Practice and Regulation of the Accountancy Profession in the Philippines

Scope of the Accountancy Practice

The practice of accountancy is categorized into four distinct sectors, each represented by a specific professional organization:

• Public Practice (ACPAPP):

  • Definition: This involves an individual practitioner, a partner, or a staff member in an accounting or auditing firm who holds themselves out as skilled in the knowledge, science, and practice of accounting and as a qualified person to render professional services as a CPA.
  • Scope: Rendering services to more than one client on a fee basis or otherwise.
  • Core Services:
    • Financial statement or accounting records audit.
    • Preparation, signing, or certification of any financial accounting schedules.
    • Design and installation of accounting systems.
    • Tax-related services, including the preparation of returns and representation before government agencies.

• Commerce and Industry (ACPACI):

  • Definition: Defined by an employer-employee relationship.
  • Scope: Involvement in decision-making that requires professional knowledge in the science of accounting, or employment in a position where being a CPA is a mandatory requirement.

• Education / Academe (NACPAE):

  • Definition: Involvement in educational institutions for the purpose of teaching.
  • Subjects Covered: Accounting, auditing, management advisory services (MAS), finance, business law, taxation, and other technically related subjects.
  • Caveat: Members of the Integrated Bar of the Philippines (IBP) are permitted to teach business law and taxation subjects.

• Government (GACPA):

  • Definition: Appointment to a position in an accounting professional group in the government or a government-owned and/or controlled corporation (GOCC).
  • Scope: Includes proprietary functions where decision-making requires professional accounting knowledge or where civil service eligibility as a CPA is a prerequisite.

Republic Act No. 9298: The Philippine Accountancy Act of 2004

RA 9298 is a regulatory act designed to oversee both existing accountants and new entrants into the profession.

• Primary Purposes:
  • Standardization and regulation of accounting education.
  • Examination for the registration of Certified Public Accountants.
  • Supervision, control, and regulation of the practice of accountancy within the Philippines.

Professional Regulatory Board of Accountancy (PRC-BOA)

• Composition:
  • The Board consists of one ($1$) Chairman and six ($6$) members appointed by the President of the Philippines.
  • A Vice-Chairman is elected from among the members for a term of one ($1$) year.
• Member Qualifications: At the time of appointment, a member must:
  • Be a natural-born citizen and resident of the Philippines.
  • Be a duly registered CPA with at least ten ($10$) years of work experience in any scope of accountancy practice.
  • Be of good moral character and not convicted of any crime involving moral turpitude.
  • Have no pecuniary interest (direct or indirect) in any school, college, university, or institution offering BSA degrees or CPA review classes. They must not be a member of the faculty or administration of such institutions at the time of appointment.
  • Not be a director or officer of the Accredited Professional Organization (APO) at the time of appointment.
• Term of Office:
  • The Chairman and members serve a term of three ($3$) years.
  • No person who has served two ($2$) successive complete terms is eligible for reappointment until the lapse of one ($1$) year.

Powers and Functions of the Board (Section 9)

• Administrative and Regulatory Powers:
  • To prescribe and adopt rules/regulations for RA 9298.
  • To supervise registration, licensure, and practice.
  • To administer professional oaths.
  • To issue, suspend, revoke, or reinstate Certificates of Registration (COR).
  • To adopt an official seal.
  • To adopt a Code of Ethics.
  • To monitor conditions affecting accountancy and promulgate accounting/auditing standards based on international best practices.
  • To coordinate with CHED to ensure educational instruction (curriculum, faculty, facilities) meets standards.
• Investigative and Quasi-Judicial Powers:
  • To conduct quality review oversight of financial statement audits.
  • To investigate violations of the Act and standards; this includes the power to issue summons, subpoena, subpoena ad testificandum, and subpoena duces tecum.
  • To delegate fact-finding investigations to the accredited national professional organization of CPAs.
  • To make investigations motu propio to determine violations.
  • To issue cease and desist orders to violators.
  • To punish for direct and indirect contempt per the Rules of Court.
• Licensure Examination Functions:
  • To prepare, adopt, issue, or amend examination syllabi in consultation with the academe.
  • To determine, prepare, and correct licensure examination questions and release results.

Professional Regulation Commission (PRC) Supervision (Section 10)

• The Board is under the administrative supervision of the PRC.
• Custodian of Records: The PRC holds all records, including exam applications, questions, answer sheets, and investigative case files.
• Support Services: The PRC provides the secretariat and other support services for implementation.

Suspension or Removal of Board Members (Section 11)

Upon recommendation of the Commission and after proper administrative investigation, the President may suspend or remove a member for:

• Neglect of duty or incompetence.
• Violation or tolerance of violations of RA 9298, its IRR, the Code of Ethics, or professional standards.
• Final judgment of crimes involving moral turpitude.
• Manipulation or rigging of CPA licensure examination results, disclosure of confidential exam questions, or tampering with grades.

