Republic of the Philippines PROFESSIONAL REGULATION COMMISSION

BOARD OF ACCOUNTANCY

REVISED CPA LICENSURE EXAMINATION SYLLABI Effective October 2006 Examination

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THE CPA LICENSURE EXAMINATION SYLLABUS THEORY OF ACCOUNTS (Effective October 2006 Examination) The subject tests the candidates’ conceptual knowledge of financial accounting for business enterprises. Candidates should know and understand the objectives, basic concepts, principles, and terminology of financial accounting and financial statements, including related issues and topics. They should also be familiar with the basic concepts and practices. Each examination will contain a minimum of 80 and a maximum of 100 multiple-choice questions equitably, allocated to different subject areas, as indicated below. The examination questions shall be based on accounting standards in effect on the date of the examination. 1.0 Accounting and Financial Accounting Concepts 1.1 1.2 Overview of accounting (definition, purpose and functions, uses of accounting information, branches of accounting) Accounting standard setting in the Philippines (institutions and process) a. BOA b. SEC c. ASC/FRSC d. IASB Conceptual framework for the presentation of financial statements a. Nature of the framework b. Purposes of the framework c. Components of the framework 1. Objective of the financial statements 2. Qualitative characteristics of information 3. Definition of the elements of financial statements 4. Recognition of the elements of financial statements 5. Measurement of the elements of financial statements 6. Concepts of capital and capital maintenance

1.3

2.0

Presentation of Financial Statements 2.1 2.2 2.3 2.4 2.5 2.6 Definition and nature of financial statements Responsibility for preparation of financial statements Components of financial statements Overall considerations in the preparation and presentation of financial statements Structure of the financial statements Minimum requirements for the content of the financial statements a. Balance sheet b. Income statement c. Statement of changes in equity d. Cash flow statement e. Notes to financial statements

3.0

The Accounting Process 3.1 3.2 3.3 Double-entry accounting system (definition, characteristics, and underlying concepts; distinguished from single entry; logic and techniques) The accounting cycle Accounting records (journals, ledgers, and voucher system)

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4.0

Income Determination 4.1 4.2 4.3 4.4 4.5 Approaches to income measurement Concepts of capital maintenance Concept of comprehensive income Bases for recognition of income Elements of income statement

4.6 Revenue and gains (definition, recognition, measurement, and disclosure requirements) 4.7 Expenses and losses (definition, recognition, measurement, and disclosure requirements) 5.0 6.0 Discontinued Operations Accounting for Assets (nature, recognition, measurement, valuation, classification, derecognition, and disclosure) 6.1 6.2 Concept of financial and non-financial assets Current assets a. Cash and cash equivalents b. Short-term investments (including financial assets at fair value through profit or loss, available-for-sale securities, derivatives) c. Trade and non-trade receivables (including receivable financing) d. Inventories (except LIFO, peso value-LIFO, retail LIFO, and conventional retail method) e. Prepaid expenses f. Other financial assets Noncurrent assets a. Noncurrent investments (including held-to-maturity securities, available-forsale securities, investment in associates, investments in joint ventures, other financial instruments, and investment property) b. Property, plant, and equipment c. Intangibles and other noncurrent assets (including noncurrent assets held for sale) Impairment of assets

6.3

6.4 7.0

Accounting for Liabilities (nature, recognition, measurement, valuation, classification, disposition, and disclosure) 7.1 7.2 7.3 7.4 7.5 Concepts of financial vs. non-financial liabilities Current liabilities (including provisions) Noncurrent liabilities Debt restructuring Other financial liabilities

8.0

Accounting for Equity (nature, recognition, measurement, retirement, and disclosure) 8.1 8.2 8.3 8.4 8.5 8.6 Preference and ordinary shares Additional paid-in capital Revaluation surplus Retained earnings (including dividends and appropriations/accumulated profit or loss) Capital restructuring (quasi-reorganization, recapitalization) Treasury stock

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Voluntary health and welfare organization b.3 10. Earnings per share c.2 10. Income statement c.7 8. Accounting policies f.1 Form and content a.13 10.8 10. Contingencies d.1 Accounting changes and prior-period errors a. Events after the balance sheet date b.9 10. including retirement benefit costs Leases (operating leases.11 10. associations. Other not-for-profit organizations such as churches.4 10. Change in estimates b.8 9.4 10. etc.7 10. fraternity.0 Other reserves Book value per share Financial Statements 9.5 10. sale and leaseback) Foreign currency transactions and translations Cost accumulation for product costing Business combinations and consolidation of financial statements Accounting for share-based payments Accounting for government grants and disclosure of government assistance Financial reporting and changing prices (including hyperinflationary economies) Accounting for agricultural activity Not-for-profit organizations a.8. 10.2 9.6 10.12 10.0 Government Accounting – New Government Accounting System Accounting for build-operate-transfer (BOT) 4 . Prior-period errors Accounting for income taxes Research and development Borrowing costs Employee benefits. Statement of changes in equity d. Colleges and universities d. Change in accounting policies c. Balance sheet b.0 12. Others 9. museums. Hospitals and other health care organization c.10 10. Related party e. finance leases.0 Other Topics 10.14 11. Cash flows statement Interim financial statements: Presentation & disclosure requirements Segment reporting: Presentation & disclosure requirements Accounting for/Disclosure requirements a.3 9.

