FEU - MAKATI

Auditing Theory AT – Lecture 2

Prof. F. H. Villamin

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“PROFESSIONAL PRACTICE OF ACCOUNTING”

Regulation of the Accounting Profession

1. RA 9298 (Philippine Accountancy Act of 2004) – approved May 13, 2004

Objectives:
a. Standardization and regulation of accounting education.
b. Examination for registration of CPAs
c. Supervision, control and regulation of the practice of accountancy in the Philippines.

Implementing Rules and Regulations to RA 9298 provides clarifications and guidelines geared
towards the implementation of the Philippine Accountancy Act of 2004.

2. Financial Reporting Standards and Engagement Standards as established by recognized standard-

setting bodies.

3. 2018 Code of Ethics for Professional Accountants in the Philippines. (Based on the 2016 IFAC
Code of Ethics issued by International Ethics Standards Board of Accountants (IESBA) – effective
February 20, 2018.

4. 2016 CPD Law per RA 10912

Sectors of Accounting Practice

1. Practice of Public Accountancy (Public Practice)

2. Practice in Commerce and Industry
3. Practice in Education or the Academe
4. Practice in Government
.
Examination, Registration and Licensure

The Certified Public Accountant Examination

All applicants for the registration for the practice of accountancy shall be required to undergo a
licensure examination to be given by the Board in such places and dates as the Commission may
designate subject to compliance with the requirements prescribed by PRC in accordance with RA
8981.

Scope of Examination

a. Taxation
b. Regulatory Framework for Business Transactions
c. Management Advisory Services
d. Auditing
e. Financial Accounting and Reporting I
f. Financial Accounting and Reporting II

Rating in the Licensure Examination

To be qualified as having passed the CPA licensure examination, a candidate must obtain a general
average of seventy five percent (75%), with no grades lower than sixty five percent (65%) in any given
subject. In the event a candidate obtains the rating of seventy five (75%) and above in at least a
majority of the subjects as provided in RA 9298, the candidate shall receive a conditional credit for
the subjects passed, provided, that a candidate shall take the examination in the remaining subjects
within two (2) years from the preceding examination , provided further, that if the candidate fails to
obtain at least a general average of seventy five (75%) and a rating of at least sixty five (65%) in each
of the subjects, the candidate shall be considered failed in the entire examination.
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Issuance of Certificate of Registration and Professional Identification Card

A certificate of registration (COR) and professional identification card (PIC) shall be issued to
successful candidates.

The Certificate of Registration shall bear the signature of the chairperson of the Professional
Regulations Commission and the chairman and members of the Board of Accountancy stamped with
official seal of the Commission and of the Board, indicating that the person named therein is entitled to
the practice of the profession with all the privileges appurtenant thereto. The said certificate shall
remain in full force and effect until withdrawn, suspended or revoked in accordance with RA 9298.

The Professional Identification Card (PIC) bearing the registration number, date of issuance, expiry
date, duly signed by the chairperson of the Commission is renewable for every three (3) years.

Grounds for the Refusal to Issue COR and PIC

1. Conviction by a court of competent jurisdiction of a criminal offense involving moral turpitude.

2. Guilty of immoral and dishonourable conduct.
3. Unsound mind.
4. Misrepresentation in the application for the CPA examination

Reinstatement, Reissuance and Replacement of Revoked or Lost Certificates

BOA may, after the expiration of two (2) years from the date of revocation of COR and upon
application and for reasons deemed proper and sufficient, and after being convinced of applicant’s
remorse and rehabilitation, reinstate the validity of a revoked COR and in doing so, may in its
discretion, exempt the applicant from taking another examination.

Meaningful Experience

1. Commerce and industry – significant involvement in general accounting, budgeting, tax

administration, internal auditing, liaison with external auditors, representing his/her employer
before government agencies on tax and other matters related to accounting or any other related
functions.
2. Academe/education – include teaching for at least three (3) trimesters or two (2) semesters,
subjects in either financial accounting, business law and tax, auditing problems, auditing theory,
financial management and management services, provided that the accumulated teaching
experience on these subjects shall not be less than three (3) school years.
3. Government – include significant involvement in general accounting, budgeting, tax administration,
internal auditing, and liaison with the COA or any other related functions.
4. Public practice – include at least one (1) year as audit assistant and at least two (2) years as
auditor in charge of audit engagement covering full audit functions of significant clients.

