Charter 1

THE ACCOUNTANCY PROFESSION

AND ITS DEVELOPMENT

Learning Objectives:

After studying this chapter, we should be able to:

1. familiarize the background of the accountancy profesgion, the career opporrunitieg

of a CPA and salient points of the Philippine Accountancy Act of 2004;
2. learn the various acronyms related to business, government agencies and
accountancy profession; :
understand the reason why Philippine ASC has shifted to IAS; and
w

4. understand the effect of global accounting practice to our Filipino accountants.

THE ACCOUNTANCY PROFESSION

Accountancy is not only one of the modest, less expensive but also the most prestigious
profession in the land today. Since it existed way back in 1923, it hardly gained
recognition among the professions unlike medicine, engineering and law. Accountancy
is least known and unpopular because of the nature of services it accorded to its clients
which is handled with much needed “confidentiality”. Aside from this, the profession
becomes the most feared of and dreaded of all, because it maintained the highest
mortality rate among courses that require board examinations.

Despite the mortality rate problem, accountancy emerged as the most sought-after
profession with the tremendous growth and development of business in the country
today. From a dismal 43 registered Certified Public Accountants in 1923 to
approximately 162,000 as of October 2015 with Mr. Armand Fabella of the Jose Rizal
College as holder of the first CPA Certificate or PRC-CPA Certificate No. 001.

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Chapter.1

The accountancy profession demands a quality of high standards performance at aj

times to the public it served. Be it in government service, in commerce and industry or
in the academe which requires integrity, competence, due care and diligence in the
performance of duty which are embodied in the Code of Ethics for CPAs, Much more in
public practice where the CPA should maintain a high degree of independence in mental
attitude on matters concerning the impartiality of financial reports and maintain secrecy
of confidential information because credibility of the profession is at stake in the
performance of the "attest” function.

It is a welcome development to note that Accountancy is the first among the professions
here in the Philippines to be included under the World Trade Organization's (WTO)
policy of liberalization of services. This means that Filipino accountants will be freely
ccmpéting with other accountants from other parts of the world in the global field of
accounting practice.

WHAT
ACCOUNTANT?'
IS AN
A Certified Public Accountant or a Professional Accountant is a holder of a baccalaureate
degree in Bachelor of Science in Accountancy (BSA), who has taken and passed the
difficult and competitive licensure examination for Certified Public Accountants and
carries the title as "C.P.A. ", vested by the laws of the Republic to practice Public
Accounting in general under the supervision of the Professional Regulation Commission.

The course in BS Accountancy replaces all business courses majoring in the subjects of
accounting under the old curriculum. So, those who have taken and passed the said
examination are included in the above definition of the profession.

In the past, it has been the practice of private companies especially in areas where there
are only few CPAs to hire commerce-accounting graduates (under board) and offered
the position as accountant or bookkeeper/accountant although they are not, in the real
sense of the word. This created confusion and misled the public of what really is the role
of a bookkeeper and a professional accountant.

At this juncture, the work of a bookkeeper is clearly distinguished from the work of a
professional accountant in Chapter 4

Atpresent, the Board of Accountancy employs strictness in the implementation of the

standards and regulations of the practice wherein it requires the registration of staff and
partoers of o CPA firm or we have to comply with the accreditation requirements with
both the Professional Requlation Commission and Board of Accountancy before we can
be allowed to practice public accountancy

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The Accountancy Profession and its De

Once we become accountants, there we find several opportunities to grab with. We can
be employed and worked in various fields of endeavor such as the following:

Public Accounting - under this field, we are in public practice. And as a public
practitioner, we have two options to choose from. It is either, we will become individual
tioner
_and
practi s
join . partnership with other individual practitioners or getting
employed with firms of CPAs like, Punongbayan & Araullo, Sycip Gorres Velayo & Co.
(SGV & Co.) Ampil Elises Ciudadano & Co., Reyes Tacandong & Co. and many other
auditing firms. In which case, we are to render services to the public for a fee. We are
not an employee of the client company under audit but assume the role as
“independent entity" vested with freedom to exercise our own judgment in carrying out
the engagement requiring our independence and impartiality of the report we -
prepared. Our work will include auditing, the examination of financial statements and
report our findings to the management; taxation, the preparation of Income Tax Returns
and management services, the design and installation of accounting systems. Once we
choose this field, we will become a member of the Association
of CPAs in Public Practice
(QCPAPP) sector.

