[Integ 1] Auditing - The Accountancy Profession

Accounting Standards Council

Accounting is a service activity. The accounting function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision.

American Institute of Certified Public Accountants

Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof.

American Accounting Association

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information.

Overall Objective of Accounting

• provide quantitative financial information about a business that is useful to statement users particularly owners and creditors in making economic decisions​

• decision-usefulness​

Accounting

• Embraces auditing​

• Constructive in nature​

• Ceases when financial statements are already prepared​

Auditing

• Area of accounting specialization​

• Analytical​

• Work begins after financial statements are prepared​

• Auditor examines the FS to ascertain whether they are in conformity with generally accepted accounting principles​

Republic Act No. 9298

• law regulating the practice of accountancy in the Philippines​

• “Philippine Accountancy Act of 2004”​

• developed as a profession attaining a status equivalent to that of law and medicine​

• must finish a degree in Bachelor of Science in Accountancy and pass a very difficult government examination given by the Board of Accountancy​

Board of Accountancy

• body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines​

• responsible for preparing and grading the Philippine CPA examination​

Philippine Institute of Certified Public Accountants (PICPA)

• PICPA is the accredited national professional organization of CPAs. ​

• It serves all members in the different sectors of the accounting profession. ​

• Year-round professional development programs and regular fellowship and sports activities are sponsored by the association for its members.​

CPA Examination

• offered twice a year - May and October​

• in authorized testing centers around the country​

Public Accounting

• composed of individual practitioners, small accounting firms and large multinational organizations that render independent and expert financial services to the public​

• Auditing, Taxation, Management Advisory Services​

Auditing

• traditionally the primary service offered by most public accounting practitioners​

• External auditing - examination of financial statements by independent CPA for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared​

  • attest function of independent CPAs​

Taxation

• includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors​

• familiar and updated​

Management Advisory Services

• services to clients on matters of accounting, finance, business policies, organization procedures, product costs, distribution and many other phases​

  • Advice on installation of computer system​

  • Quality control​

  • Budgeting​

  • Advice on mergers and consolidations​

Private Accounting

It includes maintaining the records, producing the financial reports, preparing the budgets and controlling and allocating the resources of the entity​

Controller

Highest accounting officer in an entity

Public Accountant

• assist the management in planning and controlling the operations​

• determination of various taxes the entity is obliged to pay

Government Accounting

• encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof​

• custody and administration of public funds​

• BIR, COA, DBM, SEC, BSP​

Academe

• licensed accounting professionals who engage in teaching, research, and curriculum development within educational institutions. ​

• They leverage their expertise to enhance accounting education and prepare students for careers in the accounting profession.​

Requirements for the Accreditation of Accounting Teachers

• 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. ​

• Completion of 12 units of relevant education subjects from the CHED recognized schools ​

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

• Proof that the CPA has undergone Continuing Professional Development (CPD) ​​

Quality Assurance Review (QAR)

• A study, appraisal or review ​

  • by the BOA or its duly authorized representative ​

  • of the quality of audit of financial statements (FS) by CPA public practitioners ​

  • through a review of the quality control (QC) measures the CPA instituted in his practice ​

  • to ascertain compliance with prescribed professional, ethical and technical standards of public practice. ​

​

Coverage of the Program:​

• All CPAs in the public accounting sector ​

• an individual practitioner, a firm or a partnership​

QAR Executive Committee

• Responsibility and Authority (BOA Resolution No. 23, Series of 2010, Section 5) ​

  • Full power and authority to set policies and to supervise the operation of QARD ​

​

• Composition (Sections 5 and 6). ​

  • Chairman and Vice-Chairman of the Board or their alternate from any of the incumbent members of the Board ​

  • President of the PICPA or his alternate from any of the incumbent members of Board ​

• Term of Office​

  • Co-terminus with their respective term in the BOA/PICPA​

  • not to exceed three (3) years.

• Qualification Requirements

  • ​Should possess high degree of competence and objectivity ​

  • Should not be in active practice of public accountancy during their incumbency in the QAR Executive Committee. ​

Continuing Professional Development (CPD)

• Republic Acts No. 10912

• Law mandating and strengthening the CPD program for all regulated professions, including accountancy profession

• Raises and enhances the technical skill and competence of the CPA

• All CPAs shall abide

CPD Credit Units

• Refer to the CPD credits hours required for the renewal of CPA license and accreditation of a CPA to practice the accountancy profession every three years

  • All, regardless of area or sector of practice shall be required to comply with 120 CPD credit units in a compliance period of three years

• Excess credit units earned shall not be carried over to the next three-year period, except credit units earned for masters and doctoral degrees​

• Mandatory​

• Required for the renewal of CPA license and accreditation of CPA to practice the accountancy profession​

15 CPD units

For license renewal (to legally maintain the right to practice as a CPA)

120 CPD units

CPAs seeking Board of Accountancy (BoA) accreditation (allowed to sign financial statements and audit reports)

Securities and Exchange Commission (SEC) ​

This is the government agency that regulates the registration and operations of corporations, partnerships and other forms of associations in the Philippines.​

Commission on Audit (CoA)

This is the agency that audits or determines whether government units handle their funds according to existing laws and whether their programs are being conducted efficiently and economically.​

Bangko Sentral ng Pilipinas

• The primary objective of this government agency is to maintain price stability conducive to a balanced and sustainable economic growth. ​

• It also aims to promote and preserve monetary stability and the convertibility of the peso.

Bureau of Internal Revenue

The BIR is responsible for enforcement of the tax laws, rules and regulations.​

Philippine Accountancy Act of 2004

Republic Act 9298 is known as the 

1. Revised Accountancy Law 

2. Revised Accountancy Act 

3. Philippine Accountancy Act of 2004 

4. Philippine Accountancy Law of 2004 

The development and improvement of accounting standards that will be generally accepted in the Philippines

Which of the following is not an objective of the Philippine Accountancy Act of 2004? 

