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THE PUBLIC ACCOUNTING PROFESSION An occupation or vocation requiring training in

the liberal arts or the sciences and advanced study in a specialized field.

PROFESSIONS ARE GENERALLY RECOGNIZED AS ELITE OCCUPATIONAL PROFESSION.

FIVE MAJOR CHARACTERISTIC1. SYSTEMATIC THEORY – underlying theory of accounting

(GAAP and GAAS)

2. PROFESSIONAL AUTHORITY- basis is expertise in the systematic theory of accounting and auditing

3. COMMUNITY SANCTION – admission to profession is controlled (must satisfy government educational and experience requirements and pass the licensure exam) and professional performance judged by standards.

4. REGULATIONS CODE – powers and privileges constitute a monopoly. Code of Ethics prevent abuse

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5. A CULTURE – time honoured profession and status of the profession and the responsibilities that accompany this status affect his/her behavior.

ORGANIZATIONS THAT AFFECT PUBLIC ACCOUNTINGA. REGULATORY GOVERNMENT AGENCIES

1. PROFESSIONAL REGULATION COMMISSION (PRC)administers, implements and enforces the

regulatory policies of the National Government with respect to the regulation and licensing of various professions under its jurisdiction.

Has jurisdiction over the regulatory boards.Derives authority from the PRC Modernization Act

of 2000.

2.BOARD OF ACCOUNTANCY (BOA)The agency empowered to administer the

Accountancy Law (RA 9298 – Phil. Accountancy Act of 2004)

The only body that may issue and revoke CPA certificates and grant licenses to practice.

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3 SECURITIES AND EXCHANGE COMMISSION (SEC)

Regulates the registration and operations of corporations, partnership and other forms of associations in the Philippines.

Its overall objective is to assist in providing investors with reliable information upon which to make investment decision.

Has considerable influence in setting financial reporting standards and disclosure requirements as a result of its authority for specifying reporting requirements.

SEC has power to establish rules for any CPA associated with audited financial statements submitted to it.

4 COMMISSION ON AUDIT (COA)

Audits funds of government units to determine compliance with existing laws and whether programs are being conducted efficiently and economically.

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3. PROFESSIONAL ORGANIZATION

PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (PICPA) Umbrella organization for CPAs

SECTORAL ORGANIZATIONSA. Association of CPAs in Public Practice

(ACPAPP)B. Association of CPAs in Education (ACPAE)C. Association of CPAs in Commerce and Industry

(ACPACI)D. Government Association of CPAs (GACPA)

4. STANDARD-SETTING BODIES1. Financial Reporting Standards Council(FRSC) * assist the BOA in carrying out its powers and functions as provided by RA 9298 * composed of 15 members

Chairman* 1Members:

Board of Accountancy 1SEC 1BSP 1

BIR 1A major organization

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composed of preparers and users of FS 1 COA 1

Sectoral RepresentativePublic Practice 2Commerce and Industry 2Education 2

2 Auditing and Assurance Standards Council (AASC) An auditing standard setting body. Composed of 15 members

Chairman (who had been or presentlyA senior practitioner in public

Accounting)Members:

BOA 1SEC 1BSP 1COA 1Association of CPAs in active

Public practice 1 Sectoral representatives:

Public practice 9Commerce and industry 1Education 1

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3 International Federation of Accountants (IFAC) Approved in Munich in 1977 Membership to IFAC is open to accountancy bodies. Mission is the development and enhancement of the

profession to enable it to provide services of consistently high quality in the public interest.

Members of council is elected by each representative of each member organization.

4 International Accounting Standards Board (IASB) Based in London began operations in 2001 It is funded by contributions from the major

accounting firms, private financial institutions and industrial companies throughout the world, central and development banks, and other international and professional organizations.

Has 14 board members (12 of whom are full time) reside in 9 countries and have a variety of functional backgrounds.

Committed to developing, in the public interest, a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements.

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The board cooperates with national accounting standard-setters to achieve convergence in accounting standards around the world.

In April 1, 2001, the IASB assumed from the IASC the responsibility for setting international accounting standards.

New standards issued by IASB were designated as International Financial Reporting Standards.

The board adopted the IAS issued by the former committee and retained the designation and format of the Standards.

5 International Auditing Practices Committee (IAPC) A standing committee of the Council of IFAC Responsible for the development and issuance on

behalf of the Council Responsible for the development and issuance on

behalf of the Council, standards and statements on a variety of audit and attest functions in order to improve the degree of uniformity of auditing practices and related services throughout the world.

