offsets the reduced revenue and net income is correct.D. The unrecorded sales cause a reduction of accounts receivable; therefore, the ratio of the two financial statements will not be misleading. 25. To determine if a sample is truly representative of the population, an auditor would be required toA. Conduct multiple samples of the same population.B Never use sampling because of the expense involved.C. Audit the entire population.D. Use systemic sample selection.26. The most important test of details of balances to determine the existence of recorded accounts receivable isA. Tracing detail of sales invoices to shipping documents.B. Tracing the credits in accounts receivable to bank deposit.C. Tracing sales returns entries to credit memos issued and receiving room reports.D. The confirmation of customers balance.27. It is common to use combination of positive and negative confirmations by sending the latter to accounts with larger balances and the former to those with small balances.

When sending confirmations during most audits of accounts receivable, the emphasis is often on confirming larger and older balances.A. True; TrueC. True; FalseB. false; falseD. False; True28. Which of the following is the most effective control procedure to detect vouchers that were prepared for the payment of good that were not received?A. Count goods upon receipt in storeroom.B. Match purchase order, receiving report, and vendors invoice for each voucher in accounts payable department.C. Compare goods received with goods requisitioned in receiving department.D. Verify vouchers for accuracy and approval in internal audit department.29. Internal controls that are likely to prevent the client from including as a business expense those transactions that primarily benefit management or other employees rather than the entity being audited satisfy the control objective that

A. Acquisitions are correctly valued.B. Existing acquisitions are recorded.C. Acquisitions are correctly classified.D. recorded acquisition are for goods or services received.30. A CPA learns that his client has paid a vendor twice for the same shipment, once based upon the original invoice and once based upon the monthly statement. A control procedure that should have prevented this duplicate payment isA. Attachment of the receiving report to the disbursement report.B. Prenumbering of disbursement vouchers.C. Use of a limit or reasonableness test.D. Prenumbering of receiving reports.31. If the client fails to record disposals of property, plant, and equipment, both the original cost of the asset account and the net book value will be incorrect. What will the effect be of this misstatement on the original cost and the book value?A. both will be overstated indefinitely.B. The original cost will overstated indefinitely, and the net book value will be overstated until the asset is fully depreciated.C. The original cost will be overstated indefinitely and the net book value will be understated indefinitely.D. The original cost will be overstated indefinitely and the net book value will be understated until the asset is fully depreciated.32. The nature, extent, and timing of substantive tests of payroll transactions vary depending, In part, on assessed control risk.

Physical control over assets is not a type of control that is applicable to the payroll cycle.A. True; FalseC. True; TrueB. False; TrueD. False; False33. Which of the following controls would be appropriate regarding the release of materials from a stockroom?A. Production employees request materials be delivered to their work areas as they need them.B. Stockroom employees deliver materials to work areas throughout the day to maintain acceptable levels of safety stock-no written records are maintained.C. Production employees submit approved requisition forms to the stockroom for material needed.D. Production employees in needed of material should personally pick up needed materials from the Stockroom.34. If the auditor concludes that physical controls over inventory are so inadequate that the inventory will be difficult to count the auditor should ordinary A. Withdraw from the engagement.B. Issue a qualified audit report.C. Conduct expanded observation tests of physical inventory.D. Hire an expert to assist the auditor.35. You are gathering evidence for the audit objective that existing inventory items are included in the inventory listing schedule. The audit procedure that would provide you with the best evidence to confirm this objective isA. trace from inventory tags to the inventory listing schedule and make sure the inventory tag is included.B. Trace the inventory totals to the general ledgers.C. Perform tests of lower-cost-or-net realizable value.D. Account for unused tags shown in the auditors documentation to make sure no tags have been added. 36. Which of the following is not an objective of the auditors examination of notes payable?A. To determine whether internal controls adequate.B. To determine whether clients financing arrangements are effective and efficient.C. To determine whether transactions regarding the principal and interest of notes are properly authorized.D. To determine whether the liability for notes and related interest expense and accrued liabilities are properly stated.37. Which of the following errors would be least likely to be discovered during the tests of the bank reconciliation?A. Payment was made to an employee for more hours than he worked.B. Cash received by the client subsequent to the balance sheet date was recorded as cash receipts in the current year.C. Payments on notes payable debited directly to the bank balance by the bank were not entered in the clients records.D. Deposits were recorded in the cash receipts records near the end of the year, deposited in the bank, and were included in the bank reconciliation as a deposit in transit.38. A major consideration in the audit of the general cash balance is the possibility of fraud.The auditor must extend his or her procedures in the audit year-end cash to determine the possibility of a material fraud when there areA. Large cash balances at the end of the year. B. Large cash receipts and disbursements during the year.C. No imprest accounts used for payroll.D. Inadequate internal controls. 39. Refusal by a client to prepare and sign the representation letter would require the auditor to issue

A. Qualified opinion or a disclaimer.B. Adverse opinion or a disclaimer.C. Qualified or an adverse opinion.D. Unmodified opinion with an emphasis of matter paragraph.40. 41. Assurance provided by a review is substantially less than an audit. Which of the following statements is true regarding these services?A. A review requires more substantive evidence than an audit.B. An audit requires less evidence related to internal control than review.C. A review requires less evidence than an audit.D. None of the above statements is true.42. Which of the following groups could not be involved in an operational audit?

