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PRACTICE & REGULATION OF THE ACCO PROFESSION ACCOUNTANCY SCOPE OF PRACTICE (Sectors) Practice of Public Accountancy Practice in Commerce and Industry Practice in Education / Academe Practice in the Government OBJECTIVES OF “PH ACCO ACT OF 2004” (RA 9298) Standardization and regulation of accounting education Examination for registration of CPAs Supervision, control, and regulation of practice of accountancy in the PH COMPOSITION OF PR-BOA 1 Chairman Term of 3 years for 2 successive terms May be reappointed after lapse of 1 year Maximum term is 12 years 6 members Natural-born citizen and resident of the Philippines Registered CPA w/ 10 years of experience in any scope Must be of good moral character Must not have pecuniary interest in any school Not a director / officer of APO at the time of appointment Appointment APO (PICPA) nominates 5 candidates to PRC PRC recommends 3 candidates to the Pres The President appoints 1 A Vice Chairman is elected among its members The Vice chairman has a term of 1 year POWER AND FUNCTIONS OF THE BOARD Prescribe and adopt the rules and regulations (RR) of this act; syllabi is every 3 years Supervise the regulation, licensure, and practice of accountancy Administer oaths Issue, suspend, revoke, or reinstate COR for the practice of accountancy profession Adopt official seal of the Board Prescribe and/or adopt Code of Ethics Monitor conditions affecting practice of accountancy and adopt measures Conduct oversight into quality of audit of FS thru review of the quality control measures Investigate violations of this Act; issue summons, subpoenas (tetsificandum or duces tecum) Make investigations deemed necessary to determine whether any person violated rules Issue a cease or desist order for violations of provision, standards, or rules Punish for contempt of the Board, both direct and indirect Prepare, adopt, issue, or amend the syllabi of the subjects for examinations Ensure compliance of instruction / offering of accountancy (in accordance with CHED / authorities) Exercise such other powers may be provided by law FUNCTIONS OF THE PRC The Board shall be under the administrative supervision of the Commission Keep custody of all records of the Board Provide secretarial services ANNUAL REPORT Board shall submit annual report to the President through the commission Submitted at close of each calendar year GROUNDS FOR SUSPENSION / REMOVAL OF MEMBERS OF BOARD BY THE PRESIDENT Neglect of duty or incompetence Violation or tolerance of violations of the RR, Code of Ethics and Standards Final judgement of crimes involving moral turpitude Manipulation or rigging of the conduct of the LECPA QUALIFICATIONS OF APPLICANTS Filipino citizen (evidenced by the PSA) Good moral character (NBI Clearance) Holder of BSA degree Has not been convicted of criminal offense involving act of moral turpitude SCOPE OF EXAMINATION MS – Management Services AUD – Auditing TAX – Taxation RFBT – Regulatory Framework for Business Transactions FAR – Financial Accounting and Reporting AFAR – Advanced Financial Accounting and Reporting REPORT OF RATINGS Announced within 10 calendar days OATH Taken before any member of the Board or authorized government official RATINGS IN THE LECPA Passed Gen Ave = At least 75% Each subject = At least 65% Conditional Gen Ave = Less than 75%; or Has grade of less than 65%; BUT 4/6 subjects must be at least 75% Removal Examination Take within 2 years from preceding exams All subjects with grades less than 75% Failed After failing 2 complete examinations May retake after completing 24 units Valid for 2 years DOCUMENTS ISSUED Certificate of Registration (COR) Professional Identification Card (PRC ID) Special / Temporary Permit COR Issued to Passers of the LECPA Persons admitted under reciprocity Bears the following Full name and assigned registration no. Signature of PRC Chair and all members of BOA Official seal of PRC and BOA PRC ID Registration number Date of issuance Expiry date Signed by the PRC Chairperson Renewable every 3 years SPECIAL / TEMPORARY PERMIT Foreign CPA called for consultation or specific purpose Foreign CPA engaged as professor, lecturer, critic Foreign CPA who is an internationally recognized expert REFUSAL TO ISSUE Convicted of a criminal offense involving moral turpitude Guilty of immoral and dishonorable conduct Of unsound mind SUSPENSION / REVOCATION OF THE COR / PRC ID As mentioned in the grounds for refusal to issue Any unprofessional or unethical conduct Malpractice Violation of provisions of IRR, Code of Ethics, & Standards REINSTATMENT After 2 years from date of revocation REISSUANCE / REPLACEMENT Upon payment of the required fees PRACTICE OF ACCOUNTANCY PROHIBITION Use of the CPA title unless received COR / PRC ID / Permits PUBLIC PRACTICE LIMITATION Shall be registered CPAs in the Philippines PUBLIC PRACTICE ACCREDITATION Issue of certification after 3 years of meaningful experience Register with Board and the Commission, renew every 3 years Date of expiration (Individual): Birthday + 3 years Date of Expiration (Partnership): Month of registration + 3 years Date of Renewal (Individual and Partnership): On or before date of expiration Meaningful experience: 1 year Audit Assistant + 2 years Auditor In-Charge SEAL Name Registration No. Title AUDITOR’S REPORT Seal Professional Tax Receipt (PTR) Number Date / Place of Payment when filed or used professionally WORKING PAPERS Confidential, privileged, and property of the CPA FOREIGN RECIPROCITY Permit foreign CPA to practice accountancy in the Philippines As long as their country permits Filipino CPAs to practice the profession PENAL PROVISION Fine of at lease P50k, or imprisonment not exceeding 2 years, or both ENFORCEMENT OF THE ACT PRC and BOA CONTINUING PROFESSIONAL DEVELOPMENT ACT OF 2016 (RA 10192) Renewal of PRC ID 15 credit units XPN: Professional working overseas Newly licensed professionals for 1st renewal cycle Required CPD units Minimum of 20 units per year Initial / renewal of Accreditation (120 units) 30 Units - Technical Competence 5 units - Professional Skills 5 units - Professional Values, ethics, and attitudes 80 units – Flexible CPD units Source of CPD units Seminar/workshops (accredited CPD providers) Academic Track (applied within 5 years from completion) Self-directed and / or Lifelong Learning Other activities recommended by CPD council PICPA Composed of 15 national directors (25 in real life) Renewal of accreditation is every 3 years

CODE OF ETHICS CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS IN THE PHILIPPINES PART 1: Code of Ethics FOUR BASIC NEEDS (CPCQ) Credibility Professionalism Confidence Quality of Services CHARACTERISTICS OF A PROFESSION Mastery of particular intellectual skill Adherence by its members to a common code of conduct and values Acceptance of a duty to society as a whole ADOPTION OF THE CODE (DEP FB) 1 Discussion Papers 2 Exposure Drafts 3 Public comments FRSC - majority (60 or 30 days); AASC – Majority (90 days) 4 Final Draft (AASC – at least 10 members) 5 BOA Approval OVERARCHING REQUIREMENTS OF THE CODE Fundamental Principles (COBID) CONFIDENTIALITY: respect confidentiality OBJECTIVITY: No bias, conflict of interest, undue influence PROFESSIONAL BEHAVIOR: Comply law, avoid discrediting acts INTEGRITY: Straightforward and honest PROF. COMPETENCE AND DUE CARE: Professional knowledge, diligent Conceptual Framework (IdEA) Identify Threats Evaluate Threats Address Threats International Independence Standards Established for audits, reviews, & other assurance engagements regarding threats to independence specific to the firm BREACHES OF THE CODE Provisions of the Code (EAR) EVALUATE significance and impact of the breach TAKE ACTIONS to address the consequences Determine whether to REPORT THE BREACH to the relevant parties THREATS Categories (IF ASS) INTIMIDATION: Not act objectively because of actual/perceived pressures FAMILIARITY: Long / close relation; too sympathetic / accepting ADVOCACY: Promote client or employ organization’s position SELF-INTEREST: For financial or other intention may influence judgement SELF-REVIEW: Not appropriately evaluate previous judgement Evaluation Whether threat is at acceptable level Address (ESE) Eliminate those creating the threat Apply safeguards to reduce threats to acceptable level Ending or declining the specific professional activity BIAS (CAAARGOS) Confirmation Bias Place weight on information that corroborates with existing beliefs Anchoring Bias Subsequent information is inadequately assessed Automation Bias Favor output generated from automation system Availability Bias Place weight on what immediately comes to mins Representation Place weight on a pattern of experiences, events or beliefs Groupthink Discourage individual creativity and responsibility Overconfidence Overestimate one’s own abilities Selective Perception How expectation influence views CONSIDERATIONS FOR ASSURANCE ENGAGEMENTS Independence Independence of mind Independence of appearance Firm Culture Professional Skepticism PART 2: Professional Accountants in Business (PAIB) CIRCUMSTANCES THREATS CREATED FUNDAMENTAL PRINCIPLES ACCEPTED Conflict of Interest Self-Interest Objectivity Preparation and Presentation of Information Self-Interest and Intimidation All Acting with sufficient expertise Self-Interest Professional Competence and Due Care Financial interest, Compensation and Incentives Self-Interest Objectivity and confidentiality Inducements Including Gifts and Hospitality Self-Interest, Familiarity and Intimidation