BSA 3104 - GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL CONTROL

MODULE 1 - THE PROFESSIONAL PRACTICE OF ACCOUNTING

Learning Objectives: At the end of the lesson, the learner will be able to:

1. Enumerate the different sectors of accounting practice.

2. Identify the attributes of a profession and how accounting meets these attributes.
3. Identify the different ways to regulate the accounting profession.
4. Describe the organizations that affect the practice of accountancy
5. Enumerate the requirements to obtain the Certified Public Accountant (CPA) Certificate
6. Describe the rules and regulations of foreign CPAs who plan to practice their profession in the
Philippines
7. Enumerate the fundamental principle that must be observed by CPAs when performing
professional responsibilities
8. Discuss the rationale for the continuing professional development of CPAs
9. Enumerate the different penalties and sanctions against violators of the profession’s laws, rules
and regulations

I. SECTORS OF ACCOUNTING PRACTICE

1.1 Definition of Professional Accountant
• Those persons who hold a valid certificate issued by the Board of Accountancy(i.e.,
Certified Public Accountants), whether they be in public practice, (including a sole
proprietorship or partnership), industry, commerce, the public sector or education.
(Source: Code of Ethics for Professional Accountants in the Philippines).
 • Certified Public Accountant (CPA) a person who holds a valid Certificate of Registration
and a valid Professional Identification Card issued by the Commission upon
recommendation by the Board to those who have satisfactorily complied with all the legal
and procedural requirements for such issuance, including in appropriate cases, having
passed the CPA licensure examination. (Source: Section 4(d) of the Rules and Regulations
Implementing RA No.9298 otherwise known as the Philippine Accountancy Act of
2004).

1.2 Definition of Practice of Accountancy (RA 9298 otherwise known as the Philippine Accountancy
Act of 2004)

The practice of Accountancy shall include, but not limited to the following:

1.2.1 Practice of Public Accountancy – shall constitute in a person,

1.2.1.a be it in his individual capacity, or as a partner or staff member in an
accounting or auditing firm,
1.2.1.b holding out himself as one skilled in the knowledge, science, and
practice of accounting, and as qualified to render professional services as a certified
public accountant; or offering or rendering, or both, to more than one client on a fee
basis or otherwise services such as

§ the audit or verification of financial transactions and accounting

records; or

§ the preparation, signing, or certification for clients of reports of audit,

balance sheet, and other financial, accounting and related schedules,
 exhibits, statement or reports which are to be used by stockholders or for
publication or for credit purposes, or to be filed with a court or government
agency, or to be used for any other purpose; or

§ the design, installation, review and revision of accounting systems and

controls, or the preparation and/or review of income tax returns when
related to accounting and auditing procedures; or

§ when he/she represents hers/her clients before government agencies on

tax and other matters related to accounting; or

§ renders professional assistance in matters relating to accounting

procedures and the recording and presentation of financial facts or data.

1.2.2 Practice in Commerce and Industry – shall constitute in a person

I. involved in decision making requiring professional knowledge in the science
of accounting, as well as the accounting aspects of finance and taxation, or
II. when he/she represents his/her employer before government agencies on
tax and other related to accounting; or
III. when such employment or position requires that the holder thereof must
be a certified public accountant.
In this connection, 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
external auditors for the audit of such financial statements and other
 related functions shall be occupied by a duly registered CPA. Provided,
that the business or company where the above position exist has a
paid- up capital of at least Five Million Pesos (P5,000,000) and/or an
annual revenue of at least Ten Million Pesos (P10,000,000).

IV. in an educational institution which involve teaching of accounting,

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

V. the Dean or the department chairman or its equivalent that supervises the
Bachelor of Science in Accountancy in the academe/education and
therefore must be occupied by a duly registered CPA.

1.2.3 - Practice in the Government shall constitute in a person

I. who holds, or is appointed to, apposition in an accounting professional group in
government or in a government-owned and/or controlled corporation,
including those performing proprietary functions, when decision making
requires professional knowledge in the science of accounting, or

II. where a civil service eligibility as a certified public accountant is prerequisite.

1.3 THE PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANT (PICPA)

• It was founded in 1929 and is the accredited professional accountancy
organization by the Philippines Professional Regulation Commission (PRC).
The national professional organization of CPAs in the Philippines, thus,
 membership of the institute is mandatory for all professional accountants in
the jurisdiction.
• In the absence of authoritative pronouncement by the Philippine Financial
Reporting Standards Council (PFRSC), it issues bulletins that have a persuasive
effect on the CPAs work.
• It is the umbrella of several accounting associations representing different
sectors in accounting.

1.3.1 OBJECTIVES of PICPA

1. To promote and maintain high professional and ethical standards
among accountants
2. To advance the science of the accountancy
3. To develop and improve accountancy education
4. To encourage cordial relations among accountants
5. To protect the certificate of Certified Public Accountants granted
by the Republic of the Philippines.