and underlying philosophy of the law. Quasi-delicts b. Each examination will contain a minimum of 25 and maximum of 35 multiple choice questions. general principles. Remission or condonation. Sources of obligations and their concepts 1. Persons bound e. concepts. Quasi-contracts 4. Freedom from contract and limitation d. Delicts 5. Law 2. Fraud 3. and negotiable instruments. particularly as they relate to accounting and auditing situations. Concepts and classification b. Elements and stages c. Kinds of obligations in general under the Civil Code c. Breach of contract d.2 5 . Vices of consent f. compensation and novation 5. confusion. as indicated below: I. Mercantile documents as means of payment 3. Objects of contracts 1. Special forms or modes of payment 4. Extinguishment of obligation with special emphasis on 1.0 Obligations and Contracts 1. Consent 1. Contracts 3. apply the underlying principles of law to accounting and auditing. Delay 5. Requisites 3. allocated to the different subject areas.1 Obligations a. Specific circumstances affecting obligations in general 1. The business law examination is not intended to test the candidates’ competence to practice law or their expertise in legal matters but to determine that their knowledge is sufficient to enable them to recognize the legal implications of business situations. and know when to seek legal counsel or recommend that it be sought. Fortuitous events 2. Duties of the obligor in obligation to do or not to do e. Effect of insolvency and bankruptcy on extinguishment of obligation Contracts a. business associations. LAW ON BUSINESS TRANSACTIONS 1. Candidates should know and understand the pertinent legal provisions. Negligence 4. Capacitated persons 2. Payment of debts of money 2.THE CPA LICENSURE EXAMINATION SYLLABUS BUSINESS LAW (50% of Business Law and Taxation) (Effective October 2006 Examination) This subject tests the candidates’ knowledge of the legal implications of business transactions.

Rights and obligations of mortgagor and mortgagee 4. Requisites 3. Obligations of agents and principals c.6 2. Obligations/rights of pledgor and pledge c. Contract for a piece of work d. Barter Earnest money as distinguished from option money Rights/obligations of vendor and vendee Remedies of unpaid seller Warranties (in relation to consumer laws) Sale with a right to repurchase or conventional redemption.1 Contract of agency a. Rescissible 2. Mode of extinguishment 3.9 3.4 2.1 4. forms and requisites Distinguished from a. Guaranty of commission agents d. PD 957 / Condominium Act 2. h. i.0 Contract of Sales 2.2 Nature. Pactum commissorium d. Dacion en pago b. Modes of extinguishments Mortgage a. Considerations of contracts Formalities of contracts Interpretation and reformation of contract Defective contracts 1. Nature and binding effect on third persons b. Pledge and Mortgage 3. forms and kinds of agency b.3 2.g.1 2.7 2. j. Unenforceable 4. Personal property – Recto Law b.8 2.3 II.0 Partnership 4. Voidable 3. LAW ON BUSINESS ASSOCIATIONS 4. legal redemption Sale on credit Installment sales a.5 2. Modes of extinguishing an agency Pledge a.3 Nature and as distinguished from corporation Elements and kinds Formalities required 6 . Nature 2.2 3. Requisites to have binding effect on third persons 5. Real and chattel 1.2 4. Void 2. Nature.0 Contract of Agency. Real property – Maceda Law c. Cession in payment c.

Election and removal c. Concepts b.6 4. Qualifications b. Other business combinations Modes of dissolution and liquidation Foreign corporations a. Implied c.0 Negotiable Instruments Law 6. Definition and rights of foreign corporations c. License to do business 1. Mergers b. Resident agent (purpose.3 Nature and classes of corporation Requirements for organization Powers of a corporation a.7 4.4 4. Definition of doing business and its relation to foreign investments d.2 5. Powers and fiduciary duties Classes of stocks a. Withdrawal from business Kinds and availability of corporate books 5.1 6.11 III.0 Rules of management Distribution of profits and losses Sharing of losses and liabilities Modes of dissolution Limited partnership Corporations 5. Purpose of the license 2. Suspension/revocation of license g. duties.3 6.7 5. Expressed b. Suits against foreign corporations f. Subscriptions Powers. Consequence of doing business without a license b.2 6.8 5. Requirements for application/ issuance of license 3. LAW ON NEGOTIABLE INSTRUMENTS 6.4 5.9 5. rights and obligations of stockholders Majority and minority control Corporate reorganization a.10 5. Incidental Board of Directors/Corporate Officers a.1 5.4.8 Negotiability of instrument Functions and kinds of negotiable instruments Construction of ambiguous instrument Parties and their liabilities Indorsements Accommodation party Consideration Manner and consequence of transfer of instruments 7 .5 5. qualifications) e.6 5.5 4.5 6.8 5.6 6. Consolidations c.4 6.7 6.

13 Dishonored instruments and its effects (including clearing house rules and BP 22) Requisites of holder in due course Defense of parties Forgery and its effects Discharge of negotiable instruments and the parties secondarily liable.9 6.10 6. 8 .6.11 6.12 6.

THE CPA LICENSURE EXAMINATION SYLLABUS TAXATION (50% of Business Law and Taxation) (Effective October 2006 Examination) This subject tests the candidates’ conceptual knowledge and proficiency in the practical application of the basic principles of taxation as they relate to accounting practice. Classification c. Judicial actions (civil or criminal) Remedies of the taxpayer a. Against an assessment (protest.4 1. and schedular donor’s tax rates. Candidates are expected to know.1 Remedies of the government (State) a.0 3. scope.6 1. Each examination will contain a minimum of 25 and maximum of 35 multiple choice questions allocated to the different subject areas.9 1. business taxes (value-added and percentage taxes). understand and be able to apply the laws on income tax. Definition. scope. donors tax. as well as Revenue Regulations and Court of Tax Appeals and Supreme Court decisions. other charges (toll. police power and eminent domain Tax evasion vs. Essential characteristics b.0 4. estate tax.0 Powers and Authority of the Commissioner of Internal Revenue under Section 4 to 7. Administrative remedies 1. Tax vs. Administrative remedies (tax lien. compromise.2 1. levy and distraint) c. except for the following where the tax rates will be given: schedular income tax rates for individuals schedular estate tax rates.0 Principles of Taxation and its Remedies 1. as indicated below. Candidates should know the tax rates for computing taxes. 1. special assessment. prescriptive period b. and essential characteristics Principles of sound tax system Limitations of the power of taxation (inherent limitations and constitutional limitations) Differences between taxation and police power Differences between taxation and eminent domain Similarities among taxation. request for reinvestigation) 4.2 9 . license fee.5 1.8 1. Title 1 of the Tax Code Authority of the Commissioner to Compromise Tax Payments.10 Nature. The emphasis is on the application of the theory and principles in solving tax problems.3 1. debt) 2. Prescriptive periods b.1 1. classification. Abate or Cancel Tax Liability and Refund or Credit Taxes Tax Remedies 4.7 1. tax avoidance Sites/place of taxation Double taxation (direct and indirect) Taxes a.