Ownership of Working Papers

All working papers, schedules and memoranda made by CPA and his staff in the course of
examination, including those prepared and submitted by client, incident to or in the course of
examination by such CPA, except reports submitted by CPA to a client shall be treated as confidential
and privileged and remain the property of such CPA in the absence of written agreement between the
CPA and the client, to the contrary, unless such documents are required to be produced through
subpoena issued by any court, tribunal or government regulator or administrative body in accordance
with Philippine laws.

Seal and Use of Seal

All registered CPAs shall obtain and use a seal of design prescribed by BOA bearing the registrant’s
name, registration number and date. The auditor’s report shall be stamped with said seal, indicating
therein, his/her current PTR (Professional Tax Receipt) number, date/place of payment when filed with
government authorities or when used professionally.

The seal of a CPA shall be circular in form with a smaller circle within and in the upper portion of the
space between the circles shall be engraved the name of individual CPA, firm or partnership as the
case maybe, the lower portion thereof shall be engraved the CPA registration number of individual
CPA, proprietor of the firm and the signing partner of the partnership and in the middle of the smaller
circle shall be engraved the letters “CPA”. Affixing the CPA’s seal and signature is an indication of
compliance by the CPA of the requisite accounting and auditing standards and rules.

Limitation of the Practice of Accountancy

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Single practitioners and partnerships for the practice of public accountancy shall be registered certified
public accountants in the Philippines.

Foreign CPAs

Special/temporary permits may be issued by the BOA subject to the approval of PRC for the following:
1. A foreign CPA called for consultation or for a specific purpose which, in the judgment of the BOA,
is essential for the development of the country.
2. A foreign CPA engaged as professor, lecturer, critic in fields essential to accountancy education in
the Philippines and his/her engagement is confined to teaching only.
3. A foreign CPA who is internationally recognized expert or with specialization in any branch of
accountancy and his/her service is essential for the advancement of accountancy in the
Philippines.

Continuing Professional Development (CPD Program)

It refers to the inculcation, assimilation and acquisition of knowledge, skills, proficiency and ethical and
moral values, after the initial registration of a professional that raise and enhance the professional’s
technical skills and competence.

One credit hour of CPD program activity or source shall be equivalent to one (1) credit unit.

Temporary exemption – a CPA working or practicing or furthering his/her studies abroad provided
that he/she has been out of the country for at least two years immediately prior to the date of renewal.

Penal Provision

Any person who shall violate any of the provisions of RA9298 or any of its implementing rules and
regulations as promulgated by the Board of Accountancy subject to the approval of the Professional
Regulations Commission shall, upon conviction be punished by
a. Fine of not less than Fifty Thousand Pesos (P50,000) or
b. Imprisonment for a period not exceeding two (2) years or
c. Both

Rules and Regulations Covering the Accreditation of Accounting Teachers

I. Coverage

The accreditation policy shall apply to all CPAs involved in the teaching of accounting, auditing,
management advisory services, finance (which shall include working capital management, investment
policies, sources of finances for long-term capital projects), business law, taxation, and other technically
related subjects. This policy covers those who teach accounting in the primary, secondary, tertiary and
graduate levels including CPA board review schools/centers that are school-based.

The requirement in Section II, Nos. 2 and 3 below shall not apply to those CPAs already engaged in
teaching as of the date of the effectivity of these rules.

II. Requirements for Accreditation:

The following shall be the requirements for the accreditation of Accounting Teachers:

1. Possession of relevant Master’s degree. Any post-graduate degree program in business,

accounting, taxation, law, education and related fields earned from any graduate school duly
recognized by the Commission on Higher Education (CHED) will qualify for this requirement.