Issues the International Standards on Auditing (ISAs) that are to be applied in the audit of financial statements, audit of other information and related services

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CPA SERVICESA. ASSURANCE SERVICES

1. AUDITA. Financial Statement AuditB. Audits of Internal Control Over Financial

Reporting

2. REVIEWC. Review of Financial StatementsD. Review of Interim Information

3. OTHERSE. Examination of Prospective Financial

InformationF. CPA Performance ReviewG. CPA Risk Advisory

B. NON-ASSURANCE SERVICES (Related Services)1. Agreed-Upon Procedures

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2. Compilation of Financial Statements3. Preparation of Tax Returns & Tax

Consulting4. Management Consulting5. Other Advisory Services

REGULATIONS OF THE PUBLIC ACCOUNTING PRACTICENeed for Regulations1. Rendering of Assurance Services Pertain to independent professional services

designed to improve quality of information, or its context for decision-making.

Designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.

Evolved from attestation services, which in turn evolve from audit

“EXPECTATION GAP”

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Though auditors historically enjoyed a high degree of credibility, users of audit reports expect auditors to detect both intentional and unintentional material misstatements and to report when an entity is not likely to survive. Audits are not designed for these tasks, changes in audit standards and practices have been made to better recognize auditor’s responsibility for detecting fraudulent financial reporting and to improve communication of the work done by the auditor.

A. Public Regulation of the Profession The PRC through BOA and the Courts of Justice are

responsible for the public regulation of public accounting practice.

The objective is to protect the investing public from fraud, gross negligence, and failure to comply with laws and regulations related to the independent audit of financial statements.

Auditors found guilty of not complying with the minimum standards of performance established by law are subject to penalty such asa.Payment of damages to those claiming injuryb.Public censure

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c. Injunctiond.Suspension or prohibition from practice before SECe.Temporary or permanent loss of license to

practice.

B. Regulation Within the Profession Setting requirements to ensure that only qualified

people are admitted to the accounting practice. Establishing Financial Reporting Standards and

standards for accounting and auditing services. Adopting the Revised Code of Ethics for Professional

Accountants Developing a program for quality control of public

accounting practice. Requiring regular, periodic reviews of auditor’s

compliance with professional standards Penalizing those found guilty of unacceptable

practices. Monitoring adequate competition among CPAS

AUTHORITY ATTACHING TO PHILIPPINE STANDARDS OF AUDITING (PSAs), INTERPRETATIONS AND STATEMENTS.

1.Pronouncements of AASC are in the form of:a.Philippine Standards on Quality Control (PSQCs)

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to be applied to all services falling under the AASC’s Engagement Standards

2.Philippine Standards on Auditing (PSAs)to be applied to audit of historical financial

information.

3.Philippine Standards on Review Engagement (PSREs)

To be applied in the review of historical information.

4.Philippine Standards on Assurance Engagement (PSAEs)

To be applied in assurance engagements dealing with subject matters other than historical financial information.

5.Philippine Standards on Related Services (PSRSs)To be applied to compilation engagements,

engagement to apply agreed-upon procedures to information and other related services engagements as specified by the AASC.

6.Philippine Auditing Practice Statements (PAPSs)

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7.Philippine Review Engagement Practice Statements (PREPSs)

8.Philippine Assurance Engagement Practice Statements (PAEPSs)

9.Philippine Related Services Practice Statements (PRSPSs)

The practice statements are issued to provide interpretive guidance and practical assistance to professional accountants in implementing PSAs and to promote good practice.

The StandardsThe AASC’s Standards contain basic principles and essential procedures together with related guidance in the form of explanatory and other material, including appendices.

The basic principles and essential procedures are to be understood and applied in the context of the explanatory and other material that provides guidance for their application. It is therefore necessary to consider the whole text of a Standard to understand and apply the basic principles and essential procedures.

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The nature of Philippine Standards issued by the AASC requires professional accountants to exercise professional judgment in applying them.

In exceptional circumstances, a professional accountant may judge it necessary to depart from a basic principle or essential procedure of an Engage-ment Standard to achieve more effectively the objective of the engagement. When such a situation arises, the professional accountant should be prepared to justify the departure.

R.A 9298 – THE ACCOUNTANCY ACT OF 2004* An act regulating the practice of Accountancy in the Philippines.

Policy – The state recognizing the importance of accountants in nation building and development, shall develop and nurture competent, virtuous, productive and well- rounded professional accountants whose standards of practice and service shall be excellent, qualitative, world class and globally competitive and through inviolable, honest, effective and credible licensure examinations and through regulatory measures, programs and

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activities that foster their professional growth and development.

Objectivesa. The standardization and regulation of

accounting education;b.The examination for registration of CPAs; andc. The supervision, control, and regulation of the

practice of accountancy in the Philippines.

Scope of Practice of Accountancy – shall include, but not limited to

1. Practice of Public Accountancy2.Practice in Commerce and Industry3.Practice in Commerce and Industry4.Practice in Government

Professional Regulatory Board – Board of AccountancyUnder the supervision and administrative control

of the Professional Regulation Commission (PRC)Composed of a chairman and 6 members

appointed by the President of the Philippines from a list of 3 recommendees for each position, from a list of 5 nominees from the accredited professional organization of CPAs.