aircraft and machinery. Basic and personal exemptions 3. Classification (domestic and foreign) 2.) (b) Resident foreign (international carriers. pure compensation income earner. offshore banking units.3 5. Optional standard deduction 5. Income taxes (a) Regular corporate income tax (b) Minimum corporate income tax (c) Optional corporate income tax (d) Improperly accumulated earnings tax 3. Capital gains tax on sale of shares of stock not through the local stock exchange and the applicable documentary stamp tax f. royalties. interest. rents. partner’s distributive share from the net income of the general professional partnership. Passive income subject to final tax d. Corporations 1. Estate and trust (exempt and taxable) Gross income a. Classification (citizens.2 5. other income including special problems such as mergers and consolidation. Premium payments for health and/or hospitalization insurance 4. Items not deductible c. prizes and winnings. etc. Joint ventures (exempt and taxable) e. Final income tax on fringe benefits (including exemptions) Deductions from gross income a.3 10 . owners of vessels chartered by Philippine nationals. trade practice of profession. pensions. Individuals 1. forfeiture of cash refund and tax credit) Expanded jurisdiction of the Court of Tax Appeals (limited to jurisdiction) 2. Capital gains tax on sale of real property classified as capital asset and the applicable documentary stamp tax (including exemption from the capital gains tax) e. wash sale) b. branch profits remittances) (c) Non-resident foreign (lessors of equipment. Partnerships (general professional partnerships and business partnerships) d. pure business or professional income earner. Exclusions from gross income c. Itemized deductions b. petroleum service contractor or subcontractor b. offshore banking units. distributor or owner of cinematographic films) c. income derived from business. regional operating headquarters of multinationals.1 Taxpayer and tax base a. gains derived from dealings in property. aliens. Tax on aliens employed by regional operating headquarters of multinationals. Inclusions in the gross income (compensation for services. Income Tax 5. transfers to controlled corporation. government owned or controlled corporation. lessor.4.0 Request for refund or credit of taxes (recovery of erroneously or illegally collected taxes. non-profit hospitals. dividends. mixed income earner) 2. annuities. Special corporations (a) Domestic (proprietary educational institution.

Withholding VAT (creditable and final) e. payment of estate tax requirements e. Filing of donor’s tax returns. Presumptive VAT input d. Transitional VAT input c. payment and requirements 7. Gross estate b.4 8. short accounting period) Accounting methods (cash. Gross gift b.5 11 .4 5. lump sum or outright method. Passed-on VAT b. Deductions allowed to estate (ordinary and special deductions) c. fiscal year. Capital gains tax 2.3 8. deemed sales.5.3 6.000. power of the Commissioner to suspend business) 8. Payment of taxes in installment 1. Tax rates in general and when the donee is a stranger d. including CPA certificate. Sale of services and lease of properties (actual sales or lease.1 6.4 Administrative requirements (registration.0 Value Added Tax 8. issuance of receipts.2 6.2 8. zero rated sales) c. networth method of determining taxable income) Tax return preparation and tax payments (venue and due dates) a. including CPA certificate Donor’s tax a. per NIRC requirement Keeping of books of accounts and records. Excess VAT input in previous return Refund of VAT input (zero rated sales.2 8. Attachments to the estate tax return.0 Accounting periods (calendar year. printing of receipts) Attachments to the income tax return. Exemption of certain gifts and other deductions from gross gift c. Income tax credits (local and foreign) d. expanded or creditable withholding tax. Importation VAT exempt transactions Input value added taxes a. returns and payment of value added tax. Sale of goods or properties (actual sales.6 5. final withholding taxes and withholding tax on government payments) Compliance Requirements 6. zero rated sales) b. deferred payment method. Filing of estate tax returns. installment method. purchase of land and capital goods) Compliance requirements (invoicing. Tax credit for estate tax paid to a foreign country d. Regular filing (including substituted filing of return and electronic filing) b.7 6. Tax due exceeds P2. Large taxpayers and non-large taxpayers c.1 Estate taxes a. accrual.5 5.1 VAT-subject transactions a.0 Transfer Taxes 7. including report of inventories Prescriptive period of books of accounts and other accounting records 7. annual or spread out method. percentage of completion method.00 Withholding taxes (at source.

tax base and tax rates Tax on persons exempt from value added tax (annual gross sales or receipts do not exceed P550.9.000. false or fraudulent returns) Interests (on deficiency. additional and optional community tax for individuals and corporations and the maximum amount due) Additions to Tax 11.5 9.9 9.2 9. on extended payments) Compromise penalties. on delinquency.3 9.10 9.4 9. wrong venue.6 9.0 11. 12 .8 9.13 Taxpayer. amount to be specified in the problem.7 9.0 Percentage Taxes 9.1 9.3 Surcharges (late filing/payment.0 Community Tax (computation of basic. willful neglect.2 11.12 9.11 9.1 11.00) Tax on domestic or international carrier (including exemptions) Tax on franchise Overseas communications tax (including exemptions) Tax on banks and non-bank financial intermediaries performing quasi-banking functions Tax on other non-bank financial intermediaries Tax on life insurance Tax on agents of foreign insurance companies Amusement taxes Tax on winnings Stock transaction tax Returns and payment of percentage tax (regular and electronic filing) 10.