2. Completion of 12 units of relevant education subjects from the CHED recognized schools.

a. For purposes of compliance, the 12 units may be earned either from the undergraduate
education program or from a graduate degree program of any Higher Education Institution (HEI)
duly recognized by CHED. These subjects may include but not limited to the following: Test
and Measurement/ Statistical Concepts for Teachers, Classroom Management Concepts for
Teachers, Curriculum Design Concepts for Teachers, Instructional Materials Preparation, and
Teaching and Learning with Computer based Technologies.

b. The 12 units may also be earned from in-service or in-house trainings on these topics offered by
schools or training centers.
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c. The 12 units can also be a combination of in-service trainings and units earned in an
undergraduate or graduate education programs.

d. CPAs who have passed the Teachers Board Exams and are already licensed Professional
Teachers shall be exempt from this requirement.

3. A total of three years meaningful experience in actual accounting work either in the Public Practice,
Commerce and Industry or Government sector.

a. The three years experience is total or cumulative and not necessarily continuing.

b. Meaningful experience shall be considered as satisfactory compliance of this requirement if it is

earned in
i. Commerce and industry and shall include significant involvement in general accounting,
budgeting, tax administration, internal auditing, liaison with external auditors or any other
related functions; or

ii. Government and shall include significant involvement in general accounting, budgeting, tax
administration, internal auditing, liaison with the Commission on Audit or any other related
functions; and

iii. Public practice and shall include at least one year as audit assistant and at least two years
as auditors in charge of audit engagement covering full audit functions of significant clients.

4. Proof that the CPA has undergone Continuing Professional Development (CPD)

The following shall be the proof of compliance with the CPD:

a. Certification of CPD units from accredited CPE providers issued by the Accredited Professional
Organization, presently, the Philippine Institute of Certified Public Accountants (PICPA), or

b. Certificates of Attendance or other proofs of meaningful participation in other CPD programs as

approved by the PRC/CPD Council upon recommendation of the PICPA of the individual CPA of
a minimum of sixty (60) CPD credit units earned for the past immediate three (3) years

III. Registration:

Individual accounting teachers shall register with the BOA and the PRC in accordance with prescribed
rules and shall not commence to teach until a valid Certificate of Accreditation has been issued.

A. Documentary Requirements
1. Application for accreditation duly accomplished in the form prescribed by the BOA, in three (3)
copies with the required metered documentary stamps. The application for registration shall
contain such information as may be required by the BOA including, but not limited to, the
following matters:
a. Name of the Individual CPA; telephone and/or facsimile numbers, e-mail address, if any;
Complete home address; The name of the Institution where he is presently connected or
subjects that he intends to teach;
b. Copy of valid CPA Board Certificate (required for initial accreditation);
c. Photocopy of expired Certificate of Accreditation of accounting teachers (required for
renewal of accreditation);
d. Photocopy of valid PRC Identification Card;
e. Certified copy of his diploma/transcript of records of the relevant graduate degree program
earned;
f. Certified copy of the transcript of records of the twelve (12) units of relevant education
courses earned;
g. Certificates of CPE units earned;

h. A sworn statement by the Individual CPA that he has at least three (3) years of meaningful
experience in any of the areas of the practice of accountancy as defined in Section II,
paragraph 3 of these Rules and Regulations. A detailed description of such work
experience should be attached to the sworn statement;
i. Valid NBI clearance;
j. Payment as prescribed accreditation fee in cash, postal money order, manager’s check or
bank draft payable to the Professional Regulation Commission.
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2. Any change with respect to the matters enumerated in Section III, paragraph A should be
reported in writing to the BOA, copy furnished the Commission, within sixty (60) days from such
change.

B. The Education Sector of the Accredited Professional Organization which at present is the
Philippine Institute of Certified Public Accountants may be deputized by the BOA to assist in the
processing of accreditation of teachers as provided for in these Rules and Regulations.

C. The BOA shall duly authenticate all applications for accreditation received in proper form, and
after having passed upon such applications, shall recommend to the Commission the approval or
denial thereof not later than sixty (60) days after the receipt of the aforesaid applications in proper
form (i.e. with complete and proper documentary requirements).

D. The Commission shall upon favorable recommendation of the BOA, issue to the applicant the
corresponding Certificate of Accreditation to teach accounting.

IV. Renewal of Certificate of Accreditation:

Unless sooner revoked, cancelled or withdrawn, said Certificate of Accreditation shall be valid for three
(3) years and renewable every three (3) years.

