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. Identify the attributes of a profession and how accounting meets

these attributes.
2. Enumerate the different sectors of accounting practice.
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. ATTRIBUTES/CHARACTERISTICS OF ACCOUNTING PROFESSION AND HOW

ACCOUNTING MEETS THESE ATTRIBUTES:
In our society, professions are generally recognized as occupational
classifications. Experts identified five major characteristics/attributes of an ideal
profession which the CPA/CMA professional satisfy.

1. SYSTEMATIC BODY OF THEORY -

 the underlying theory of the public accounting profession
consists of accounting theory (generally accepted accounting
principles and practices) and auditing theory ( a science of
validation).

 Knowledge in systematic theory can be achieved best through

formal college level education in academic environment.
2. PROFESSIONAL AUTHORITY –
 clients who use the service of a professional often do not really
understand their own needs. The professional thus determines
what is good or bad for the client and the client accedes to this
professional judgment.

 The basis for the CPA’s authority is his EXPERTISE in the

systematic theory of accounting and auditing.

3. COMMUNITY SANCTION
 Admission to the public accounting profession is controlled.
 To become a CPA, a candidate must satisfy government
educational and experience requirements and pass the CPA
Licensure Board Examinations.
 The Professional Regulation Commission (PRC) through the Board
of Accountancy controls this licensing system.
 Also, although CPAs are responsible to the community for their
actions, it is generally accepted that a professional’s performance
should be judged by STANDARDS established by the profession
itself.

4. REGULATIONS CODE
 The powers and privileges granted to the public accounting
profession by the community effectively constitute a monopoly.

 To prevent abuse of this monopoly and to discipline its members,

the Code of Professional Ethics have been promulgated and
made legally binding through the Accountancy Law.

5. A CULTURE
 The CPA is a member of a time-honored profession and the
status of the profession and the responsibilities that accompany
this status affect his behavior in society.

 Accounting has developed a professional culture as evidenced by

such factors as the formal norms of the code of ethics, the
informal rules that guide relationships among practitioners and
 the traditions and myths that have arisen concerning the CPA
examination.

FURTHER, The Code of Ethics for Professional Accountants in the Philippines

identifies three(3) distinguishing characteristics of a profession, namely:

1. Mastery of a particular skill, acquired by training and education.

2. Adherence by its members to a common code of values and

conduct established by its administering body, including maintaining an outlook
which is essentially objective; and

3. Acceptance of a duty to society as a whole (usually in return for

restrictions in use of title or in the granting of a qualification).

II. SECTORS OF ACCOUNTING PRACTICE

II.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).

II.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:

II.2.1 Practice of Public Accountancy – shall

constitute in a person,
II.2.1.a be it in his individual capacity, or as a
partner or staff member in an accounting or auditing
firm
II.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.

II.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.

II.2.3 - Practice in the Government shall constitute in a

person
I. who holds, or is appointed to, a position 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.

I.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) and Auditing and Assurance
Standard Council (AASC) (Sec. 9a of IRR of RA
9298), 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.

I.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.

I.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

I.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.

I.4.1 RESPONSIBLE FOR REGULATION OF

PROFESSIONAL ACCOUNTANTS

I.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.

I.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

I.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.