A. CPA firms.B. Government auditors.C. Internal auditors.D. None is correct; that is, all of the above could be involved.43. 44. Which of the following conditions most likely would pose the greatest risk in accepting a new audit engagement?A. Staff will need to be rescheduled to cover this new client. B. There will be a client-imposed scope limitation.C. The firm will have to hire an expert in one audit area.D. the clients financial reporting system has been in place for 10 years.45. Audit plans should be designed so that A. Most of the required procedures can be performed as interim work.B. Inherent risk is assessed at a sufficiently low level.C. The auditor can make constructive suggestion to management.D. The audit evidence gathered supports the auditors conclusion.46. When expressing an unmodified opinion, the auditor who evaluates the audit findings should be satisfied that theA. Amount of known misstatement is documented in the management representation letter.B. Estimate of the total likely misstatement is less than a material amount.C. Amount of known misstatement is acknowledgement and recorded by the client.D. estimate of the total likely misstatement includes the adjusting entries already recorded by the client.47. In assessing the objectivity of internal auditors, an independent auditor should A. Evaluate the quality control program in effect for the internal auditors.B. Examine documentary evidence of the work performed by the internal auditors.C. Test a sample of the transactions and balances that the internal auditors examined.D. Determine the organization level to which the internal auditor report.48. Reyes Merchandising Co. Maintains a staff of three full-time internal auditors. If the work of the internal auditors is relevant to the audit, it is efficient to consider how that work may affect the audit, and the internal auditors are found to be competent and objective, the independent auditor most likely willA. Nevertheless need to make direct tests of assertion about material financial statement amounts for which the risk of material misstatement is high.B. Decrease the extent of the tests of control needed to restrict detection risk to the acceptable level.C. Increase the extent of the procedures needed to reduce control risk to an acceptable level.D. Not evaluate and test the work performed by the internal auditors.49. The auditors evaluation of the reasonableness of accounting estimates A. Should be in the context of individual transactions.B. Consider that management bases its judgement on both subjective and objective factors,C. Will be unfavourable if the estimate financial statements are based on assumption about future events and transactions.D. should be based on a attitude of conservatism.50. A client who recently installed a new accounts payable system employees a user identification code (UIC) and a separate password. Each UIC is a persons name, and the individuals passwords at initial log-in nor do passwords ever expire. Which of the following statements does not reflect a limitation of the clients computer-access control?A. Employees can easily guess fellow employees passwords.B. Employees are not required to change passwords.C. Employees can circumvent procedures to separate duties.D. Employees are not required to take regular vacations.51. A CPA is gaining an understanding of the internal controls for a client that sells garden products using an internet site. Which of the following is not likely to be found on the clients organizational chart?

A. The sales order department.B. The shipping department.C. The warehouse.D. Computer processing.52. 53. Which of the following describes a weakness in accounts payable procedures?A. The accounts payable clerk files invoices and supporting documentation after payment.B. The accounts payable clerk manually verifies arithmetic on the vendor invoice.C. The accounts payable system compares the receiving report to the vendor invoice.D. The accounts payable manager issues purchase orders.54. The auditor should perform test of controls whenA. Substantive procedures alone do not provide sufficient appropriate audit evidence at the relevant assertion level.B. Tests of details and substantive analytical procedures provide sufficient appropriate audit evidence to support the assertion being evaluated.C. The auditor is not able to obtain an understanding of internal controls.D. The owner-manager performs virtually all the functions of internal control.55. An auditor who has confirmed accounts receivable may discover that the sales journal was held open past year end ifA. Positive confirmations sent o debtors are not returned.B. Negative confirmations sent to debtors are not returned.C. Most of the returned negative confirmations indicate that the debtor owes a larger balance than the amount being confirmed.D. most of the returned positive confirmations indicate that the debtor owes a smaller balance than the amount being confirmed.56. Which of the following procedures would best detect a liability omission by management?A. Inquiry of senior support staff and recently departed employees.B. Review and check mathematical accuracy of financial statements.C. Review articles of incorporation and corporate bylaws.D. Review purchase contracts and other legal documents.57. The risk of material misstatement refers toA. Control risk and acceptable audit risk.B. Inherent risk.C. The combination of inherent risk and control risk.D. Inherent risk and audit risk.