V. Penalty:

Any person who shall violate any of the provisions of this Resolution, shall, upon conviction, be
subjected to the penalties provided in the Accountancy Act of 2004, its Implementing Rules and
Regulation (IRR) and in the Rules and Regulations prescribed by the PRC.

VI. Transitory Provisions:

1. Any tenured/full time/full load faculty member who does not meet the requirements for
accreditation in Section II as of the date of effectivity of these Rules and Regulations may be
issued a Provisional Accreditation which will be valid for a period not exceeding three (3) years
unless earlier withdrawn, revoked, or cancelled for cause by the Board of Accountancy.
Provisional Accreditation may be issued only once and is not renewable.

2. The requirement shall also apply to (a) CPAs who want to join the teaching profession for the first
time; and (b) Returning teachers who have not been teaching for the last five (5) years.

VII. Effectivity:

The accreditation of teachers shall take effect June 2008 or in time for the School Year 2008 – 2009
provided that this resolution is published in the Official Gazette or any newspaper of general circulation
in the Philippines for not later than fifteen (15) days prior to the opening of classes for school year
2008- 2009.

Date of publication in the newspaper (Manila Standard Today) - June 4, 2008

Date of Effectivity – June 20, 2008

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REGULATORY FRAMEWORK
Governing Laws and Regulations
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1. Revised Securities Act

2. Corporate Code
3. National Internal Revenue Code
4. Accountancy Law
5. CPD Law
6. Code of Ethics (BOA Resolution 18 Series of 2018)
7. Local Government Code and Provincial/Municipal Ordinance
8. CoA Rules and Regulations

Institutions and Primary Functions

1. Securities and Exchange Commission

2. Bureau of Internal Revenue
3. Board of Accountancy
4. Reports to the Professional Regulatory Commission
5. Other Agencies: BSP, IC, CDA, NEA, PDIC, CoA

Functions of Board of Accountancy

1. Issues STPs to foreign accountants to work in the Philippines.

2. Oversees the investigation of erring accountants.
3. Oversees the APO and the 4 sectoral organizations.
4. Reviews the Accountancy Program with CHED.
5. Conducts the search for the most outstanding CPA and APO.
6. Implements the ASEAN MRA for Accountancy Services
7. Provides oversight over government accounting matters.
8. Attends to PRC matters.
9. Attends to international accounting activities.

HISTORY OF THE ACCOUNTANCY PROFESSION

1. Accountancy Act of 1923 – Created the Board of Accountancy

Issuance of CPA certificates
2. Accountancy Act of 1967- Standardization of accounting education
Stipulated the examination process for CPA registration
Regulated the practice of accountancy
3. Revised Accountancy Act of 1975 (Presidential Decree 692)
4. Philippine Accountancy Act of 2004 (Republic Act No. 9298)

CONTINUING PROFESSIONAL DEVELOPMENT – R.A. 10912

1. The gradual increase in the number of CPD units required to be completed for the three-year
period from 80 units of the period ended December 31, 2017, to 100 units for the period ended
December 31, 2018 and 120 units for the period ended December 31, 2019. (BOA Resolution
358 Series of 2016).
2. Shift from the CPD learning categories of Thematic to Competence areas, to make it
consistent with International Education Standards, with the Competence areas to be
categorized into:
Technical Competence, Professional Skills, and Professional Values, Ethics and Attitudes.
3. Minimum credit units
A. Technical Competence – 30 CUs
B. Professional Skills – 5 CUs
C. Professional Values, Ethics, Attitudes – 5 CUs
4. Flexible units
5. No exemptions for those 65 years and above;
6. CPD compliance mandatory for accreditations in public practice, education, commerce &
industry

7. The CPD programs shall consist of activities that range from structured to non-structured
activities which have learning processes and outcomes.
These include, but are not limited to, the following:
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a. Formal learning
b. Non-formal learning
c. Informal learning
d. Self-directed learning
e. Online learning activities; and
f. Professional work experience

6-POINT EXPANDING HORIZON (BOARD OF ACCOUNTANCY)

1. Institute quality and governance measures.

2. Effectively regulate the profession.
3. Enhance image and reputation of the accounting professional.
4. Enhance stakeholders’ involvement and cooperation.
5. Institute structural changes.
6. Provide communication and assistance mechanisms.

