Module #03: The Professional Practice of Accounting

Introduction: Attributes that make Accounting a Profession

1. Mastery of a Particular Skill
o An individual must first obtain a degree of Bachelor of Science in Accountancy
and continue learning through working experience and continuing professional
education.
2. Adherence by its members to a common code of values and conduct
o CPAs have their own Code of Ethics which is mandatory for all members of the
profession
3. Acceptance of a duty to society as a whole
o The CPA’s paramount concern is the public, “guardians of the public interest.”

Sectors of Accounting
1. Practice of Public Accountancy
o Shall constitute in a person, be it his/her individual capacity, or as a partner or as
a staff member in an accounting or auditing firm, holding out himself/herself as
one skilled in the knowledge, science and practice of accounting, and as a
qualified person to render professional services as a certified public accountant;
 Offering or rendering, or both, to more than one client on a fee basis or
otherwise, services such as the audit or verification of financial
transaction and accounting records
 Or the preparation, signing, or certification for clients of reports of audit,
balance sheet, and other financial, accounting and related schedules,
exhibits, statements or reports which are to be used for publication or for
credit purposes, or to be filed with a court or government agency, or to
be used for any other purpose; or the design, installation, and revision of
accounting system
 Or the preparation of income tax returns when related to accounting
procedures
 When he/she represents clients before government agencies on tax and
other matters related to accounting or renders professional assistance in
matters relating to accounting procedures and the recording and
presentation of financial facts or data.
2. Practice in Commerce and Industry
o Shall constitute a person involved in decision making requiring professional
knowledge in the science of accounting, or when such employment or position
requires that the holder thereof must be a certified public accountant.
3. Practice in Education or Academe
o Shall constitute a person in an educational institution which involves teaching of
accounting, auditing, management advisory services, finance, business law,
taxation, and other technically related subjects.
4. Practice in Government
o Shall constitute a person who holds, or is appointed to, a position in an
accounting professional group in government or in a government–owned and/or
controlled corporation, including those performing proprietary functions.

Regulation of the Accountancy Profession

1. Republic Act No. 9298 or The Philippine Accountancy Act of 2004
 2. Financial Reporting standards and Engagement Standards established by recognized
standard-setting bodies
3. Adoption of Code of Ethics for CPAs in the Philippines
4. Self-regulation through a system of quality control
5. Sanctions/penalties against violators of the laws, rules and regulations affecting the
accounting profession

Organizations that affect Accountancy Profession

1. Professional Regulation Commission
2. Professional Regulatory Board of Accountancy
3. Commission on Audit
4. Securities and Exchange Commissions
5. Bangko Sentral ng Pilipinas
6. Bureau of Internal Revenue
7. Insurance Commission

The Professional Regulatory Board of Accountancy

Composition and Nomination and Appointment Process
 The Professional Regulatory Board of Accountancy, hereinafter referred to as the
Board, under the supervision and administrative control of the Professional
Regulation Commission
o Shall be composed of a chairman and six (6) members to be appointed by
the President of the Philippines from a list of three (3) recommendees for
each position and ranked by the Commission, from a list of five (5)
nominees for each position submitted by the accredited national professional
organization of certified public accountants.
o The Board shall elect a vice-chairman from among its members for a term
one (1) year.

Qualifications of Members
1. Must be a natural-born citizen and a resident of the Philippines;
2. Must be a duly registered Certified Public Accountant with a least ten (10) years of
work experience in any scope of practice of accountancy.
3. Must be of good moral character and must not have been convicted of crimes
involving moral turpitude; and
4. Must not have any pecuniary interest, directly or indirectly, in any school, college,
university or institution conferring an academic degree necessary for admission to
the practice of accountancy or where review classes in preparation for the licensure
examination are being offered or conducted, nor shall he/she be a member of the
faculty or administration thereof at the time of his/her appointment to the Board.

Terms of Office
 The Chairman and members of the Board shall hold office for a term of three (3)
years.
 Any vacancy occurring within the term of a member shall be filled up for the
unexpired portion of the term only.
 No person who has served two (2) successive complete terms shall be eligible for
reappointment until the lapse of one (1) year.
 Appointment to fill up an unexpired term is not to be considered as a complete term.

Grounds for suspension or removal or members of the board:

 1. Neglect of duty or incompetence;
2. Violation or tolerance of any violation of this Act and its implementing rules and
regulations or the Certified Public Accountant’s Code of Ethics and the technical and
professional standards of practice for certified public accountants;
3. Final judgment of crimes involving moral turpitude; and
4. Manipulation or rigging of the certified public accountant’s licensure examination
results, disclosure of secret and confidential information in the examination
questions prior to the conduct of the said examination or tampering of grades.

The Commision on Audit

Commission on Audit composed of a Chairman and two Commissioners:
 Natural born citizens of the Philippines
 At least 35 years of age
 CPA with not less than ten years of auditing experience or members of the Philippine
Bar who have been engaged in the practice of law for at least 10 years
 Must not have been candidates for any elective position in the elections immediately
preceding their appointment

The Chairman and the Commissioners shall be appointed by the President with the
consent of the Commission on Appointments for a term of 7 sayers without reappointment.

The COA is not the internal auditor of the government. It is the sole external auditor of
all government departments and agencies, including GOCCs.