58. In a financial statement audit, inherent risk is evaluated to help an auditor assess which of the following?A. the internal audit departments objectivity in reporting a material misstatement of a financial statement assertion it detects to the audit committee.B. The risk the internal control system will not detect a material misstatement of a financial statement of a financial statement assertion.C. The risk that the audit procedures implemented will not detect a material misstatement of a financial statement assertion.D. The susceptibility of a financial statement assertion to a material misstatement assuming there are no related controls.59. Auditors begin their assessments of inherent risk during audit planning. Which of the following would not help in assessing inherent risk during the planning phase?A. Obtaining clients agreement on the engagement letter.B. Obtaining knowledge about the clients business and industry.C. Touring the clients plant and offices.D. Identifying related parties.60. As the acceptable audit risk is decreased, the likely cost of conducting an audit increases.

Acceptable audit risk is measure of the auditors willingness to accept that the financial statements do not contain material misstatements after the audit is completed and a qualified audit report has been issued.

A. True; TrueB. True; FalseC. False; FalseD. False; True61. 62. Related party transactions may be indicated when another companyA. Subsidizes certain operating expense of the company.B. Purchases its securities at their fair value.C. loans to company at market rates.D. Has had a distributor relationship with the company for 10 years.63. An auditor should examine minutes of the board of directors meetings

A. Through the date of the financial statements.B. Through the date of the audit report.C. Only at the beginning of the audit.D. On a test basis. 64. 65. If the auditor were responsible for making certain that all of managements assertions is the financial statements were absolutely correctA. Bankrupts could no longer occur.B. Bankrupts would be reduced to a very small number.C. Audits would not be much easier to complete.D. Audits would not be economically practical.66. Which of the following statements is true?A. Auditors have generally found that the most effective and efficiently way to conduct an audit is to obtain some assurance for each class of transactions and for the ending balance of the related account.B. Managements assertion follow and are closely related to the audit objectives.C. The auditors primary responsibility is to find and disclose fraudulent management assertions.D. Assertions about presentation and disclosure deal with whether the accounts have been included in the financial statements at appropriate amounts.67. Which of the following statements about the existence and completeness assertions is not true?A. The existence and completeness assertions emphasize different concerns.B. Existence deals with overstatements and completeness deals with understatements.C. Existence deals with understatements and completeness deals with overstatements.D. The completeness assertion deals with unrecorded transactions.68. In testing for cutoff, the objective is to determineA. Whether all of the current periods transactions are recorded.B. Whether transactions are recorded in the correct accounting period.C. The proper cutoff between capitalizing and expensing expenditures.D. The proper cutoff between disclosing items in notes to the financial statements or in accounts balances.69. Determine which of the following is most correct regarding the reliability of audit evidence?A. Information that is indirectly obtained from external sources is the most reliable audit evidence.B. Reliability of audit evidence is dependent upon the evidence being convincing.C. Reliability of evidence refers to the amount of evidence obtained.D. An effective control system provides more reliable audit evidence.

70. When the auditor develops supporting evidence for amounts posted to account balances with documentary evidence, that process is called

A. Inquiry.B. Confirmation.C. Vouching.D. Physical examination.71. 72. Narratives, flowcharts, and internal control questionnaires are three common methods ofA. Documenting the auditors understanding of internal controls.B. Designing the audit manual and procedures.C. Documenting the auditors understanding of a clients organization structure.D. Testing the internal controls.73. Who is most likely to perpetrate fraudulent financial reporting?

A. Members of the board of directors.B. Production employees.C. Management of the company.D. The internal auditors.74. 75. Which of the following is not a factor that relates to opportunities to misappropriate assets?A. Inadequate internal controls over assets.B. Presence of large amounts of cash on hand.C. Inappropriate segregation of the duties or independent checks on performance.D. Adverse relationships between management and employees.76. A control that relates to all parts of the IT system is called a/an

A. General controls.B. Systems control.C. Universal control.D. Applications control.77. 78. The auditor would design which of the following audits test to detect possible monetary errors in the financial statement?

A. Controls tests.B. Analytical procedures.C. Risk assessment procedures.D. Test of operating effectiveness of controls over revenue and cash.79. 80. If inherent risk is increased to medium from low, test of details of balances can be reduced.

The extent of test of details of balances cannot be reduced when transaction-related audit objectives have been satisfied by tests of controls or substantive tests of transactions.A. B. True; FalseC. False; TrueD. True; TrueE. False; False81. 82. A document that details what the auditor will do to gather sufficient, appropriate evidence is theA. B. Audit strategy.C. Audit programD. Audit procedureE. Audit risk model83. 84. Analytical procedures must be performed inA. The planning and test of control stages.B. Conjunction with tests of transactions and tests of details of balance.C. The planning and completion stages.D. The planning, test of control, and completion stages.85. An auditor noted that the accounts receivable department is separate from other accounting activities. Credit is approved by a separate credit department. Control accounts and subsidiary ledgers are balanced monthly. Similarly, accounts are aged monthly. The accounts receivable manager writes off delinquent accounts after 1 year, or sooner if a bankruptcy or other or other unusual circumstances are involved. Credit memoranda are prenumbered and must correlate with receiving reports. Which of the following areas could be viewed as an internal control weakness of the above organization?