Rules and Regulations on Advertising and Promotion for the Practice of Accountancy in the
Philippines

1. Generally, advertising and publicity in any medium are acceptable provided:

a. It has as its objective the notification to the public or such sectors of the public as are concerned, of
matters of fact (e.g., name, address, contact numbers, services offered) in a manner that is not
false, misleading or deceptive;
b. It is in good taste;
c. It is professionally dignified; and
d. It avoids frequent repetition, of and any undue prominence being given to the name of the firm or
professional accountant in public practice.

The following however shall not be allowed:

a. Self-laudatory statements
b. Discrediting, disparaging, or attacking other firms or CPA practitioners
c. Referring to, using or citing actual or purported testimonials by third parties
d. Publishing and comparing fees with other CPAs or CPA firms or comparing those services with
those provided by another firm or CPA practitioner
e. Giving too much emphasis on competitive differences
f. Using words or phrases which are hard to define and even more difficult to substantiate objectively
g. Publishing services in billboard (e.g. tarpaulin, streamers. etc.) advertisements

2. The use of the name of an international accounting firm affiliation/correspondence other than a notation
that it is a “member/correspondent firm of that foreign firm” shall not be allowed so as to imply that the
foreign firm is practicing in the Philippines.

3. No firm or CPA practitioner shall identify the name of a client or items of a client’s business in
advertising, public relations or marketing material produced to promote his practice provided that the
client gives its written consent.

4. No firm or CPA practitioner shall use the term “Accredited” or any similar words or phrases calculated to
convey the same meaning, if the claimed accreditation (BOA, SEC, BSP or IC) has expired.

5. All advertisements must have prior review and approval in writing by the Risk Management Partner and
Managing Partner or their equivalents.

6. The following examples are illustrative of circumstances in which publicity is acceptable and the matters
to be considered in connection therewith subject always to the overriding requirements mentioned in the
preceding rules.

a Awards
It is in the interests of the public and the accountancy profession that any appointment or other
activity of a professional accountant in a matter of national or local importance, or the award of
any distinction to a professional accountant, should receive publicity and that membership of
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the professional body should be mentioned. However, the professional accountant should not
make use of any of the aforementioned appointments or activities for personal professional
advantage.

b. Professional Accountants Seeking Employment or Professional Business

A professional accountant may inform interested parties through any medium that a
partnership or salaried employment of an accountancy nature is being sought. The
professional accountant should not, however, publicize for subcontract work in a manner
which could be interpreted as seeking to procure professional business.

Publicity seeking subcontract work may be acceptable if placed only in the professional press
and provided that neither the accountant’s name, address or telephone number appears in the
publicity. A professional accountant may write a letter or make a direct approach to another
professional accountant when seeking employment or professional business.

c. Directories
A professional accountant may be listed in a directory. Entries may include name, address,
telephone number, professional description, services offered and any other information
necessary to enable the user of the directory to make contact with the person or organization
to which the entry relates.

d. Books, Articles, Interviews, Lectures, Radio and Television Appearances

Professional accountants who author books or articles on professional subjects, may state
their name and professional qualifications and give the name of their organization but shall not
give any information as to the services that firm provides. Similar provisions applicable to
participation by a professional accountant in a lecture, interview or radio or television program
on a professional subject. What professional accountants write or say, however, should not
be promotional of themselves or their firm but should be an objective professional view of the
topic under consideration. Professional accountants are responsible for using their best
endeavors to ensure that what ultimately goes before the public complies with these
requirements.

e. Training Courses, Seminars, etc.