1. The standardization and regulation of accounting education 

2. The examination for registration of certified public accountants. 

3. The supervision, control, and regulation of the practice of accountancy in the Philippines. 

4. The development and improvement of accounting standards that will be generally accepted in the Philippines. 

Practice of Public Accountancy, Practice in Commerce and Industry, and Practice in Education/Academe 

The practice of Accountancy includes 

1. Practice of Public Accountancy 

2. Practice in Commerce and Industry 

3. Practice in Education/Academe 

Represents his/her clients before government agencies on tax and other matters related to accounting

A CPA is in public accounting practice when he/she 

1. Represents his/her employer before government agencies on tax and other matters related to accounting. 

2. Represents his/her clients before government agencies on tax and other matters related to accounting. 

3. Teaches accounting, auditing, management advisory services, accounting aspect of finance, business law, taxation and other technically related subjects. 

4. Holds, or is appointed to, a position in an accounting professional group in government or in a government-owned and/or controlled corporation where decision making requires professional knowledge in the science of accounting. 

Paid-up capital of at least P5,000,000 and/or an annual revenue of at least P10,000,000

Section 4 of the Rules and Regulations Implementing RA 9298 (IRR) provides that any position in any business or company in the private sector which requires supervising the recording of financial transactions, preparation of financial statements, coordinating with the external auditors for the audit of such financial statements, and other related functions should be occupied by a duly registered CPA. It provides further that the business or company where such position exists has a 

1. Paid-up capital of at least P5,000,000 and/or an annual revenue of at least P10,000,000. 

2. Paid-up capital of at least P10,000,000 and/or an annual revenue of at least P5,000,000. 

3. Paid-up capital and/or an annual revenue of at least P10,000,000. 

4. Paid-up capital and/or an annual revenue of at least P5,000,000. 

Philippine Institute of Certified Public Accountants (PICPA)

It is the accredited national professional organization of CPAs

Practice in Education or Academe

This shall constitute in a person in an educational institution which involve teaching of accounting, auditing, management advisory services, finance, business law, taxation and other technically related subjects. 

Board of Accountancy

This has the power to conduct an oversight into the quality of audits of financial statements through the review of the quality control measures instituted by auditors?

Quality Assurance Review Office (QARO)

In the exercise of its power to conduct an oversight into the quality of audits, the BOA organized the ________________ which shall have independence in its operation. 

Executive Committee

The operation of the Quality Assurance Review Office (QARO) is supervised by the 

1. Executive Committee 

2. Supervisory Board 

3. Oversight Committee 

4. Accountability Board 

To select the CPA practitioners to be reviewed for the year, in accordance with the three-year plan

Which of the following is not a responsibility of the Executive Committee? 

1. To set policies that will ensure effective implementation of the quality assurance review program. 

2. To monitor the quality of audits through its QARO. 

3. To recommend to the BOA a rolling Quality Assurance Review (QAR) plan for 3 years. 

4. To select the CPA practitioners to be reviewed for the year, in accordance with the three-year plan. 

The Chairman and members may continue to be in active practice of public accountancy during their term, subject to certain restrictions imposed by the Board

Which of the following is an incorrect statement concerning the term of office of the Executive Committee members? 

1. The term of office of the Chairman and members shall be co-terminus with their respective term in the BOA unless replaced earlier by the Board. 

2. The term of office of the Chairman and members in no case shall be more than 3 years. 

3. The Chairman and members may continue to be in active practice of public accountancy during their term, subject to certain restrictions imposed by the Board. 

4. The Chairman of the Executive Committee shall be from the Board’s appointees. 

1, 2, 3 and 4

Which of the following are requirements for the accreditation of accounting teachers? 

1. Possession of relevant Master’s degree. 

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

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

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

CPAs who have passed the Teachers Board Exams and are licensed Professional Teachers should earn the 12 units through in-service or in-house trainings

The following statements relate to the requirements to complete 12 units of relevant education subjects for the accreditation of accounting teachers. Which is incorrect? 

1. For purposes of compliance, the 12 units may be earned from the undergraduate education program or from a graduate degree program of any Higher Education Institution (HEI) duly recognized by the CHED. 

2. The 12 units may be earned from in-service or in-house trainings on relevant education subjects offered by schools or training centers. 

3. The 12 units may be a combination of in-service trainings and units earned in an undergraduate or graduate education programs. 

4. CPAs who have passed the Teachers Board Exams and are licensed Professional Teachers should earn the 12 units through in-service or in-house trainings. 

This refers to the inculcation of advanced knowledge, skills, and ethical values in a post-licensure specialization or in an inter- or multidisciplinary field of study, for assimilation into professional practice, self-directed research and/or lifelong learning.

Continuing Professional Development (CPD)

120

It is the required number of Continuing Professional Development (CPD) credit units for the accreditation of CPAs in Public Practice, Academe, Commerce and Industry, and Government

Securities and Exchange Commission

It is responsible for the registration of corporations and partnerships, as well as monitoring of compliance with the Corporation Code, Civil Code provisions on partnerships, Foreign Investments Act, and other related laws

Bangko Sentral ng Pilipinas (BSP)

The primary objective of this government agency is to maintain price stability conducive to a balanced and sustainable economic growth. It also aims to promote and preserve monetary stability and the convertibility of the peso.

Commission on Audit (CoA)

This Constitutional Commission has the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations and recommend measures to improve the efficiency and effectiveness of government operations. 

Bureau of Internal Revenue (BIR)

This agency is responsible for enforcement of the tax laws, rules and regulations.