CHAPTER 2

PRACTICE OF PUBLIC ACCOUNTANCY

Certified Public Accountant (CPA)

– is a person who after obtaining the required education passes an extensive examination
and is licensed by the country to practice as a professional accountant.
Regulatory and Professional Organizations Influencing the Profession
A. Regulatory Government Agencies
Professional Regulation Commission (PRC)
 Administers, implements and enforces regulatory policies with respect to the
regulation and licensing of various professions including maintenance of
professional standards and ethics
 Derives authority from PRC Modernization Act of 2000
Professional Regulatory Board of Accountancy (BOA)
 Consists of a chairman and 6 members
 Administers Accountancy Law and is the only body that may issue and revoke
CPA certificate and licenses
 Functions are provided for in the Philippine Accountancy Act of 2004
Securities and Exchange Commission (SEC)
 Government agency that regulates the registration and operations of corporations,
partnerships and other forms of associations in the Philippines
Commission on Audit (COA)
 Agency that audits and determines whether government units handle their funds
according to existing laws and whether their programs are being conducted
efficiently and economically
Bureau of Internal Revenue (BIR)
 Responsible for enforcing tax laws, rules and regulations

B. Professional Organizations
Philippine Institute of Certifies Public Accountants (PICPA)
 Is the Accredited National Professional Organization (ANPO) of CPAs
Sectoral Organizations
 Association of CPAs in Public Practice (ACPAPP)
 Association of CPAs in Education (ACPAE)
 Association of CPAs in Commerce and Industry (ACPACI)
 Government Association of CPAs (GACPA)

ANPO PICPA

ACPAPP ACPAE ACPACI GACPA

Public
Business
Practice

C. Standard-Setting Bodies

International Federation of Accountants (IFAC)

  A non-profit, non-governmental, non-political international organization of
accounting bodies
International Accounting Standards Board (IASB)
 Is 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
Financial Reporting Standards Council (FRSC)
 Assists to Board in carrying out its powers and functions
 Composed of 15 members with a Chairman, who had been or presently a senior
accounting practitioner of any scope of accounting practice and 14 representatives
from the following:
(a) Board of Accountancy 1
(b) Securities and Exchange Commission 1
(c) Bangko Sentral ng Pilipinas 1
(d) Bureau of Internal Revenue 1
(e) A major organization composed of preparers and users 1
of financial statements
(f) Commission on Audit 1
(g) Accredited National Professional Organization of CPAs
Public Practice 2
Commerce and Industry 2
Academe/Education 2
Government 2 8
Total 14

International Auditing Practices Committee (IACP)

 Is a standing committee of the Council of IFAC and is responsible for the
development and issuance of standards and statements in a variety of audit and
attest functions
Auditing and Assurance Standards Council (AASC)
 Auditing standards setting body
 Composed of 17 members, with a Chairman who had been or presently a senior
practitioner in public accountancy and 16 representatives from the following:
(a) Board of Accountancy 1
(b) Securities and Exchange Commission 1
(c) Bangko Sentral ng Pilipinas 1
(d) Commission on Audit 1
(e) An association or organization of CPAs in active public 1
practice of accountancy
(f) Accredited National Professional Organization of CPAs
Public Practice 9
Commerce and Industry 1
Academe/Education 1 11
Total 16

Types of Services of a Professional Accountant in Public Practice

A. Assurance Services
1. Independent financial statement audit
2. Reviews
3. Other assurance services (e.g., CPA Web Trust, Business Performance Measurement
Service)

B. Non-Assurance Services
1. Agreed-upon procedures
 2. Compilation
3. Tax
4. Management consultancy/advisory services
5. Accounting and data processing
6. Other non-assurance services (e.g., Information Technology System Services)
Assurance Engagement
 An engagement in which a practitioner expresses a conclusion designed to enhance the
degree of confidence that intended users can have about the evaluation or measurement
of a subject matter that is a responsibility of a party, other than the intended users or the
practitioner, against criteria.

Elements of an Assurance Engagement

A. Subject Matter
 Financial/Non-financial Performance
 Physical Characteristics
 Systems and Processes
 Behavior

B. Suitable Criteria
 Relevance
 Reliability
 Neutrality
 Completeness
 Understandability

C. Three Party-Relationship

D. Sufficient

Appropriate Evidence
Sufficient – quantity
Appropriate – quality
 Professional Skepticism
o Ability to have a questioning mind
o Neither assume honesty nor dishonesty
o Critical mind
 Generalizations on the Reliability of Audit Evidence
o Evidence is more reliable when it is obtained from independent sources
outside the entity.
o Evidence that is generated internally is more reliable when related controls
are effective.
o Evidence obtained directly by the practitioner is more reliable than
evidence obtained indirectly or by inference.
 o Evidence is more reliable when it exists in documentary form, whether
paper, electronic or other media.
o Evidence provided by original documents is more reliable than evidence
provided by photocopies of facsimiles.

E. Written Assurance Report

 Report containing a conclusion that conveys the assurance obtained about the
subject matter information