A. Write-offs of delinquent accounts.B. Credit approvals.C. Monthly aging of receivables.D. Handling of credit memos.86. 87. A purchasing agent places an order for inventory whenever a requisition is received from the warehouse. The warehouse clerk issues requisitions based on predict physical counts because no perpetual records are maintained. Numerous duplicate orders have been placed for goods previously ordered but not received. To prevent this excess ordering, the firm shouldA. Keep an adequate record of open purchase orders and review it before ordering.B. Count goods in the warehouse less often.C. Use prenumbered purchase orders.D. Not use purchase requisition. 88. Negative confirmation of accounts receivable is less effective than positive confirmation of accounts receivable becauseA. A majority of recipients usually lack the willingness to respond objectively.B. some recipients may report incorrect balances that require extensive follow-up.C. The auditor cannot infer that all nonrespondents have verified their account information.D. Negative confirmations do not produce evidence that is statistically quantifiable.

89. The refusal of a clients lawyer to provide a representation on the legality of a particular act committed by the client is ordinarilyA. Sufficient reason to issue a Subject to opinion.B. Considered to be a scope limitation.C. Insufficient reason to modify the auditors report because of the lawyers obligation of confidentiality.D. Proper grounds to withdraw from the engagement.90. Which of the following steps should an auditor perform first to determine the existence of related parties?A. Examine invoices, contracts, and purchase orders.B. Request a list of related parties from management.C. Review the companys business structure.d. Review proxy and other materials filed with the SEC.91. In planning the audit engagement, the auditor should consider each of the following exceptA. The auditors independence.B. Risk of material misstatement due to fraud.C. Anticipated levels of audit risk and materiality.D. The kind of opinion (unmodified, qualified, or adverse) that is likely to be expressed.92. After obtaining a sufficient understanding of the entity, its environment, and internal control in an audit of the financial statements, the auditor assesses. A. The need to apply auditing standards.B. Detection risk determining the acceptable level of inherent risk.C. Detection risk and inherent risk to determine the acceptable level of control risk.D. Control risk and inherent risk to determine the acceptable level of detection risk.

A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo CityTel. No.: (033) 320-2728; 09106547262Email Address: a1nursingreviewic@yahoo.com.ph

BOARD OF CERTIFIED PUBLIC ACCOUNTANT

CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A

MANAGEMENT ADVISORY SERVICES

General Instructions:1. This test booklet contains 50 test questions.2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate your answer.4. AVOID ERASURES.

INSTRUCTIONS: 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.2. Write the subject title MANAGEMENT ADVISORY SERVICES on the box provided.3. Shade Set Box A on your answer sheet if your test booklet is Set A; Set Box B if your test booklet is Set B.__________________________________________________________________________________________

USE THE FOLLOWING TO ANSWER QUESTION 1-4:Little Star Products Company has a maximum productive capacity of 100,000 units per year. Normal capacity is 90,000 units per year. Standard variable manufacturing cost are P20 per unit. Fixed factory overhead is p450,000 per year. Variable selling expense is P10 per unit, and fixed selling expense is P300,000 per year. The unit sales price is P50. The operating results for the year are as follows: sales, 80,000 units; and beginning inventory, 5,000 units. All variances are written off as additions (or deductions from) the standard cost of goods sold.1. What is the break-even point expressed in peso sales?a. b. P1,125,000c. P1,875,000d. P1,250,000e. P 37,5002. 3. How many units must be sold to earn a net income of P50,000 per year?a. b. 2 millionc. 37,500d. 40,000e. 25,0004. 5. Income under absorption costing is:a. P900,000b. P975,000c. P 925,000d. P1,975,0006. 7. Income uncer variable costing is:a. b. P 25,000c. P875,000d. P825,000e. P850,000

8. Product costs appear on the balance sheet:a. only if goods are partially completed at the end of the period.b. only if goods are unsold at the end of a period.c. only if partially completed or are end of a period.d. only in merchandising firms.9. Data for A and Cost B are as follows: Number of Units Produced Unit Cost Total CostCOST A1?P10 10? P100 100? P1,000 1,000? P10,000COST B1 P5,000? 10 P500? 100 P50? 1,000 P5?

Which of the above best describes the behaviour of Cost A and B?a. b. Cost A is fixed, Cost B is variable.c. Cost A is variable, Cost B is fixed.c. Both Cost A and Cost B are variable.d. Both Cost A and Cost B are fixed.