cash flow analysis and gross profit variation analysis b. scope.0 Management Accounting-Related Services 1. historical perspective. Cost terms and concepts / cost behavior / design of cost and management accounting systems 13 . standards. financial management–related services. computer-aided design and manufacturing automation. controller as top management accountant. computer integrated manufacturing. Objectives. e-commerce. d. focus on the customer. 1. product life cycles and diversity. Each examination will contain a minimum of 50 and a maximum of 70 multiple choice questions. and direction of management accounting a. the changing role and expanding role of management accountant.2 Foundations of management accounting a.1 Role. as indicated below. cost management system. and methodology applicable to management services / consultancy practice by CPAs. limitations and steps in financial statements analysis 2. capital budgeting concepts and techniques. common-size financial statements. time-based competition. and project feasibility studies. Understanding and analysis and interpretation of financial statements 1. techniques. international aspects of management accounting Management Accounting and Ethical Conduct Ethical behavior and code of conduct of management accountants. financial ratios. Management Accounting Information System Management functions and accounting. 1. assessment of the impact of price level changes in financial analyses 3. Code of conduct on the international level Current focus of Management Accounting Impact on organization structure. total quality management. just-in-time inventory. Identification of matters for further interpretation of information produced. trend percentages. relationship with financial accounting and cost accounting. role and activities of management accountant. e. and proficiency in the concepts. cross-functional teams. c. information needs of managers and other users for planning and control (value chain and enhancing the value of management accounting system). general approach. Certification available to Management Accounting The Institute of Management Accountants and CMA Certification b.THE CPA LICENSURE EXAMINATION SYLLABUS MANAGEMENT SERVICES (Effective October 2006 Examination) This subject tests the candidates’ knowledge of. continuous improvement and benchmarking. organization structure and management accountant. Analysis of business performance and financial position such as comparative financial statements. Objectives. management accounting. global competition. allocated to the different subject areas. information and communication technology management.

CVP analysis for a multi-product firm 3. and balanced scorecard 1. distinguishing performance of managers from performance of organization units. features of a good balanced scorecard. Underlying concepts. System design: Activity-based costing and management. flow of costs in manufacturing. transfer pricing . Functional and activity-based budgeting 14 . c. Variable costing and absorption costing 1. Development of business plans to meet agreed objectives.rationale and need. Evaluation of the success of strategy. System design: Job order costing and process costing 5. limitations and design of an ABC system.high-low method. aligning the balanced scorecard to strategy.3 Management accounting concepts and techniques for planning and control a. transfer pricing. Strategic planning 1. CVP analysis with changes in cost structure. basic segments and contents of a business plan 5. Nature and classification of costs Basics of cost behavior. Basic concepts. Cost-volume-profit relationships 1. cost. Responsibility accounting. Comparison between variable costing and absorption costing 3. executive performance measures and compensation. environmental and ethical responsibilities 5. significance. Types of responsibility centers (revenue. cost classification on financial statements. commercial. operating leverage and profit planning b. advantages. Concept of margin of safety. alternative transfer pricing schemes and multinational transfer pricing 3. Splitting mixed costs . assumptions and limitations of CVP analysis 2.1. profit and investment). Goal congruence and motivation 2. d. Distinction between a business plan and strategic plan 3. rationale. least-squares regression. strategic analysis of operating income c. scatter graph 4. Advanced analysis and appraisal of performance: financial and non-financial performance measures 4. 2. trading or service companies 3. Setting short term objectives consistent with long term strategies 4. Preparation of financial statements under variable and absorption costing including reconciliation of net income Business planning 1. Performance measurement in multinational companies. performance evaluation. perspectives of the balanced scorecard. advantages and disadvantages of variable costing 2. Objectives and uses of a business plan 2. uses. Nature of the balanced scorecard. pitfalls when implementing a balanced scorecard 6.

users. Functions of budgeting 4. 15 . Queuing theory 9. Shadow prices 7. expected activity time.d. international uses of standard cost. mix and yield variances) (c) Factory overhead variances . Four-way method (variable spending variance. Gantt chart: preparation.4 Management accounting concepts and techniques for decision making a. limitations of standard costs. The budget period 10. benefits. Budgeting terminologies defined 8. advantages and limitations. mix and yield variances) (b) Direct labor variances (rate. The management process of preparing the master budget 9. Linear programming: nature and application. steps in making a decision tree. Difference between planning and control 3. The purposes of the budget 5. Rationale in using quantitative techniques 2. variable efficiency variance and volume variance). concept of critical path. Budget cycle of a manufacturing firm 11. computational methods of linear programming (graphic and simplex). Decision tree: underlying concepts. Rationale. Sensitivity analysis 8. how standards are set. 1. quantity. efficiency. advantages 5. performance measurement using variances. Analysis of variances (a) Direct material variances (price. Comprehensive budget illustrated 13.Two-way method (budget variance and volume variance). Decision making under certainty / under uncertainty. pay-off 4. variable efficiency variance and volume variance) 1. expected value of perfect information. illustrative problem: preparation of a decision tree 6. Definition of budget 2. operating performance evaluation 2. Fixed and flexible budget variance compared Standard costing and variance analysis 1. Quantitative techniques 1. steps in formulation of a linear program. Advantages and limitations of budgets 6. Program evaluation and review techniques (PERT): basic underlying concepts. Steps in developing a master budget 12. Three-way method (spending variance. Decision theory 3. assigning probabilities. illustration. fixed spending variance. Flexible budgeting 14. Types of budgets 7.

