Audit Theory

• Scope of practice in the accountancy profession includes: Public Practice, Commerce and Industry, Government, and Education/Academe
• In Public Practice, individuals may have a client-service provider relationship, work as a partner/staff member in an accounting or auditing firm, practice accountancy (CPA), have more than one client on a fee basis, or be in an employer-employee relationship
• In Commerce and Industry, individuals may be involved in decision-making requiring professional knowledge in the science of accounting
• In Government, individuals may work in the government or GOCC, hold/appointed in an accounting professional group in government, or be part of an educational institution teaching accounting, auditing, management services, finance, business law, and related subjects
• Regulation of the accountancy profession in the Philippines is governed by Republic Act No. 9298, the "Philippine Accountancy Act of 2004", which aims to standardize and regulate accounting education, conduct examinations for registration of certified public accountants, and supervise, control, and regulate the practice of accountancy in the country
• Professional Regulatory Board of Accountancy composition includes a Chairman and six members appointed by the President of the Philippines, with a vice-chairman elected from among its members for a term of one year
• Qualifications for board members include being a natural-born citizen and resident of the Philippines, a registered Certified Public Accountant with at least ten years of work experience in any scope of practice of accountancy, good moral character, and no pecuniary interest in certain educational institutions
• Board members hold office for a term of three years, with limitations on reappointment after serving two successive complete terms
• Grounds for suspension or removal of board members include neglect of duty, incompetence, violation of laws or ethical standards, conviction of crimes involving moral turpitude, and manipulation of licensure examination results
• Qualifications for exam candidates include being a Filipino citizen, of good moral character, holding a Bachelor of Science in Accountancy degree from a recognized institution, and not having been convicted of any criminal offense involving moral turpitude
• Candidates failing in two complete CPA Board Examinations may be disqualified from taking another set of examinations unless they complete at least twenty-four units of subjects given in the board exam
• Rating in the Licensure Examination requires a general average of at least seventy-five percent, with no grades lower than sixty-five percent in any subject for a passing grade
• Certificates of Registration and Temporary/Special Permits are issued to successful examinees and individuals admitted under reciprocity or international agreements
• Certificates of Registration include the full name and assigned registration number of the registrant, signatures of relevant authorities, and official seals
• Special/temporary permits may be issued for specific purposes to foreign CPAs deemed essential for the country's development or accountancy education in the Philippines
• Professional Identification Cards indicate Certificate of Registration, Identification Card, and Professional Tax Receipt details, renewable every three years, and must be used in connection with the practice of the profession
• Professional Tax Receipt number must be included on the documents signed, used, or issued in connection with the practice of the profession
• Refusal to Issue, Suspension, and Revocation can occur if:

  • Convicted by a court of competent jurisdiction of a criminal offense involving moral turpitude
  • Guilty of immoral and dishonorable conduct
  • Of unsound mind
  • Engaged in any unprofessional or unethical conduct
  • Involved in malpractice
• After two (2) years from the date of revocation of a certificate of registration, the Board may reinstate the validity of the revoked certificate upon application and for reasons deemed proper and sufficient
• Practice of Accountancy:

  • Single practitioners and partnerships for public accountancy must be registered certified public accountants in the Philippines
  • A minimum of three (3) years of meaningful experience in any area of public practice, including taxation, is required
• All licensed certified public accountants must obtain and use a seal prescribed by the Board, bearing the registrant's name, registration number, and title
• Renewal and Expiration:

  • Individual renewal date is on or before birthdate plus 3 years
  • Firm/Partnership renewal date is on or before September 30 and expire on December 31
• Ownership of Working Papers:

  • Working papers are privileged and property of the CPA
• Foreign and Reciprocity:

  • In accordance with existing laws, international treaty obligations, including mutual recognition agreements
  • Foreign CPAs must prove that Filipino CPAs can practice in their country
• Penal and Final Provision:

  • Fine of not less than 50,000
  • Imprisonment for a period not exceeding 2 years or both
  • Enforcement of the Act is done by the BOA, PRC, law agencies and offices, and the Secretary of Justice
• Continuing Professional Development (CPD) requirements:

  • Renewal of PIC requires 15 credit units
  • For Accreditation, 120 credit units are needed, including technical competence, professional skills, and professional values, ethics, and attitudes
  • Flexible CPD units can be earned through seminars/workshops, academic track, self-directed and/or lifelong learning, and similar activities
• Organizations discussed under RA 9298:

  • Philippine Institute of Certified Public Accountant (PICPA) is recognized as the APO
  • PICPA membership is open to all registered CPAs in all sectors
  • PICPA has specific requirements for renewal of accreditation and grounds for cancellation
• Regulatory Government Agencies affecting the accountancy profession:

  • Professional Regulation Commission (PRC) administers and enforces regulatory policies
  • Board of Accountancy (BOA) issues and may revoke CPA certificates
  • Commission on Audit (COA) is the Supreme Audit Institution
  • Securities and Exchange Commission (SEC) regulates corporations, partnerships, and associations
  • Bureau of Internal Revenue (BIR) raises revenues for the government
  • Bangko Sentral ng Pilipinas (BSP) maintains price stability for economic growth
• • Insurance Commission prescribes additional requirements for audits in specific industries
• Professional Organizations:

  • Philippine Institute of Certified Public Accountant
  • Sectoral Organizations like ACPAPP, ACPAE, ACPACI, GACPA
• Standard-Setting Bodies:

  • Financial and Sustainability Reporting Standards Council
  • Auditing and Assurance Standards Council