10. Differential cost can:a. b. Only be fixed costs.c. Only be variable costs.d. Be either fixed or variable.e. Be incremental but not decremental.11. 12. If Carne Company were to sell 32,000 units, the total expected cost per units would be:a. b. P75,000c. P78,000d. P80,000e. P77,00013. 14. If Carne Company were to sell 40,000 units, the total expected cost per unit would be:a. b. P2.50c. P2.25d. P2.13e. P1.88

15. John Johnson decided to leave his former job where he earned P12 per hour to go to a new job where he will earn P13 per hour. In the decision process, the former wage of P12 per hour would be classified as a(n):a. b. Sunk cost.c. Direct cost.d. Fixed cost.e. Opportunity cost.

16. The Standards of Ethical Conduct for Management Accountants developed by the Institute of Management Accountants contain a policy regarding confidentially that requires management accountants to refrain from disclosing confidential information acquired in the course of their work: a. Except when authorized by management.b. In all situations.c. Except when authorized by management, unless legally obligation to do so.d. In all cases not prohibited by law.17. During the month of January, direct labor cost totalled P17,000 and direct labor cost was 60% of prime cost. If total manufacturing costs during January were P82,000 the manufacturing overhead was:a. b. P11,333c. P53,667d. P28,333e. P65,00018. 19. Samantha Galloway is a managerial accountant in the accounting department of Mustang Industries, Inc. Samantha has just discovered evidence that some of the corporations marking mangers have been wrongfully inflating their expense reports in order to obtain higher reimbursements from the firm . According to the Institute of Management accountants Standards of Ethical Conduct, what should Samantha do upon discovering this evidence?a. notify the controller.b. notify the marking managers involved.c. notify the president of the corporationd. Ignore the evidence because she is not part of the Marking Department.20. Which of the following statements is true when referring to fixed cost?a. Committed fixed costs arise from the annual decisions by management.b. As volume increases, unit fixed cost and total fixed cost will change.c. Fixed costs increase in total throughout the relevant ranged. Discretionary fixed costs can often be reduced to zero for short periods of the without seriously impairing the long-run goals of the company21. A P2.00 increase in a products variable expense per unit accompanied by a P2.00 Increase in its selling price per unit will:a. decrease the degree of operating leverage.b. decrease the contribution margin.c. have no effect on the break-even volume (In units).d. have no effect on the contribution margin ratio.22. The following information relates to the break-even point at Pezzo Corporation:Sales pesosP120,000Total fixed expenses P30,000 If Pezzo wants to generate net operating income of p12, 000, what will its sales pesos have to be?a. b. P132,000c. P136,000d. P168,000e. P176,000

23. The contribution approach income statement:a. Organizes costs on a function basis.b. Provides owners with more cash flows.c. Is particularly helpful to the manager in planning and decision making.d. Provides a gross margin figure from which selling and administrative expenses are deducted.

24. Minist company sells a single product at a selling price of p15.00 per unit. Last year, the companys sales revenue was P225, 000 and its net operating income was P18,000.

If fixed expenses totalled P72,000 for the year, the break-even point in unit sales wasa. b. 15,000c. 9,000d. 14,100e. 12,000

25. A single- product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit produced under absorption costing in year 2 was the same as in year 1. The year 2 variable costing statement reported a profit whereas the year 2 absorption costing statement reported a loss. The difference in reported income could be explained by units produced in year 2 being:a. Less than units sold in year 2.b. Less than the activity level used for allocating overhead to the product.c. In excess of the activity level used for allocating overhead to the product.d. In excess of units sold in year 226. Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?a. b. Cost of unit-level activities.c. Costs of batch-level activities.d. Costs of product-level activities.e. Costs of organization-sustaining activities27. 28. If all sub-variances are calculated for labor, which of the following cannot be determined?a. b. Labor rate variance.c. Actual hours of labor used.d. Reason for the labor variances.e. Efficiency of the labor force.29. 30. Under variable costing:a. Net operating income will tent to move up and down in response to changes in levels of production.b. Inventory costs will be lower than under absorption costing.c. Net operating cost income will tend to vary inversely with production changes.d. Net operating income will always be higher than under absorption costing.31. Hettich Corporation uses an activity-based costing system with the following three activity cost pools: Activity Cost Pool Total ActivityFabrication20,000 machine-hoursOrder processing200 ordersOtherNot applicable The other activity cost pool is used to accumulate costs of Idle capacity and organization- sustaining costs.

The company has provided the following data concerning its costs:Wages and salaries P480,000Depreciation120,000Occupancy200,000Total P800,000

The distribution of resource consumption across activity cost pools is given below:

FabricationOrder processingOther TotalWages and salaries 55% 20%25%100% Depreciation 10% 45%45%100% Occupancy 25% 40%35%100%

The activity rate for the Order processing activity cost pool is closest to:a. b. P1,400 per orderc. P1,600 per orderd. P1,150 per order e. P800 per order32. 33. The following information relates to Snowbird Corporation:

Sales at the break-even pointP312,500Total fixed expenses P250,000Net operating incomeP150,000

What is snowbirds margin of safety?a. b. P62,500c. P187,500d. P100,000e. P212,50034. 35. Which of the following is true of a company that uses absorption costing?a. Net operating income fluctuates directly with changes in sales volume.b. Fixed production and fixed selling costs are considered to be product costs.c. Unit product costs can change as a result of changes in the number of units manufactured.d. Variable selling expenses are included in product costs.