and other business decisions requiring quantitative analysis Capital budgeting decisions 1. net cash returns. variation along a path. Decentralized operations (a) Nature of decentralized operation (b) Advantages of decentralization (c) Limitations of decentralization 2. sensitivity analysis. preferences decisions – mutually exclusive projects. characteristics. ranking investment projects. cost estimating. cost of capital. sell now or process further. d. c. Identifying relevant costs 3.b. Net investment. PERT . discounted payback and internal rate of return. categories.payback.cost network. bailout. Types of decisions Make or buy decisions. Non-discounted cash flow methods .net present value. variation in activity time. shutdown or continue operations. adding or dropping product segments. Definition. Decision making process 2. accounting and average rate of return 4. utilization of scarce resources. pricing products and services. crashing the network. capital rationing. Financial and nonfinancial performance measures 16 . Screening decisions – independent projects. NPV point of indifference (fisher rate) Decentralized operations and segment reporting 1. profitability index. Learning curve Using accounting information in decision making. Approaches in analyzing alternatives in non-routine decisions 4. benefits and limitations of PERT 10. relevant costs and benefits 1. accountant’s role in PERT. special sales pricing. Discounted cash flow methods . and elements of capital budgeting decisions 2.5 Advanced management control and strategic performance measurement a. screening capital budgeting projects 3. Advanced analysis and appraisal of performance: financial and non-financial 1. payback reciprocal. equalized annual return (ear) 5. Segment reporting (a) Levels of segmented statement (1) Segmented income statement in the contribution format (2) Sales and contribution margin (3) Traceable and common fixed costs (4) Problems related to proper cost assignment (i) Omission of costs (ii) Inappropriate methods for allocating costs among segments (iii) Arbitrarily dividing common costs among segments 1.

4. Types of client served d. Measuring productivity (a) Partial productivity (1) Partial operational productivity (2) Partial financial productivity (3) Advantages / limitations of partial productivity measures (b) Total productivity (1) Benefits and limitations of total productivity measures 3. Objectives of management compensation 2. Steps in designing accounting-based performance measures Performance measurement in multinational companies Computation of foreign division’s ROI Distinguishing performance of managers from performance of organization units 6. independent accounting firm’s role in MAS and CPA’s objective engaging in MAS c. 5.0 Management Consultancy Practice by CPAs 2. Performing tasks 8.1 An overview a. Environmental and ethical responsibilities 2. Evolution of MAS. Bonus plans (a) Bases for bonus compensation (b) Bonus compensation pools (c) Bonus payment options 6. developing trends. 2. future prospects b. Areas of Management Advisory Services Areas of MAS practice: traditional and emerging. Performance measures at the individual activity level 7. c. Financial and nonfinancial incentives Managing productivity and marketing effectiveness 1. interpersonal and consulting process skills) 17 . Cash compensation 4. Nature of MAS by independent accounting firms. Professional attributes of management consultants (technical. Managing productivity 2. Summary of variance analysis to assess marketing effectiveness Executive performance measures 1. Executive performance measures and compensation 3. rationale of using management consultants. Determining scope of service. 3.b. Team-based compensation arrangements 9. Noncash compensation 5. Managing marketing effectiveness 4.

reasons for carrying inventories 2. Receivables management 1. Objectives. factors in determining accounts receivable policy. Inventory management techniques 3. Estimating costs of short term funds c. reasons for holding cash.1 Financial forecasting a. Objectives. Steps in financial forecasting e.pledging of accounts receivable. Basic concepts and significance of working capital management b. Marginal or incremental analysis of credit policies d. risk.2 2. Role of financial management b.5 2. f. Inventory management 1. factoring accounts receivable.term funds a.3 2. disadvantages of inadequate or excessive working capital. Objectives of the firm c. Reasons for holding marketable securities. Secured short-term financing . Working capital policy. summary of trade-offs in credit and collection policies 2.6 2.e. inventory financing 3. Objectives.7 3. cash conversion cycle b.0 Code of ethics for professional accountants in the Philippines applicable to non-assurance services Organization and management of the MAS practice Stages of management consulting engagement Project management and control Presentation of engagement reports Management of the client relationship Management of people relationships Managing the quality of consulting engagements Financial Management-Related Consultancy Services 3. costs associated with accounts receivable. external financing needed (EFN) Management of current assets a. Nature of financial forecasting d.3 3. Cash and marketable securities management 1. 2.4 18 . advantages of adequate working capital. Projected financial statement method Working capital management and financing decision a. b.2 3. Sources of short-term funds d. Objectives of current assets management. Inventory control systems Short-term credit for financing current assets Factors in selecting source of short. cash management techniques 2. factors influencing the choice of marketable securities c.4 2.return trade off. alternative current asset investment and financing policies.

Option 5. Intermediate and long-term financing 1. basic elements of data processing system and operation. Convertibles 4. Hybrid financing: Preference shares. purpose and component. Basic concepts. Fundamentals of computer-based processing Data processing defined. Factors influencing capital structure decisions c. data and information distinguished.3 Nature. Warrants 3. leasing. Leasing (a) Potential benefits from leasing (b) Capital or finance lease (c) Operating lease 3.2 4.0 Preparation of Project Feasibility Studies Engagements 4. options. and convertibles 1. Effects of operating leverage and financial leverage on capital structure.5 Long-term financing decisions a. Debt financing (a) Benefits and drawbacks of debt (b) Term loans (c) Bonds or long-term debt (1) Retirement of bonds 3.6 4. weighted average cost of capital (WACC) d.3. Incorporating capital structure into capital budgeting. warrants. Equity financing (a) Ordinary shares (b) Retained earnings b. Preference share (a) Advantages and disadvantages of issuing preference share 2. methods of data processing.0 Information Systems Engagements 5. basic tools of capital structure management b. overview of computer-based data processing. components of the computer 19 . development and analysis of project revenue costs under specific assumptions Procedures in the preparation of projected financial statements Analysis of financial projections 5. optimal capital structure Sources of financing a.1 4. Principal sources of funds 2.1 Management Information Systems Engagement a.