1.3.2 SECTORS OF ACCOUNTING PRACTICE

PICPA

nACPAE ACPACI
 GACPA AIA ACPAPP

• nACPAE National Association of Certified Public Accountant in

Education
• ACPACI Association of Certified Public Accountant in Commerce and
Industry
• GACPA Government Association of Certified Public Accountant
• AIA Association of Internal Auditors
• ACPAPP Association of Certified Public Accountant in Public Practice

1.4 REGULATION OF THE ACCOUNTING PROFESSION

• Objective of Public Regulation
o To protect the investing public from fraud, gross negligence and
failure to comply with the laws and regulations related to the
practice of professional accountancy particularly in the preparation
and independent audit of financial statements.

1.4.1 RESPONSIBLE FOR REGULATION OF PROFESSIONAL ACCOUNTANTS

1.4.1.1. PROFESSIONAL REGULATION COMMISSION (PRC) –

 § It operates under the Office of the President of the
Philippines and its mandate is to regulate and supervise the
practice of all professionals.
§ Administer examination, accreditation, inspection and
monitoring, and CPD procedures of all professional bodies
§ nurture Filipino professionals towards technical proficiency
and civic responsibility in the service of Filipino nation

1.4.1.2 THE PROFESSIONAL REGULATORY BOARD OF ACCOUNTANCY

(BOA)
• Republic Act (RA) 9298, Philippine Accountancy Act, as revised
and enacted in 2004, stipulates that the Professional
Regulatory Board of Accountancy , which operates under the
supervision of the Professional Regulation Commission
• The Board is composed of a chairman and six members to be
appointed by the President of the Philippines from a list of three
(3) recommendees for each position and ranked by the
Commission, from a list of five(5)nominees for each position
submitted by the Accredited National Professional Organization
of Certified Public Accountant (APO). The four (4) sectors in the
practice of accountancy shall as much as possible be equitably
represented in the Board.
 POWERS AND FUNCTIONS OF BOARD OF ACCOUNTANCY
1. Supervising the registration, licensing, and practice of accountancy
in the Philippines
2. Maintaining a registry of registered and accredited CPAs
3. Issuing and renewing Certificate of Registration and Accreditation
4. Adopting ethical , accounting and auditing standards, taking into
consideration international standards and generally accepted best practices.
5. Conducting quality assurance (QA) REVIEWS
6. Investigating violations of rules and regulations and issuing
sanctions
7. Preparing and issuing the syllabi of the subjects for examinations in
consultation with the academe, preparing questions for the licensing
examination; and administering and releasing the results of the
examinations

1.4.1.3 THE SECURITIES AND EXCHANGE COMMISSION

§ Established on October 26, 1936 under C.A. 83.
§ It is tasked to safeguard public interest specially in the capital
market (stock and bonds).
§ It regulates business operations specifically of partnerships,
corporations, entities granted license/franchise to operate, and
foreign companies doing business in the country.
 § It reviews/registers securities issued by firms, evaluate financial
position and performance, supervises brokers, dealers, transfer
agents, investment houses, and capital market participants.
§ It ensures that investor are provided with full and fair
information about public trade companies and protect them
from manipulations and back hand deals.

SELF CHECK :
Multiple Choice

1. A person is NOT considered in the practice of Accounting in

Commerce and Industry if
A. The position he is occupying requires that the holder thereof
must be a CPA
B. He/ She represents his/her employer before government
agencies on tax or other matters related to accounting.
C. He/ She makes decisions requiring professional knowledge in science of
accounting as well as the accounting aspect of finance and taxation
D. He/ She supervises the recording of financial transactions and
preparations pf financial statements of a company whose paid in
capital and annual revenue amount to P1,000,000 and
P5,000,000, respectively.
 2. Which of the following is the authoritative body designated to
promulgate auditing standards?
A. PICPA
B. Financial Reporting Standard Council
C. Auditing and Assurance Standards Council
D. Association of CPAs IN Public Practice (ACPAPP) & PICPA

3. Which of the following services is not within the area of public

accounting?
A. Taxation service
B. Write-up work for one client
C. Management Advisory Services
D. Attest function

4. The objective of the Philippine Accountancy Act of 2004 includes

A. The standardization and regulation of accounting education
B. The examination of Certified Public Accountant
C. The supervision, control and regulation of practice of
accountancy in the Philippines
D. All of the above

5. Which of the following statements concerning the practice of

accountancy in commerce and industry is INCORRECT?
A. A CPA is in the practice of accountancy in commerce and
industry when he is involved in decision making requiring
professional knowledge in the science of accounting, as well as
the accounting aspects of finance and taxation.

B. A CPA in in the practice of accountancy in commerce and

industry when he renders professional services as a Certified
Public Accountant to more than one client on a fee basis.

C. A CPA is in the practice of Accountancy in commerce and

industry when he represents his employer before government
agencies on tax and other related to accounting.

D. A CPA in in the practice of accountancy in commerce and

industry when such employment or position requires that the
holder thereof must be a CPA.