USE THE FOLLOWING TO ANSWER QUESTIONS 26-30:The Dresden Company uses standard costing for the single product the company makes and sells. The following data are for the month of April: Actual cost of direct material purchased and used: P62,400 Material price variance: P4,800 unfavourable Total materials variance: P14,400 unfavourable Standard cost per pound of material: P6 Standard cost per direct labor hour: P8 Actual direct labor hours: 3,800 hours Labor efficiency variance: P1,600 favourable Standard number of direct labor hour per unit of product: 2 Total labor variance: P680 unfavourable

36. The total number of units produced during April was:a. b. 8,000c. 12,000d. 2,000e. 3,80037. 38. The standard quality of material allowed to produce one unit of product was:a. b. 1 pound c. 4 poundsd. 6 poundse. 2 pounds

39. The actual material cost per pound was:a. b. P6.50c. P6.00d. P5.00e. P7.20

40. The actual direct labor rate per hour was:a. b. P16.00c. 6.50d. P8.00e. 8.6041. 42. The labor rate variance was:a. b. P2,280 favourablec. P2,280 unfavourabled. P920 favourablee. P920 unfavourable43. 44. The nut house, Inc, sells three types of nuts: almonds, cashews, and walnuts. Ten thousand cans of nuts were sold in 2011, and the amount of walnuts sold were twice as much as the number of cans of cashews, whereas almond sakes were one-half the amount of cashew sales. Fixed costs were P37,680, and the unit variable costs were as follow:

ProductUnit Sales PriceUnit Variable CostAlmond P8P4Cashews 10 5Walnuts 6 4

The company plans to earn profit of P6,280. The overall break-even unit sales is:a. b. 10,000c. 14,000d. 12,000e. 6,857

45. Qualitative factors:a. b. Generally are easily measured quantitative terms.c. Are generally irrelevant for decision making.d. May include either financial or nonfinancial information e. Include customer satisfaction.46. Lacob Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for P103.40 per unit.Sales volume (units) 5,0006,000Cost of sales P315,500 P378,000Selling, general, and administrative costP162,500 P177,600 The best estimate of the total contribution margin when 5,300 units are sold is:a. b. P 56,710c. P133,560d. P 41,340e. P213,59047. Of the following which is the best reason for using activity-based costing?a. To keep better track of overhead costsb. To more accurately assign overhead costs to cost pools so these cost are better controlled.c. To better assign overhead costs to products.d. To assign indirect service overhead costs to direct overhead cost pools. 48. Stead Company produces a single product. Last year, the companys net operating income computed by the absorption costing method was P6,400, and its net operating income computed by the variable costing and method was P9,100. The companys unit product cost was P17 under variable costing and P20 under absorption costing. If the ending inventory consisted of 2,100 units the beginning inventory in units must have been:a. b. 1,200c. 2,100d. 3,000e. 4,80049. 50. Black Tool Company has a production capacity of 1,500 units per month, but current production is only 1,250 units. The manufacturing costs are P60 per unit and marking costs are P16 per unit. Doug Hall offers to purchase 250 units at P76 each for the next five months. Should Black accept the one-time-only special order if only absorption-costing data are available?a. Yes, good customer relations are essential.b. No, the company will only break even.c. No, since only the employees will benefit.d. Yes, since operating profits will most likely increase.51. If Konrades engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly avoidable costs (costs that will no longer be incurred) total:a. b. P 82,000c. P 98,000d. P 50,000e. P100,000

52. If Konrades Engine Company purchases 1,000 Te456 parts from the outside supplier per month, then its monthly operating income will:a. b. Increase by P2,000c. Increase by P80,000 d. Decrease by P3,000e. Decrease by P85,000