Government Accounting - under this field, we are to render services to the government:
We will gain employment in the National Government Agencies (NGA), such as
Department of Finance, Securities and Exchange Commission, Bangko Sentral ng
pilipinas, National Bureau of Investigation, Bureau of Internal Revenue, Department of
Budget and Management, Department of Public Works and Highways, Department of
Trade and Industry, etc. ar in the Government-Owned and Controlled Corporations
(GOCC), such as Government Service Insurance System, Social Security System, Home ~ 7
Development and Mutual Fund, etc. At present all cities, provinces and municipalities
which are considered as Local Government Units (LGU) are already employing
accountants pursuant to Republic Act 7160 known as the “Local Government Code of
1991". This widens the job opportunities of accountants. Once we choose this field, we .
will become a member of the Government Association of CPAs (GACPA) sector.

Private Accounting - under this field, we will gain employment in private firms and hold
positions as Chief Accountant, Accounting Manager, Internal Auditor, Finance Manager
or the highest accounting officer of an enterprise which is known a’s‘}!‘\_er "Col ler".
Once we choose this field, we will become a member of the Associati s
Commerce and Industry (ACPACI) sector.

Accounting Education — there are CPAs who join in the academe and sacrifice the high
income generating profession for the sake of love in accounting education. They are our
accounting professors, researchers, CPA Reviewers where only few become authors in

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accounting books; the dnsung heroes who are'corfirf\“tedrto p!ih?taklngly prepare thel
candidates to the difficult examinations for Certified Public Accountants. Once we
choose this field, we will become a member of the A

Other accountants become entrepreneurs in their own rights. They managed their own
businesses. With all these, can we imagine how versatile the accountants are?

All CPAs ar
0

CODE OF PROFESSIONAL ETHICS FOR CPAS IN THE PHILIPPINES

The Code of Ethics for Professional Accountants in the Philippines was recently adopted
from the revised Code of Ethics for Professional Accountants developed by International
Federation of Accountants (IFAC) which took effect on June 30, 2008.

The use of this Code of Ethics has been approved by the Board of Directors of the
Philippine Institute of Certified Accountants (PICPA) and the same has been adopted by
the Board of Accountancy (BOA) and finally approved by the Professional Regulation
Commission (PRC) as part of the rules and regulations of the BOA for the practice of
accountancy profession. This is the start of the relationship among business,
government, the investing public and other users of financial information.

The Internal Federation of Accountants (IFAC) is an international body representing all

the major accounting bodies across the world. Its mission is to develop, adopt and
implement with high quality international standards and guidance; contributing to the
development of strong professional accounting organizations and accounting firms and
to high quality practice of by professional accountants worldwide.

Being a member of International Federation of Accountants (IFAC), it is committed to

observe the following fundamental principles, viz:

Integrity - A professional accountant should be straighlf_flar'd_and honest in all

professional and business relationships. Integrity also implies fair dealing and
truthfulness. A professional accountant should not be associated with reports, returns,
communications or other information where they believe that the information:
a) Contains a materially false or misleading statement;
b) Contains statements or information fur'nished recklessly
c) Omits or obscures information required to be included where such
omission or obscurity would be misleading.

Objectivity - A professional accountant should not allow bias, conflict of interest of

under influence of others to override professional or business judgments.