Integrity, Objectivity, and Professional Behavior Responding to NOCLAR (Non-Compliance with Loss and Regulations) Self-Interest and Intimidation Integrity and Professional Behavior Pressure to Breach Fundamental Principles Intimidation All THREE-STEP APPROACH FOR PAIBS Identify Threats IFASS Evaluate Leadership Policies and Procedures Systems of Corporate Oversight Strong Internal Controls Recruitment procedures Timely communication of policies and procedures Ethics and code of conduct policies Address Refer how to address conflict of interest and breach of fundamental principles If threat cannot be eliminated, resign. PART 3: Professional Accountants in Public Practice (PAPPs) CIRCUMSTANCES THREATS CREATED FUNDAMENTAL PRINCIPLES AFFECTED Conflict of Interest Self-Interest Objectivity Professional Appointments All All Second Opinions Self-Interest Professional competence and Due Care Fees and Other Remunerations Self-Interest Professional Competence, Due Care, and Objectivity Inducements including gifts & hospitality Self-Interest, Familiarity, and Intimidation Integrity, Objectivity, and Professional Behavior Custody of Client Assets Self-Interest Objectivity, and Professional Behavior Responding to NOCLAR Self-Interest and Intimidation Integrity and Professional Behavior
THREE-STEP APPROACH FOR PAIBS Identify Threats IFASS Evaluate Client and its operating environment Firm and its operating environment Address Apply safeguards COMMUNICATION TO THOSE CHARGED WITH GOVERNANCE (TCWG) (PAIBS AND PPAPs) The nature and importance of the circumstances The matter to be communicated Part 4: International Independence Standards (IISs) • Independence for Audit and Review Engagement • Independence for Assurance Engagements Other than Audit and Review CIRCUMSTANCES THREATS Fees (relative size, overdue fees, contingent fees) Self-Interest and Intimidation Compensation and Evaluation Policies Self-Interest Gifts and Hospitality Self-Interest, Familiarity, and Intimidation Actual or Threatened Litigation Self-Interest and Intimidation Financial interests Self-Interest Loans and Guarantees Self-Interest Business Relationships Self-Interest and Intimidation Family and Personal Relationships Self-Interest, Familiarity, and Intimidation Recent Service with an Audit Client Self-Interest, Familiarity, and Self-Review Serving as a Director or Officer of an Audit Client Self-Interest and Self-Review Employment with an Audit Client Self-Interest, Familiarity, and Intimidation Temporary Personnel Assignments Self-Interest, Familiarity, and Advocacy Long association of personnel with audit client Self-interest and Familiarity Provision of Non-Assurance Services to an Audit Client Self-Interest, Familiarity, Intimidation, and Self-Review Reports on Special purpose financial statements than include restriction on use and distribution (Audit and Review) All PART 4A: Independence for Audit and Review Engagements MEMBERS OF THE AUDIT OR REVIEW WHO ARE INDEPENDENT Engagement Team Other members of firm who participates in rendering service Network Firm RULES ON ROTATION FOR A PUBLIC INTEREST ENTITY (PIE) 7 years time-on period Key Audit Partner (KAP) Role 5 years cooling off Engagement Partner (EP) 3 years cooling off Engagement Quality Control Reviewer (EQCR) 2 years cooling off Other KAP Role 5 years cooling off Combination of KAP Role and EP for more than 4 cumulative years ROTATION FOR NON-PIE Determine appropriate period to address threats ADDRESSING BREACHES OF THE INTERNATIONAL INDEP0ENDENCE STANDARDS End, suspend, eliminate the interest / relationship Consider whether legal / regulatory requirements apply to the breach Communicate the breach in accordance with policies and procedures Evaluate the significance of the breach Evaluate impact on objectivity to issue audit report Depending on the significance, end the engagement or take action that addresses the consequences PART 4B: Independence for Assurance Engagements other than Audit and Review Engagements TYPES OF ASSURANCE ENGAGEMENTS Assurance on entity’s Key Performance Indicators (KPI) Assurance on entity’s compliance with law or regulation Assurance on performance criteria Assurance on effectiveness of entity’s system of internal controls Assurance on entity’s greenhouse gas statement Audit of specific elements, accounts, or items of FS INDEPENDENCE REQUIREMENTS Same provisions with part 4A CIRCUMSTANCES Same provisions with part 4A (xpn: compensation and evaluation policies) EQCR does not exist in part 4B ADDRESSING BREACH OF THE IISs End, suspend, or eliminate interest / relationship Evaluate significance of breach Evaluate impact on objectivity to issue an audit report Determine whether action can be taken that addresses the consequence of the breach Independence of mind in appearance