53. The maximum price that Konrades Engine Company should be willing to pay the outside supplier is:a. b. P80 per TE456 partc. P82 per TE456 partd. P98 per TE456 parte. P100 per TE456 part54. 55. The sum of the material price variance (calculated at point of purchase) and material quality variance equals.a. b. The total cost variance.c. The material yield variance d. The material mix variance.e. No meaningful number.56. 57. In activity-based costing, final cost allocations assign costs toa. b. Departmentsc. Processes d. Productse. Activities58. 59. King Company produces a single product. During March, the company had net operating income under absorption costing that was P3,500 lower than under variable costing. The company sold 7,000 units in March, and its variable costs were P7 per unit of which P3 was variable selling expense. If fixed manufacturing overhead was P2 per unit under absorption costing then how many units did the company produce during March?a. b. 5,250 unitsc. 8,750 unitsd. 6,500 unitse. 6,125 units60. 61. Engagements should be adequately planned, supervised, and controlled. Controlling involves the measurement of progress in attaining the engagement plan and objectives. At significant engagement points, progress should be measured in item ofa. Time schedule, accomplishments, and quality of work.b. Accomplishment, time schedule, and expenses incurred.c. Quality of work, number of reports prepared, and time schedule.d. Accomplishments, number of personnel who played a role in the engagement and attendance of the participants in the engagement.62. A company that produces a single product had a net operating income of P85,500 using variable costing and a net operating income of P90,000 using Absorption costing. Total fixed manufacturing overhead was P150, 000 and production was 100,000 units.Between the beginning and the end of the year, the inventory level:a. b. Increase by 4,500 unitsc. Decrease by 4,500 unitsd. Increase by 3,000 unitse. Decrease by 3,000 units63. 64. Which of the following is least likely to be considered an advantage of a database?a. Easy to store large qualities of information.b. Easy to retrieve information quickly.c. Easy to organized and reorganize information.d. Easy to distribute information to every possible user.65. Which of the following market features is likely to cause a surplus of a particular product?a. b. A monopolyc. A price floord. A price ceilinge. A perfect market66. 67. All of the following are ways that companies in developed countries generally amy complete with companies in developing countries excepta. b. Technology.c. Customer service.d. Qualitye. Low-cost resources.68. 69. Laptop computers provide automation outside of the normal office location. Which of the following would provide the least security for sensitive data stored on a laptop computer?a. Encryption of data files on the laptop computer.b. Setting up a password for the screensaver program on the laptop computer.c. Using a laptop computer with a removable hard disk drive.d. Using a locking device that can secure the laptop computer to an immovable object.70. Accounting systems are designed to attain some objectives. Which of the following cannot be considered an objective of accounting systems?a. To provide a means by which interested parties may be given information on the financial position and results of operations of a business organization.b. To protect the business owners safeguard their assets. c. To facilitate management planning control and decision-making.d. To accomplish the different routinary administrative activities of the business organization.71. The following information relates to Zinc Corporation for last year:

SalesP500,000Net operating income 25,000Degree of operating leverage 5

Sales at Zinc are expected to be P600,000 next year. Assuming no change in cost structure, This means that net operating income for next year should be:a. P30,000b. P45,000c. P50,000d. P125,000

A1 PASSERS TRAINING, RESEARCH, REVIEW & DEVELOPMENT COMPANY2nd Floor Sommerset Bldg., Lopez Jaena St. Jaro, Iloilo CityTel. No.: (033) 320-2728; 09106547262Email Address: a1nursingreviewic@yahoo.com.ph

BOARD OF CERTIFIED PUBLIC ACCOUNTANT

CERTIFIED PUBLIC ACCOUNTANT Licensure Examination SET A

AUDITING PROBLEMSGeneral Instructions:1. This test booklet contains 60 test questions.2. Read INSTRUCTIONS TO EXAMINEES printed on your answer sheet.3. Shade only one (1) box for each question on your answer sheets. Two or more boxes shaded will invalidate your answer.4. AVOID ERASURES.

INSTRUCTIONS: 1. Detach one (1) answer sheet from the bottom of your Examinee ID/Answer Sheet Set.2. Write the subject title AUDITING PROBLEMS on the box provided.3. Shade Set Box A on your answer sheet if your test booklet is Set A; Set Box B if your test booklet is Set B.__________________________________________________________________________________________

PROBLEM NO.1

Anyang corp. invested its excess cash in marketable equity securities during 2012. The securities do not qualify as financial asset held for trading. Anyang Corp. Has made an irrevocable election to present in other comprehensive income subsequent changes in fair value of its investment securities. As of December 31,2012 the companys securities portfolio consisted of the following:

Investee Company ShareCost Fair Value Kandong, inc.30,000 P1,350,000 P1,275,000 Egoy corp.60,000 4,500,000 4,830,000 Yoga Enterprises60,000 6,480,000 6,900,000 Totals P12,330,000 P13,005,000

During the year 2013, Anyang Corp. Sold 60,000 shares of Egoy Corp. For P4,800,000 and purchased 60,000 addition shares of kingdom, Inc. And 30,000 shares of Company.On December 31,2013, Anyang Corps portfolio of securities comprised the following: Investee Company Shares Cost Fair Value Kandong, Inc. 30,000 P1,350,000 P1,500,000 Kandong, Inc. 60,000 3,900,000 4,350,000 Kongga Company 30,000 1,560,000 1,440,000 Yoga Enterprises 60,000 6,480,000 2,100,000 Totals P13,290,000 P9,390,000During the year 2014, Anyang Corp. Sold all the Kandong, Inc. Share. Also, 15,000 shares of Kongga Company were sold at a loss of P270,000. The net realized gain on sale of securities in 2014 amounted to P1,440,000. On December 31,2014, Anyang Corps portfolio of securities consisted of the following:Page 1 AUDITING PROBLEMS Investee CompanyShares Cost Fair Value Yoga Enterprises60,000 P6,480,000 P12,600,000

