MODULE 6A – CORE ACCTG 13

REGULATION OF THE ACCOUNTANCY PROFESSION

TOPICAL OVERVIEW

§ Lesson 6.1 – The Concept of Regulation

§ Lesson 6.2 – Professional Regulation in the Philippines
§ Lesson 6.3 – Regulatory Structure in the Accountancy Profession
§ Lesson 6.4 – Competency Requirements for Professional Accountants
§ Lesson 6.5 – Globalization of Accounting and Auditing
§ Lesson 6.6 – CPA Horizons 2025: A Roadmap for the Future
§ Lesson 6.7 – Core Values and Competencies
§ Lesson 6.8 – Challenges Faced by the Public Accounting Profession

LEARNING OUTCOMES

After studying this module, the learners are expected to:

1. Explain how the accountancy profession in the Philippines is regulated;
2. Describe the general nature of professional regulation and how it functions in the accountancy
profession;
3. Discuss the regulatory structure of the accountancy profession;
4. Discuss the relevant issues and trends in the contemporary practice of accounting; and
5. Enumerate the modern day challenges faced by the public accounting profession.

MODULE OVERVIEW

This module takes a closer look at how the accountancy profession in the Philippines is regulated by
various authoritative and regulatory bodies. It details the components and attributes of regulating the
accountancy profession in the Philippines. It also distinguishes the functions of the different entities and
the processes which professionals must undertake in their practice. Relevant issues and trends in the
contemporary practice of accounting are also discussed such as competency requirements for
professional accountants, the increase globalization of accounting and auditing, and future insights and
directions for the global accountancy profession. Finally, this module also provides some examples of
modern day challenges being faced by the public accounting profession around the world.

(This module will cover Lessons 6.1 to 6.4 for Week 11. This module will be updated in Week 12
to include already discussions for Lessons 6.5 to 6.8.)

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 LESSON 6.1
THE CONCEPT OF REGULATION

Regulation is generally defined as a vast system of laws and directives expected to govern all kinds of
behavior. The common perspective about regulation is that it is state-centered. This is premised on the
belief that the state is the only one with capacity to command and control and to be potentially effective
in performing regulatory functions. The other perspective views regulation as a mechanism of social
control or influence affecting any aspect of behavior. While this thought is not state-centered, it provides
no boundaries as to the point where regulation might end.

Professional regulation is based on the rationale that the services of any learned profession significant
affect the welfare of the public. Thus, the goal of professional regulation is to protect the public by
ensuring that professionals provide safe and competent services to the clients. Regulatory regimes
customarily ensure that the public has access to high quality professional services by promoting both
public protection and the integrity of the professionals where their practices evolve.

Professions are at least to a degree self-regulating in that they control the training and evaluation
processes that admit new persons to the field, and in judging whether the work done by their members
reaches the standard. This is one distinguishing feature of a profession. As stated earlier, a profession
differs from other kinds of work where regulation (if considered necessary) is generally imposed by the
state.

The structural arrangement of professionalization and regulation shall be undertaken by the professional
bodies and which are supposed to be done by the state. In some countries, the professional bodies are
responsible for the certification of professionals and may additionally set examinations of competence
and enforce adherence to an ethical code of practice. However, in other countries like the Philippines,
both the certification and licensure are undertaken by the government.

Understandably, the need for regulation cannot be overemphasized. First, it is necessary to ensure that
appropriate quality is provided in the market for accountancy services. Regulation in this aspect includes
promulgation and enforcement of standards and guidelines. Regulation is specifically essential because
of the knowledge imbalance between the client who is acquiring services and the provider of those
services, who has professional expertise.

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 LESSON 6.2
PROFESSIONAL REGULATION IN THE PHILIPPINES

In the Philippines, the significance of a profession has been recognized in the Constitution. Section 14
of Article XII of the 1987 Philippine Constitution provides that the “sustained development of a reservoir
of national talents consisting of Filipino scientists, entrepreneurs, professionals, managers, high-level
technical manpower, skilled workers, and craftsmen in their field shall be promoted by the state,”

The practice of a profession in the Philippines involves public interest and is open only to persons who
have undergone the necessary academic preparation and have passed the appropriate government
examination prescribed by law. Clearly, the State recognizes the important roles of professionals in
nation-building. Hence, there are initiatives to promote the sustained development of a reservoir of
professionals whose competence has been determined by honest and credible licensure examinations
and whose standards of professional practice are internationally recognized and considered world-class.
These initiatives are in the form of regulatory measures, programs, and activities that foster professional
growth and advancement.