A professional accountant may invite clients, staff or other professional accountants to attend
training courses or seminars conducted for the assistance of staff. Other persons should not
be invited to attend such training courses or seminars except in response to an unsolicited
request. The requirement should in no way prevent professional accountants from providing
training services to other professional bodies, associations or educational institutions which
run courses for their members or the public. However, undue prominence should not be given
to the name of a professional accountant in any booklets or documents issued in connection
therewith.

f. Booklets and Documents Containing Technical Information

Booklets and other documents bearing the name of a professional accountant and giving
technical information for the assistance of staff or clients may be issued to such persons,
other professional accountants or other interested parties.

g. Staff Recruitment
Genuine vacancies for staff may be communicated to the public through any medium in which
comparable staff vacancies normally appear. The fact that a job specification necessarily
gives some detail as to one or more of the services provided to clients by the professional
accountant in public practice is acceptable but it should not contain any promotional element.
There should not be any suggestion that the services offered are superior to those offered by
other professional accountants in public practice as a consequence of size, associations, or
for any other reason.

In publications such as those specifically directed to schools and other places of education to
inform students and graduates of career opportunities in the profession, services offered to
the public may be described in a business like way.

More latitude may also be permissible in a section of a newspaper devoted to staff vacancies
than would be allowed if the vacancy appeared in a prominent position elsewhere in a
newspaper on the grounds that it would be most unlikely that a potential client would use such
media to select a professional adviser.
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h. Publicity on Behalf of Clients

A professional accountant in public practice may publicize on behalf of clients, primarily for
staff. However, the professional accountant in public practice should ensure that the
emphasis in the publicity is directed towards the objectives to be achieved for the client.

i. Brochures and Firm Directories

A professional accountant in public practice may issue to clients or, in response to an
unsolicited request, to a non-client:
a. A factual and objectively worded of the services provided; and
b. A directory setting out names of partners, office addresses and names and addresses of
associated firms and correspondents.

j. Stationery and Nameplates

Stationery of professional accountants in public practice should be of an acceptable
professional standard and comply with the requirements of the law and of the member body
concerned as to names of partners, principals and others who participate in the practice, use
of professional descriptions and designatory letters, cities or countries where the practice is
represented, logotypes, etc. The designation of any services provided by the practice as
being specialist nature should not be permitted. Similar provisions, where applicable, should
apply to nameplates.

k. Announcements
Appropriate newspapers or magazines may be used to inform the public of the establishment
of a new practice, of changes in the composition of partnership of professional accountants in
public practice, or of any alteration in the address of a practice. Such announcements should
be limited to a bare statement of facts and consideration given to the appropriateness of the
area of distribution of the newspaper or magazine and number of insertions.

l. Inclusion of the Name of the Professional Accountant in Public Practice in a Document

Issued by a Client
When a client proposes to publish a report by a professional accountant in public practice
dealing with the client’s existing business affairs or in connection with the establishment of a
new business venture, the professional accountant in public practice should take steps to
ensure that the context in which the report is published is not such as might result in the public
being misled as to the nature and meaning of the report. In these circumstances, the
professional accountant in public practice should advise the client that permission should first
be obtained before publication of the document.
Similar consideration should be given to other documents proposed to be issued by a client
containing the name of professional accountant in public practice acting in an independent
professional capacity. This does not preclude the inclusion of the name of a professional
accountant in public practice in the annual report of a client.

When professional accountants in their private capacity are associated with, or hold in, an
organization, the organization may use their name and professional status on stationery and
other documents. The professional accountant in public practice should ensure that this
information is not used in such a way as might lead the public to believe that there is a
connection with organization in an independent professional capacity.

m. Anniversaries
A professional accountant’s press and other media releases or announcements or newspaper
supplements, or other similar publications, or other commemorative media, or the holding of
media covered events undertaken only to commemorate their anniversaries in public practice
by informing the public of their achievements or accomplishments in contributing towards
nation building and in international understanding, goodwill, or relationship or enhancing the
image or standards of the accounting profession do not violate the rules on advertising and
solicitation provided that such announcements or undertakings contains only factual matters
without detailed listing of services. Such undertaking should be done only every five years of
celebration.

n. Websites
A professional accountant may develop and maintain a website in the Internet in such suitable
length and style which may also include announcements, press releases, publications and
such other necessary and factual information like firm’s name, partners/principals’ name and
brief description of their educational attainment, brief listing of services, postal address,
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telephone, fax and e-mail addresses. Such website should adhere to the rules mentioned
above.

7. These rules and regulations shall be effective fifteen (15) days after publication in the Official Gazette
or in any newspaper of general circulation.