Effectiveness versus efficiency. Planning phase 2. modes of computer operations. basic components of a manual accounting system. Advantages. such as inflation. Market influences on business strategies. and termination of business c. Economic measures and reasons for changes in the economy. deflation and interest rate changes c. Illustrative reports j. Rights.1 Business structure a. Limited liability companies (LLC). including selling. legal obligations and authority of owners and management (directors. Reporting and follow-up i.2 20 . Types of operational audits g.2 7. Who performs operational audit? h. limited liability partnership (LLP) and joint ventures b. c. Approach 6. General approach to operational audit 1. duties. Nature and objectives b. flowcharts. Sole proprietorship and general and limited partnership.b. difference between manual and computerized processing system common business applications of computers Information systems audit Other Consultancy Services 6. objective of an accounting information system. operation.0 system.1 Operational auditing a. its essential elements and characteristics. partners and other owners) Economic concepts essential to obtaining an understanding of the entity’s business and industry a. hierarchy of computer processes. Scope of operational audit e. 6. Nature b. supply chain and customer management strategies 7. telecommunications. corporation 2. Financial structure. capitalization. Examples of operational audit findings Business process improvement / Re-engineering consultancy services a. Business cycles and reasons for business fluctuations b. officers. economy c. profit and loss allocation and distribution d. stockholders. Objectives of operational audits d. implications and constraints of legal structure for business 1. Accounting information system engagement Basic concepts. Distinction between operational auditing and financial auditing f. Formation. overview of a computerized accounting information system.0 Business Environment and Concepts* 7. Evidence accumulation and evaluation 3.

hedging and exchange rate fluctuations * To be effective in the October 2007 Examination 21 . Implication to business of dealings in foreign currencies.d.

internal audit. philosophy. as indicated below: 1. Types of assurance engagements (audits. Securities and Exchange Commission. the candidate shall apply the Philippine Standards on Auditing (PSA) and other regulatory laws and regulations in effect at the time of examination. Nature. Bangko Sentral ng Pilipinas. Regulation of the public accounting practice 1. Code of Ethics for Professional Accountants in the Philippines c. the responsibilities of professional accountants. Philippine Accountancy Act of 2004 / Implementing Rules and Regulations 2. Philippine Standards on Auditing b.THE CPA LICENSURE EXAMINATION SYLLABUS AUDITING THEORY (Effective October 2006 Examination) This subject tests the candidates’ conceptual knowledge and understanding of assurance and related services performed by professional accountants.2 22 . Candidates should know and understand the nature of assurance and related services particularly independent audits of financial statements.2 1. reviews. Responsibilities on fraud. Each examination will contain a minimum of 80 and a maximum of 100 multiple-choice questions. Insurance Commission. Quality control d. audit objectives. evidence. Regulatory government agencies (Professional Regulatory Board of Accountancy. error. 2. compliance audit) According to types of auditor (external independent financial statements audit. Bureau of Internal Revenue) 2. Standard-setting bodies (Auditing and Assurance Standards Council. other assurance engagements) c. Organizations that affect public accounting 1. According to nature of assertion/data (financial statements audit. Financial Reporting Standards Council) c. auditing standards. SEC rulings on financial statement presentation The CPA’s professional responsibilities a. procedures. and noncompliance 2. Assurance service vis-à-vis attestation services Introduction to auditing a. Nature. In all the areas included. government audit) 2. the audit process. Commission on Audit. operational audit.0 Fundamentals of Auditing and Assurance Services 1.1 Introduction to assurance engagements a. and objectives b. equitably allocated to different subject areas. and the elements of the independent auditors’ report. Types of audit 1. objective and elements b.0 The Professional Practice of Public Accounting 2. Public accounting as a profession b.1 Public accounting profession a.

other independent auditors) 3. Knowledge of the business 2.3 4. Measurement and review of the entity’s financial performance Internal control a. Assessing and managing audit risks 5. Attribute and variables sampling technique d. Considerations of the work of others (experts. Risk assessment procedures c.2 5. Revision of risk assessment Communicating with those charged with governance and management Audit Objectives. Understanding and documentation 2.1 Basic audit sampling concepts a. Sampling and nonsampling risk 23 .0 Audit Sampling 6. Materiality 4.3 5. supervision and review Understanding the Entity and its Environment Including its Internal Control and Assessing the Risks of Material Misstatement 4.3 4.4 Nature and significance Evidential matters Audit procedures / techniques Audit working papers 6.0 4. Evidences and Documentation 5.1 Industry. Supervision and Monitoring Overview of the audit process Pre-engagement procedures Scope and purposes of audit planning a.4 5. Audit Planning. including the applicable financial reporting framework a.0 The Financial Statements Audit –Client Acceptance. internal auditor. Procedures. Overall audit plan and audit program 6. Discussion among the engagement team d. Nature of the entity b. Significant risks that require special audit consideration e. Non-statistical and statistical sampling c.1 3.1 5.3. Consideration of accounting and internal control systems 1. Preliminary analytical procedures 3. Basic concepts and elements of internal control b. Fraud and errors b. Assessment of control risks (a) Test of controls (b) Documentation 3. regulatory and other external factors.0 Assessing the risks of material misstatement a. Nature and purpose b. Essential planning requirements 1.2 3.4 Direction. Objectives and strategies and related business risks c. Risks for which substantive procedures alone do not provide sufficient appropriate audit evidence f.2 4.