Standard Setting Bodies

Local:
1. Financial Reporting Standards Council (IFRS)
2. Auditing and Assurance Standards Council (AASC)

Foreign:
1. International Accounting Standards Board (IASB)
2. International Auditing and Assurance Standards Board (IAAS)

Professional Organizations
 Professional organizations affecting the practice of the accountancy profession include
accredited national professional organization of CPAs (APO) and organizations that
address the needs of CPAs in the four sectors.
 The PICPA is designated by PRC as the APO for accountancy

Requirement to obtain a CPA Certificate

 Obtain a degree of BSA and to pass the CPA board examinations prepared by PRBOA.

CPA Board Examinations

 All applicants for 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
the Commission in accordance with Republic Act No. 8981.

Scope of Examination
1. Financial Accounting and Reporting
2. Advanced Financial Accounting and Reporting
 3. Management Advisory Services
4. Regulatory Framework for Business Transactions
5. Auditing
6. Taxation

Qualifications of Applicants for Examination

1. Is a Filipino citizen;
2. Is of good moral character;
3. Is a holder of the degree of Bachelor of Science in Accountancy conferred by a
school, college, academy or institute duly recognized and/or accredited by the
CHED or other authorized government offices; and
4. Has not been convicted of any criminal offense involving moral turpitude.

Rating in the Licensure Examination

o To be qualified as having passed the licensure examination for accountants, 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.
o In the event a candidate obtains the rating of seventy-five percent (75%) and
above in at least a majority of subjects as provided for in this Act, he/she shall
receive a conditional credit for the subjects passed
 Provided, That a candidate shall take an examination in the remaining
subjects within two years from the preceding examination.
 Provided, further, That if the candidate fails to obtain at least a general
average of seventy-five percent (75%) and a rating of at least sixty-five
percent (65%) in each of the subjects reexamined, he/she shall be
considered as failed in the entire examination.

Oath of Membership to the Profession

 All successful candidates in the examination shall be required to take an oath of
profession before any member of the Board or before any government official authorized
by the Commission or any person authorized by law to administer oaths upon
presentation of proof of his/her qualification, prior to entering upon the practice of the
profession.
 Certificate of registration shall be issued to examinees who pass the licensure
examination subject to payment of fees prescribed by the Commission.
o Shall bear the signature of the chairperson of the Commission and the chairman
and members of the Board,
o Stamped with the 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.
o The said certificate shall remain in full force and effect until withdrawn,
suspended or revoked.
 A Professional Identification Card bearing the registration number, date of issuance,
expiry date, duly signed by the chairperson of the Commission, shall likewise be issued
to every registrant renewable every three (3) years.

Refusal to Issue CPA Certificate and PRF ID

 The Board shall not register and issue a certificate of registration and professional
identification card to any successful examinee:
 Convicted by a court of competent jurisdiction of a criminal offense involving moral
turpitude
  Guilty of immoral and dishonorable conduct
 To any person of unsound mind
 Misrepresentation in the application for the CPA examination

Foreign Certified Public Accountancy

 Subjects or citizens of foreign countries may be allowed to practice Accountancy in the
Philippines in accordance with the provisions of existing laws, international treaty
obligations including mutual recognition agreements entered into by the Philippine
government with other countries.
 A person who is not a citizen of the Philippines shall not be allowed to practice
accountancy in the Philippines unless he/she can prove, in the manner provided by the
rules of court that, by specific provision of law, the country of which he/she is a citizen,
subject or national admits citizens of the Philippines to the practice of the same
profession without restriction.

The CPA Seal

 All licensed certified public accountants shall obtain and use a seal of a design
prescribed by the Board bearing the registrant’s name, registration number and title. The
auditor’s reports shall be stamped with said seal, indicating his/her current Professional
Tax Receipt (PTR) number, date/place of payment when filed with government
authorities or when used professionally.

Ethical Fundamental Principles

1. Integrity
2. Objectivity
3. Professional Competence and Due Care
4. Confidentiality
5. Professional Behavior

Professional Standards
Service Engagement Standard Practice Statement

Audits Philippine Standards on Auditing Philippine Auditing Practice

(PSAs) Statements (PAPs)

Reviews Philippine Standards on Review Philippine Review Engagement

Engagements (PSREs) Practice Statements (PREPs)

Other Assurance Philippine Standards on Philippine Assurance Engagement

Services Assurance Engagements (PSAEs) Practice Statements (PAEPSs)

Related Services Philippine Standards on Related Philippine Related Services Practice

Services (PSRSs) Statements (PRSPSs)

Penalties and Sanctions

 Warranted in cases where the CPA has violated the rules prescribed by law, regulation,
or the Code of Ethics.

Examples of Penalties:
1. Suspension of CPA Certificate
  The BOA shall have the power to suspend the CPA’s certificate of
Registration for any of the causes/grounds mentioned under Section 23
of RA No. 9298
2. Revocation of CPA Certificate
 Same grounds as the suspension of CPA Certificate
 Revocation - loss of the license is not temporary
 Suspension - loss of license is temporary
3. Cancellation of Temporary or Special Permit
 Cancellation of the temporary or special permit effectively prevents the
foreign CPA from practicing accountancy in the Philippines
 Applies to Foreign CPAs
4. Payment of fines and/or Imprisonment
 Any person who shall violate any of the provisions of RA 9298 or the
IRR, shall, upon conviction, be punished by a fine of not less than
50,000 or by imprisonment for a period not exceeding 2 years or both.