Kongga Company15,000 780,000 540,000 Totals P7,260,000 P13,140,000 1. For the year ended December 31,2013, Anyangs statement of comprehensive Income should report unrealized loss of A. B. P1,3,000,000C. P1,190,000D. P3,915,000E. P4,245,0002. 3. What amount of unrealized loss should be reported in Anyangs December 31,2013 Statement of Changes in Equity?A. B. P3,240,000C. P3,570,000D. P4,245,000E. P3,900,0004. 5. How much was received by Anyang from the sale of its investment in Kandong securities In 2014?A. B. P6,960,000C. P7,560,000D. P7,020,000E. P8,280,0006. 7. Anyangs statement of Financial Position should report investment in equity securities of Dec. 31,2014 Dec. 31,2013 Dec. 31,2012 A. P12,330,000P13,290,000P7,260,000B. 13,005,000 9,390,000 13,140,000C. 12,330,000 9,390,000 7,260,000D. 13,005,000 13,290,000 13,140,0008. What amount should be reported as unrealized gain in Anyangs Statement of Changes in Equity for 2014?A. B. P6,420,000C. P5,880,000D. P6,960,000E. P14,760,000

PROBLEM NO. 2DARWIN CORP., a manufacturer of computer part5s, has been experiencing growth in the demand for its products over the last several years. This prompted the company to obtain addition manufacturing. A real estate firm located an available factory and used machinery from production facility and Darwin agreed to purchase the factory and used machinery from Quezon Company on October 1, 2011. Renovations were necessary to convert the factory for Darwins manufacturing use.The terms of the agreement required Darwin to pay Quezon P4,500,000 when renovations started on January 1,2012, with the balance to be paid as renovations were complete. The overall purchase price for the factory and machinery was P36,000,000. The building renovations were contracted to Mallbornes Construction company at P9,000,000. The payments made as renovation progressed during 2012 are shown below. The factory was placed in service on January 1, 2013.

QUEZON MALLBORNESJanuary 1 P 4,500,00P 2,700,000April 18,100,000 2,700,000

October 19,900,000 3,600,000December 1 13,500,000 3,600,000 P36,000,000P9,000,000 On January 1, 2012, Darwin obtained a 2-year, P9 million loan with 12% interest rate to finance the renovation of the acquired factory. This is Darwins only outstanding loan during 2012. Darwins policy regarding purchases of this nature is to use the appraisal value of the land for book purposes and prorate the balance of the purchase price over the remaining items. The building had originally cost Quezon P27,000,000 and had a net book value of P4,500,000 , while the machinery originally cost P11,250,000 and had a net value of P3,600,000 on the date of sale. The land was recorded on Quezons books at 3,600,000.

The following values were determined based on appraisal conducted by independent appraisers at the time acquisition.LandP26,100,000Building 9,450,000Machinery 4,050,000

Gino G. Nario, Darwins chief engineer estimated that the renovated plant would be used for 15 years, with an estimate residual value of P27,700,000. Nario estimated that the productive machinery would have a remaining useful life of 5 years and residual value of P270,000. Darwins depreciation policy is to apply the 200% declining balance method for machinery and the 150% declining balance method for the plant. One-half years depreciation is taken in the year the plant is placed in service and one-half is allowed when the property is disposed of or retired.

Determined the amounts to be recorded on the books of Darwin corp. As of December 31, 2012, for each of the following properties.

9. LandA. B. P23,727,000C. P27,180,000D. P26,100,000E. P32,272,00010. 11. BuildingA. B. P17,010,000C. P18,670,800D. P9,670,800E. P15,930,00012. MachineryA. B. P3,681,900C. P3,294,000D. P4,005,900E. P2,970,000

Calculate the December 31,2014 net book value of the following:

13. BuildingA. B. P14,312,700C. P15,351,525D. P13,778,100E. P14,543,55014. 15. MachineryA. B. P1,425,600C. P1,069,200D. P1,296,000E. P1,188,000

PROBLEM NO.3Presented below are three(3) Independent cases relating to the audit of shareholders equity.Answer the question/s at the end of each case.

1. KANDABA COMPANY began operations on January 1, 2012, by Issuing at P15 per share one-half of the 480,000 ordinary shares (P1 par value) that had been authorized for issue. In addition, Kandaba has 250,000 6% preference shares (P5 par value) authorized. During 2012, Kandaba reported net income of P735,00 and