Introduction b.0 Auditing in a Computerized Information Systems (CIS) Environment 9. Introduction b. Risk and assurance d. Stand alone 2. Subsequent events review d.2 6. Tolerable error e.1 Completing the audit and audit report preparation a.3 8.2 8.6. Expected error in the population f. formulating an opinion and drafting the audit report Post-audit responsibilities a. Computer assisted audit techniques 9.0 Other Assurance and Nonassurance Services 10. Obtaining client’s representation letter f. Evaluating findings.1 Internal control in a CIS environment a.0 e. Population and its characteristics c. Impact of computers on accounting and internal control systems 1.0 Reports on Audited Financial Statements 8. Related party transactions c. General controls 2. On-line 3.3 6. Unique characteristics of specific CIS 1. Analytical procedures for overall review b.2 10. Variation in the population Factors affecting sample size Sample selection methods Evaluation of sample results Completing the Audit / Post-Audit Responsibilities 7. Effects of computers on the audit process c. Subsequent discovery of omitted procedures 7. Matters that do affect the auditor’s opinion Report on comparatives 9. Testing procedures which do not involve sampling Factors affecting sample design a.5 7. Assessment of going concern assumption e.1 Procedures and reports on special purpose audit engagements 24 .4 The unqualified auditor’s report Basic elements of the unqualified auditor’s report Modified auditor’s report a. Application controls c. Subsequent discovery of facts b. Audit objectives b. Database system Basic approach to the audit of CIS environment a.2 8. Matters that do not affect the auditor’s opinion b.4 6.1 8.

Reports on compliance with contractual agreements e. Reports on summarized financial statements Nonaudit engagements: procedures and reports a. Engagements to review financial statements Nonassurance engagements a. 10. Audit of a component of financial statements d. Engagements to perform agreed-upon procedures regarding financial information b. Engagements to compile financial information 25 .3 General considerations Audit of financial statements prepared in accordance with a comprehensive basis of accounting other than GAAP in the Philippines c. b.2 10. Examination of prospective financial information b.a.

2 2. the candidate shall apply the Philippine Standards on Auditing (PSA) and other regulatory laws and regulations in effect at the time of examination. Production cycle d. Candidate shall be able to plan and perform an audit.5 2. Audit of acquisitions and purchases b.1 1. prepare audit working papers and complete the audit including the preparation of the audit report.0 Evidence Accumulation and Evaluation – Substantive Tests of Transactions and Balances 2. Audit of cash disbursement transactions / cash balance d. Audit of investment account balances c. techniques.4 2. Audit of inventory balances: work-in-process and finished goods c. Investing and financing cycle 2.2 Application of analytical procedures in audit planning Understanding of the internal control and tests of controls a. Audit of cash receipt transactions / cash balance Audit of expenditure and disbursement cycle a. formulate adjusting entries. and procedures to a typical independent audit of a medium-sized service. Expenditure and disbursement cycle c.6 26 . Audit of non-trade liability balances c. Audit of intangible account balances Audit of cash balances 2. Audit of sales and revenue transactions b. Audit of property. Audit of investing transactions b. Audit of inventory balances e. plant and equipment account balances d. In all the areas included.3 2. Audit of trade payable balances f. trading or manufacturing concern. Revenue and receipt cycle b.0 Audit Planning and Internal Control Consideration 1. The examination shall be in the form of 8 to 10 situational cases containing a minimum of 40 and a maximum of 50 multiple choice questions. Audit of equity accounts Audit of investing cycle a. Audit of cost of goods sold balance Audit of the financing cycle a. analyze data for possible errors and irregularities. Audit of financing cycle transactions b. Audit of interest expense and finance cost balances d. 1. resolve audit issues. Audit of payroll transactions c. Audit of receivable balances c.THE CPA LICENSURE EXAMINATION SYLLABUS AUDITING PROBLEMS (Effective October 2006 Examination) This subject tests the candidate’s proficiency in applying audit standards.1 Audit of the revenue and receipt cycle a. Audit of prepaid expenses and accrued liabilities Audit of production cycle a. Audit of conversion activities b.

and contingencies Evaluation of events after the balance sheet date Drafting the audited financial statements Application of analytical procedures in the overall review Drafting the audit report 27 .3.1 3.0 Completing the Audit 3.2 3.4 3. going concern.3 3.5 Evaluation of related party transactions.

Earnings per share 7. classification.2 Accounting process Components of financial statements a. expenses.9 Cash and cash equivalents Trade and other receivables Inventories Prepaid expenses Investments (excluding investment in subsidiaries and joint ventures) Property.6 Net income a.5 3.0 Preparation of Financial Statements 1. Statement of changes in equity d. Contingencies 2. disposition and disclosure of assets. Balance sheet b.5 2. Each examination will contain a minimum of 40 and a maximum of 50 multiple choice problems equitably allocated to the different subject areas as indicated below. income.2 2.8 3. Other disclosures Cash basis to accrual basis and single entry Financial reporting and changing prices (including hyperinflationary economies) 1.1 2.3 1.3 2. Accounting policies 4. Income statement c. and contemporary accounting issues in accordance with Philippine Financial Reporting Standards in effect at the time of examination. Cash flow statement e. The problems involve recognition. liabilities.2 3.1 3.4 3.6 3.4 2. valuation. Segment reporting 6.4 2. equity. 1. Notes to financial statements 1. Capital maintenance approach Accounting changes Prior-period errors Interim reporting Segment reporting Development-stage enterprise 3. and net income of a business enterprise. Events after balance sheet date 3.THE CPA LICENSURE EXAMINATION SYLLABUS PRACTICAL ACCOUNTING PROBLEMS I (Effective October 2006 Examination) This subject tests the candidate’s proficiency in applying financial accounting techniques and methodology to problems likely to be encountered in practice.0 Accounting for Assets 3. measurement.3 3. Transaction approach b. plant and equipment Intangibles Other assets Impairment of assets 28 .1 1. preparation of financial statements.0 Accounting for Income and Expenses 2.7 3. Related party disclosure 5.