Certified Public Accountant Examinations

• Applicant Qualifications (Section 14):
  • Filipino citizen.
  • Good moral character.
  • Holder of a Bachelor of Science in Accountancy (BSA) from a CHED-accredited institution.
  • No conviction of a criminal offense involving moral turpitude.
• Scope of Examination (Six Subjects):
  1. Advanced Financial Accounting and Reporting (AFAR)
  2. Auditing (AUD)
  3. Financial Accounting and Reporting (FAR)
  4. Management Services (MS)
  5. Taxation (TAX)
  6. Regulatory Framework for Business Transactions (RFBT)
• Passing Ratings (Section 16):
  • A General Weighted Average (GWA) of at least $75\%$ is required.
  • A minimum grade of $65\%$ in every subject is necessary.
  • Sample Rating Scenarios and Status:
    • Scenario 1: (FAR: $90$, AFAR: $90$, AUD: $90$, MS: $90$, TAX: $90$, RFBT: $90$) - Pass
    • Scenario 2: (FAR: $75$, AFAR: $75$, AUD: $75$, MS: $75$, TAX: $75$, RFBT: $75$) - Pass
    • Scenario 3: (FAR: $90$, AFAR: $90$, AUD: $90$, MS: $90$, TAX: $90$, RFBT: $64$) - Fail (One subject below $65\%$)
    • Scenario 4: (FAR: $90$, AFAR: $90$, AUD: $90$, MS: $90$, TAX: $74$, RFBT: $64$) - Fail
    • Scenario 5: (FAR: $90$, AFAR: $90$, MS: $74$, TAX: $65$, RFBT: $50$) - Fail
• Report of Ratings (Section 17): Results must be submitted to the Commission within ten ($10$) calendar days of the exam and mailed to examinees at their submitted address.
• Refresher Course (Section 18): Candidates who fail two ($2$) complete CPA Board Examinations are disqualified from subsequent exams unless they complete at least twenty-four ($24$) units of board exam subjects.

Registration and Practice Requirements

• Professional Oath (Section 19): Required before practicing the profession.
• Roster of CPAs (Section 21): An updated list of names and business places for all registered CPAs.
• Certificates and Permits:
  • Certificate of Registration (COR): Issued to board passers and those under reciprocity. Includes full name, registration number, signatures of the PRC Chair and Board, and official seals.
  • Professional Identification Card (PIC): Validated for three ($3$) years; includes registration number, issuance date, and expiry date.
  • Special/Temporary Permits: Authorized for specific work concerning development, education, or accountancy advancement.
• Seal Requirements: Every licensed CPA must use a seal bearing their name, registration number, and title. Audit reports must be stamped, including the Professional Tax Receipt (PTR) number and payment details.
• Refusal to Issue COR/PIC: Grounds include conviction of a crime involving moral turpitude, immoral conduct, or unsound mind.
• Suspension and Revocation: Grounds include professional misconduct, malpractice, unethical conduct, or violation of RA 9298 and standards.
• Reinstatement: Possible after two ($2$) years from revocation, subject to Board discretion and potential exam exemption.

Practice of Accountancy (Article IV)

• Prohibition: No person may use the title "CPA" or offer accountancy services without a valid COR, PIC, or Special Permit.
• Limitation of Public Practice: Only registered CPAs in the Philippines may act as single practitioners or partners.
• Accreditation for Public Practice: Requires a minimum of three ($3$) years of meaningful experience in public practice (including taxation). Registration/accreditation must be renewed every three ($3$) years.
• Foreign Reciprocity: Provisions exist for international accounting entrants.
• Philippine Institute of Certified Public Accountants (PICPA):
  • The Accredited Professional Organization (APO) since October 2, 1975 (Accreditation No. 15).
  • Governed by fifteen ($15$) national directors.
  • Accreditation is renewed every three ($3$) years.
• Penal Provision: Violations of RA 9298 are punishable by a fine of at least $\ge 50,000 \text{ pesos}$, imprisonment for at most $\le 2 \text{ years}$, or both.

Continuing Professional Development (RA 10912)

• Purpose: Mandates CPD for all regulated professions.
• Required Credit Units:
  1. Renewal of PIC: $15 \text{ units}$.
     • Exemptions: Overseas Filipino Workers (OFWs) and newly licensed professionals for their first renewal cycle.
  2. Accreditation: $120 \text{ units}$ (previously categorized as CPE):
     • Technical: $30 \text{ units}$
     • Professional Skills: $5 \text{ units}$
     • Professional Values, Ethics, and Attitude: $5 \text{ units}$
     • Flexible: $80 \text{ units}$
     • Note: A minimum of $20 \text{ credit units}$ must be earned from the previous year(s).
• Methods to Earn Units:
  • Seminars and workshops (Face-to-Face or Online) from accredited providers.
  • Academic Track (must apply within $5 \text{ years}$ of completion).
  • Self-Directed and/or Lifelong Learning (from non-accredited providers).

Organizations and Councils

• Financial and Sustainability Reporting Standards Council (FSRSC): Total $16 \text{ members}$.

  • Chairman (Senior Practitioner): 1
  • BIR: 1, BOA: 1, BSP: 1, FINEX: 1, IC: 1, SEC: 1, COA: 1
  • Sector Representatives: ACPAPP: 2, ACPACI: 2, NACPAE: 2, GACPA: 2

• Auditing and Assurance Standards Council (AASC):

  • Old Composition: Total $15 \text{ members}$ (1 Chair, 1 BOA, 1 ACPAPP, 1 BSP, 1 COA, 1 APO, 1 SEC, 6 ACPAPP, 1 ACPACI, 1 NACPAE, 1 GACPA).
  • Per BOA Resolution No. 22, s. 2020: Total $18 \text{ members}$.
  • Chairman (Public Practice Practitioner): 1
  • BOA: 1, BSP: 1, COA: 1, SEC: 1, IC: 1
  • Sector Representatives: ACPAPP: 10 (1 initially + 9 additional), ACPACI: 1, NACPAE: 1.

• Quality Review Committee (QRC): Total $7 \text{ members}$.

  • Chairman (Public Practice Practitioner): 1
  • BOA: 1, ACPAPP: 2, ACPACI: 1, NACPAE: 1, GACPA: 1.

• Education Technical Committee (ETC): Total $7 \text{ members}$.

  • Chairman (Academe Practitioner): 1
  • BOA: 1, ACPAPP: 1, ACPACI: 1, NACPAE: 2, GACPA: 1.

Term for Councils: The Chairman and members of these councils serve for three ($3$) years, renewable for another term.