One common regulatory measure that is applicable to various professions in the country is the conduct
of licensure examinations. Measures to ensure high quality both in the test preparation and the conduct
of the examination are put in place both by the Professional Regulation Commission (PRC) and the
Professional Regulatory Board (PRB) in each profession. In addition, standards are mandated in the
practice of the profession. There are also CPD programs required for each professional. In the
government sector, employment for a permanent status in the Accountant position requires the
possession of a CPA license.

The PRC is the agency-in-charge of the professional sector of the Philippines. It is a government agency
attached to the Department of Labor and Employment (DOLE). It used to report directly to the Office of
the President of the Republic of the Philippines. PRC’s mandate is to regulate and supervise the practice
of the professionals who constitute the highly skilled manpower of the country. As the agency-in-charge
of the professional sector, the PRC plays a strategic role in developing the corps of professionals for
industry, commerce, governance, and the economy.

The PRC is mandated by law, through its implementing arm – the different PRBs or Boards – to administer
the professional examinations in the country. Currently, there are 46 professions with licensure
examinations under the PRC. The powers and functions of the PRC are contained in Republic Act (RA)
No. 8981, an act modernizing the PRC, also known as the PRC Modernization Act of 2000. This act
repealed Presidential Decree No. 226 which created the PRC and prescribed its powers and functions.

PRC’s functions are classified into three (3): quasi-judicial, quasi-legislative, and executive. The quasi-
judicial function entails the investigation of cases against erring examinees and professionals. Its
decisions have the force and effect of the decisions of a court of law, with the same level of authority as
a regional trial court. The quasi-legislative function includes the formation of rules and policies
primarily on professional regulation. These rules and policies have the force and effect of law once they
are published in the country’s official gazette. The executive function involves administering,
implementing, and enforcing the regulatory policies of the national government, including the
maintenance of professional and occupational standards and ethics and the enforcement of the related
rules and regulations.

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 LESSON 6.3
REGULATORY STRUCTURE IN THE
ACCOUNTANCY PROFESSION

The accountancy profession in the Philippines is regulated by the Board of Accountancy (BOA), one of
the 46 boards under the supervision and administrative control of the PRC.

The law that governs the accountancy profession is RA 9298 otherwise known as the “Philippine
Accountancy Act of 2004”. This law covers the (a) standardization and regulation of the accounting
education; (b) examination and registration of CPAs; and (c) supervision, control, and regulation of the
practice of accountancy.

The BOA is the regulatory authority in the accountancy profession. It is composed of a Chairman and six
members who are appointed by the President of the Philippines. The Board elects a vice-chairman from
among the members for a term of one year. The policies, resolutions, rules, and regulations issued or
promulgated by the BOA are subject to the review and approval of the PRC.

The chairman and members of the BOA hold office for a term of three years. They are ineligible for
reappointment if they have served two successive complete terms, otherwise, there is a need to have a
lapse of one year, if they qualify for such reappointment.

The Philippine accountancy practice has both functional and sectoral areas. The functional areas include
accounting, auditing and assurance, and tax services. On the other hand, the sectoral areas include
public practice, commerce and industry, educator or academe, and government.

Accounting is generally practiced by those in the commerce and industry and the government while
both auditing and assurance as well as tax services are practiced by those in public accountancy.

The registered CPAs are integrated through their membership in the Philippine Institute of Certified
Public Accountants (PICPA), the accredited professional organization (APO) of CPAs in the country. In
contrast to the BOA, the PICPA is a professional body and a private entity.

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 LESSON 6.4
COMPETENCY REQUIREMENTS FOR
PROFESSIONAL ACCOUNTANTS

To acquire the capabilities and competence required of professional accountants, individuals may need
further education and development beyond that needed to qualify as professional accountants.

Education and development for acquiring and maintaining the capabilities of professional accountants
can include:
1. Advanced professional education pursued at academic institutions or through the programs of
professional bodies;
2. On-the-job training and experience programs;
3. Off-the-job training; and
4. Continuing professional development (CPD) courses and activities

All professional accountants are obliged to engage in lifelong learning to keep up-to-date on
developments influencing the profession and the quality of the services they provide.