6 5.5 4.2 5. revaluation surplus.6 4.1 4.4 5.7 Accounting for deferred taxes Accounting for leases Accounting for non-current assets held for sale and discontinued operations Accounting for share-based payments Accounting for biological assets. agricultural produce at the point of harvest and government grants related to agricultural activity Accounting for government grants and disclosure of government assistance Other current pronouncements 29 . Contingent liabilities Income taxes payable Bonds payable Notes payable Debt restructuring (except dacion en pago) Employee benefits Other liabilities 5.6 6.9 Preference shares Ordinary shares Additional paid-in capital / share premium / other sources Reserves (e.5 6.0 Accounting for Equity 5.4 4.8 5. and unrealized gain or loss on assets available for sale) Retained earnings / accumulated profit or loss Treasury shares Earnings per share Book value per share Capital restructuring 6.1 5.0 Accounting for Liabilities 4.2 4.7 4. translation adjustments.8 Trade and other payables Provisions.3 5.3 4.4.0 Other Topics 6.7 5.4 6.2 6..g.1 6.3 6.5 5.

purchase or sale) 3.1 3. Other foreign currency forward contracts .purchase or sale) (c) Forecasted transaction (anticipated foreign currency transaction .0 Accounting for Foreign Currency Transactions 3. Recognized asset or liability (exposed asset or liability position) 2.1 Future contracts 30 .2 Accounting for Investment in Subsidiary (cost method) Consolidated Financial Statements a. land and depreciable assets) c. export. dividends and amortization 2.0 Acquisition of assets and liabilities (purchase method) a. Unrecognized firm commitment (identifiable foreign currency commitment-purchase or sale) 3.0 Other Derivatives and Hedging Activities 4. Required disclosures With derivatives and hedging activities a. Foreign currency options 1. 1. Date of acquisition b. Presentation and required disclosures Preparation of Consolidated and Separate Financial Statements 2. Forecasted transaction (anticipated foreign currency transaction – purchase or sale) 4. equitably allocated to the different subject areas as indicated below. lending. Required disclosures 3.1 2. techniques and methodology to problems likely to be encountered in practice.speculation c. and borrowing transactions) a. Hedge of a net investment in foreign entity b. Foreign currency forward contracts 1. With intercompany transactions (inventories.2 Without derivatives and hedging activities (import. Each examination will contain a minimum of forty (40) and a maximum of fifty (50) multiple choice problems.0 Accounting for Business Combination 1. Subsequent to date of acquisition 1. Cash flow hedge (a) Recognized asset or liability (exposed asset or liability position) (b) Unrecognized firm commitment (identifiable foreign currency commitment . Net income.THE CPA LICENSURE EXAMINATION SYLLABUS PRACTICAL ACCOUNTING PROBLEMS II (Effective October 2006 Examinations) This subject tests the candidates’ proficiency in applying accounting concepts. Fair value hedge 2. Candidates should know and understand problems involving accounting of special transactions and their effects and presentation in the financial statements.1 2.

waste.1 Job-order costing system a. By investment b. Journal entries c. Journal entries Activity-based costing system (ABC costing) Accounting for joint and by-products a.2 4. By purchase of interest 2. Preparation of statement of goods manufactured and sold d.4 6. retirement or death of a partner c. current rate / closing rate method) Restatement of financial statements (Functional currency is the currency of a hyperinflationary economy) 6.end of process only 1.1 7. Accounting for lost units .4. Normal lost units 2.3 Formation Operations Dissolution / changes in ownership interest a. Market (sales) value method 2. Journal entries 6. Accounting for scrap.2 6.3 6.5 6. Lump-sum method b. Incorporation of a partnership Liquidation a. First-in.inspection point . Preparation of cost of production report 1. Cost accumulation procedures b. Treatment of by-products Standard costing system (two-way variance excluding mix and yield variances) a.3 5.0 Partnership Accounting 7. Installment method 7. spoilage and rework Process costing system a.0 Cost Accounting 6. Abnormal lost unit Backflush costing system (JIT system) a. Average method d. Withdrawal. Methods of allocating joint cost to joint products 1. Cost accumulation procedures b. Admission of a new partner 1.1 5.2 7. Average unit (production output) method 3.6 7. Computation of variances b. Journal entries c. first-out (FIFO) method 2.2 Translation to the presentation currency (Functional currency is not the currency of a hyperinflationary economy or if the presentation currency differs from the entity’s functional currency. Weighted average method b.0 Swaps Options Preparation of Foreign Currency Financial Statements 5. Cost accumulation procedures b.4 31 .

6 8. Colleges and universities d. Accounting for build-operate-transfer (BOT) 8.8. Voluntary health and welfare organizations (VHWO) b.3 9.7 Accounting for installment sales contracts Long-term construction contracts a. Cost recovery or zero-profit method Commercial franchise operations .2 9.4 8.1 8. Other not-for-profit organizations such as churches.8 9. museums.5 8.0 Other Special Transactions 8.1 9. fraternity association. Percentage-of-completion method b.point of view of franchisor Financial reporting of interests in joint ventures Corporate liquidation Accounting for insurance contracts by insurers Not-for-profit organizations a.0 Government Accounting . Hospitals and other health care organizations c.2 8. etc.4 Transactions on the books of the home office and the branch Reconciliation of reciprocal accounts Preparation of individual and combined financial statements Agency transactions 10.3 8.New Government Accounting System 32 .0 Accounting for Branch and Agency Transactions 9.

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