Qualifications of Members of the Board

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a. Must be natural-born citizen and resident of the Philippines.

b.Must be a duly registered CPA with at least 10 years of work experience in any of the sector.

c. Must be of good moral character and must not have been convicted of crimes involving moral turpitude; and

d.Must not have any pecuniary interest, directly orIndirectly, in any school, college, university or institution conferring BSA degree.

Term of Office – Chairman and members have a term of 3 years up to 2 successive complete terms. Reappointment may be made after lapse of 1 year. Appointment to fill up vacancy for unexpired term is not considered as a complete term.

Compensation – same as that receive of other regulatory boards.

Powers and Functions of the Boarda. To prescribe and adopt the rules and regulations

necessary for carrying out the provisions of this Act;

b.To supervise the registration, licensure and practice of accountancy in the Philippines;

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c. To administer oaths in connection with the administration of this Act;

d.To issue, suspend, revoke, reinstate the Certifi-cate of Registration for the practice of accountancy

e.To adopt an official seal of the Board;f. To prescribe and/or adopt a Code of Ethics for

the practice of accountancy;g.To monitor the conditions affecting the practice

of accountancy and adopt such measures, including the promulgation of accounting and auditing standards, rules and regulations and best practices as may be deemed proper for the enhancement and maintenance of high professional, ethical, accounting and auditing standards, both domestic and international;

h.To conduct an oversight into the quality of audits of financial statements through a review of te quality control measures instituted by auditors in order to ensure compliance with standards;

i. To investigate violations of this act and the rules and regulations promulgated, to issue summons, subpoena to violators or witness thereof and compel their attendance to such investigation or hearings and production of documents in connection therewith

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j. To issue a cease and desist order to any person, association, partnership or corporation engaged in violation of any provision of this act or any accounting and auditing standards promulgated by the Board;

k.To punish for contempt of the Board, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court;

l. To prepare, adopt, issue or amend the syllabi of the subjects for examinations in consultation with the academe, determine and prepare questions for the licensure examination, administer, correct and release the results of the examination.

m. To ensure, in coordination with CHED or other authorized government offices that all higher educational instruction and offering of accountancy comply with the policies, standards and requirements of the course prescribed by CHED or other authorized government in the areas of curriculum, faculty, library and facilities;

n.To exercise such powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express posers granted to the

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Board to achieve the objectives and purpose of this Act.

Custodianship of records is vested on PRC. PRC shall designate the secretary of the Board and

shall provide the secretariat and other support services.

Grounds for Suspension or Removal of Members of the Board – The President of the Philippines, upon the recommendation of PRC and due process, may suspend or remove any member on the following grounds.a.Neglect of duty or incompetence;b.Violation or tolerance of any violation of this Act

and its implementing rules and regulations or the Code of Ethics and the technical and professional standards of practice for CPAs;

c. Final judgment of crimes involving moral turpitude;d.Manipulation or rigging of the CPA licensure

examination results, disclosure of secret and confidential information of exam questions prior to the conduct of the licensure exam and tampering of grades.

Examination, Registration and Licensure

All applicants for registration for the pra ctice of accountancy shall be required to undergo a licensure examination to be given by the Board – October and

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May in Manila, Baguio, Cebu, Iloilo (?) Cagayan de Oro and Davao.

Qualifications of Applicants for Examinationsa. Is a Filipino citizenb.Is of good moral characterc. Is a holder of BSA degree conferred by a school,

college, academy or institute duly recognized and/or accredited by CHED or other authorized government offices; and

d.Has not been convicted of any criminal offense involving moral turpitude.

Scope of examinationTheory of Accounts 2 unitsBusiness Law 1 unitTaxation 1 unitManagement Services 2 unitsAuditing Theory 2 unitsAuditing Problems 2 unitsPractical Accounting Problems I 2 unitsPractical Accounting Problems II 2 units

Rating in the Licensure ExaminationA candidate must obtain a general average of 75%,

with no grades lower than 65% in any given subject.

In the event a candidate obtains a rating of 75% and above in at least majority of the subjects , he

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or she shall take an examination in the remaining subjects within two (2) years from the preceding examination. If the candidate fails to obtain at least a general average of 75% and a rating of at least 65% in each of the subjects re-examined, he/she shall be considered as failed in the entire examination.

Report of Rating – ten calendar days after examination.

Refresher CourseAny candidate who fails in two (2) complete CPA examination shall be disqualified from taking another set of examinations unless he/she submits evidence that he/she enrolled in and completed at least twenty-four (24) units in subject given in the licensure examination.

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