KNOWLEDGE CONTENT COMPETENCIES

The knowledge content within the education and development program for audit professionals should
include the following subject areas:
1. audit of historical financial information at an advanced level;
2. financial accounting and reporting at an advanced level; and
3. information technology

The knowledge content of the audit of historical financial information subject area should include the
following at an advanced level:
• best practices in the audits of historical financial information, including relevant current issues
and developments;
• International Standards on Auditing (ISAs) and International Auditing Practice Statements
(IAPSs); and/or
• any other applicable standards or laws

The knowledge content of the financial accounting and reporting subject are should include the
following at an advanced level:
• financial accounting and reporting processes and practices, including relevant current issues
and developments;
• International Financial Reporting Standards (IFRSs); and/or
• any other applicable standards or laws

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The knowledge content of the information technology subject area should include the following:

• information technology systems for financial accounting and reporting, including relevant
current issues and developments; and
• frameworks for evaluating controls and assessing risks in accounting and reporting systems as
appropriate for the audit of historical financial information

PRACTICAL EXPERIENCE COMPETENCIES

Professional accountants should complete a period of relevant practical experience before taking on
the role of an audit professional. This period should be long enough and intensive enough to permit
them to demonstrate that they have acquired the necessary professional knowledge, professional skills,
and professional values, ethics, and attitudes. A substantial proportion of the period of practical
experience should be in the area of audit of historical financial information.

Practical experience that contributes to the competence of an audit professional needs to be relevant
to the type and size of audit assignments audit professionals are, or are likely to be, involved in. The
period of experience should permit them to: (a) apply, in a properly supervised environment, the
requisite knowledge and skills; and (2) develop and demonstrate the required competence.

PROFESSIONAL SKILLS COMPETENCIES

The professional skills for professional accountants in general include:
1. intellectual skills;
2. technical and functional skills;
3. personal skills;
4. interpersonal and communication skills; and
5. organizational and business management skills

These professional skills are part of the set of capabilities required by professional accountants to
demonstrate competence. Professional skills will be acquired in part during initial qualification and
training, but will need to be developed and honed throughout a career, often by performing different
roles within the organization and by undertaking continuing professional development and education.

THE MINDSET OF A PROFESSIONAL ACCOUNTANT

In addition, with experience, the successful professional accountant in business can typically also be
characterized by a distinctive attitude, outlook, or way of thinking or mindset.

The five (5) different areas that the professional accountant’s mindset needs to embrace include the
following:
1. Professionalism and Ethical Behavior. This involves upholding high ethical standards in
accordance with the Code of Ethics for Professional Accountants which places emphasis on
ethical behavior as well as internalization of principles of integrity.
2. Professional Judgment. This requires quick and intuitive decision making with a need for
evidence-based decisions. This will also include performance of business functions applying to
professional judgment and integrity which often requires reconciling conflicting commercial,
financial, and sustainability interests. Professional accountants should be able to influence

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 decision makers to ensure that the organization is managed in the long-term interest of
stakeholders and delivers sustainable value creation.
3. Organizational and Environmental Awareness. Professional accountants are increasingly
expected to perform as integrators, aligning economic, environmental, and social performance
and various business functions and processes, and as navigators supporting the needs of
governing bodies and management.
4. Investor and Wider Stakeholder Focus. Professional accountants, particularly CFO roles, can
be expected to lead in managing relationships with investors and other funders, and, in some
industries, with regulators. They need to be positioned to address the challenges and to
establish how various interests could be aligned in the longer term.
5. Change, Uncertainty, and Complexity. Professional accountants in business should be able to
adapt to changing circumstances and apply professional skills and judgment to often
ambiguous and imperfect information. They need to be prepared to manage uncertainty,
complexity, and strategic decision making with an overall context of heightened focus on
effective governance, risk management, and control.

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REFERENCES AND WORKS CITED

Mendoza, Rufo R. (2013). Glimpses: The Philippine Accountancy Profession at a Glance. Allen Adrian
Books, Inc.

Adams, T.L. (2010). Profession: A Useful Concept for Sociological Analysis.

Bilodeau, E. (2004). Taking a New Perspective on the Profess of Becoming a Professional. McGill
University. Quebec, Canada.

Cabrera, Ma. Elenita. (2019). Auditing and Assurance Principles. Conanan Bookstore.

Cary, J.L. (1970). The Rise of the Accounting Profession. American Institute of Certified Public
Accountants. New York.

Core Competency Framework for Entry to the Philippine Accountancy Profession. PRC. Philippines.

Davidson, C.N. et al, (2012). The Future of Learning Institutions in a Digital Age.

Duncan-Poitier, J. (2012). Regulation of Public Accountancy in New York State. The Trusted Professional.

Huse, I. et al. (2006). Literature Review: Professionalization of Evaluators. Canadian Evaluation Society.

International Federation of Accountants (2007). Regulation of the Accountancy Profession.

Philippine Accountancy Act of 2004 (RA 9298).

Scott, W. R. (1994). Institutions and Organizations Toward a Theoretical Synthesis. Institutional

Environments and Organizations. Sage Publications, Inc. California, USA.

Zarrilli, S. (2005). Moving Professionals Beyond National Borders: Mutual Recognitions Agreements and
the GATS. United Nations Conference on Trade and Development. USA.

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