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The Accountancy Profession
and its Development

Professional Competence and Due Care - A professional accountant has a continuing

duty to maintain professional knowledge and skill at the level required to ensure that a
client or employer receives competent professional service based on current
developments in practice, legislation and techniques. A professional accountant should
act diligently and in accordance with applicable technical and professional standards
when providing professional services (i.e., services requiring accountancy or related
skills performed by a professional accountant including accounting , auditing, taxation,
management consulting and financial management services). In addition, they should
conform with the technical and professional standards of the following:
« Board of Accountancy (BOA) / Professional Regulation Commission (PRC)
« Securities and Exchange Commission (SEC)
« Financial Reporting Standards Council (FRSC)
« Auditing and Assurance Standards Council (AASC)
« Relevant legislation

Competent professional service requires the exercise of sound judgment in applying

professional knowledge and skill in the performance of such services. Professional
competence may be divided into two (2) separate phases:
1. Attainment of professional competence. The normal pattern of development
starts initially with a high standard of general education followed by specific
education, training and examination in professionally relevant subjects, and
whether prescribed or not, a period of work experience.
2. Maintenance of professional competence. This requires a continuing awareness
and an understanding of relevant technical professional and business
developments. Continuing professional development develops and maintains
the capabilities that enable a professional accountant to perform competently
within the professional environments.

Diligent encompasses the responsibility to act in accordance with the requirements of

an assignment, carefully, thoroughly and on a timely basis. A professional accountant
should take steps to ensure that those working under the professional accountant’s
authority in a professional capacity have appropriate training and supervision.

Where appropriate, a professional accountant should make clients, employers or other

users of the professional services aware of limitations inherent in the services to avoid
the misinterpretation of an expression of opinion as an assertion of fact.

Confidentiality — A professional accountant should respect the confidentiality of

information acquired as a result of professional and business relationships and should
not disclose ény such information to third parties without proper and specific authority
unless there is a legal or professional right or duty to disclose. Confidential information
acquired as a result of professional and business relationships should not be used for
the personal advantage of the professional accountant or third parties.

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Professional Behavior — A professional accountant should comply with relevant laws

and regulations and should avoid any action that discredits the profession.

In marketing and promoting themselves and their work, professional accountants

should not bring the profession into disrepute. Professional accountants should be
honest and truthful and should not: make exaggerated claims for the services they are
able to offer, the qualifications they posses, or experience they have gained; or make
disparaging reference or unsubstantiated comparisons to the work of others.

CORE COMPETENCIES FRAMEWORK FOR ACCOUNTANTS

It has been a problem in the past on how to bridge the gap between clientele-
companies’ needs and what our graduates from the academe can offer. A competency-
based approach to the preparation of professionals offers a systematic and effective
way of bridging this gap.

A competency-based approach to education is one where the competencies, and skill

sets required of a newly admitted professional are identified through a formal process
and are later validated by business and industry and subject matter experts. Such
identified competencies (or learner outcomes) have predetermined performance
measures for assessing skill acquisition.

The government has undertaken efforts to improve the entry-level qualification

requirements for the Filipino CPAs by releasing the well-defined set of competencies,
Core Competency Framework for Entry to the Philippine Accountancy Profession. The
core competencies for accountants identify the knowledge, skill, and professional values
that new CPAs need to have in order to successfully face the challenges of today’s
changing environment and the future.

The strategic goal is to produce technically competent and ethical professional

accountants ready to compete internationally. Hence, the higher education structure
(which includes the curriculum and course syllabi) should develop the following
minimum core competencies:

Knowledge - The CPAs knowledge must cover:

w‘ Of emphasis here are gaining an understanding of the different

cultures in the world and developing an international perspective. It is generally
believed that the traits that will make our Filipino CPAs prominent in the global
marketplace are:
* competency in the English language (the lingua franca of business),
* adaptability to Western business practices,
o level of training and
* good capabilities in dealing with foreign partners

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 The Accountancy Profession and its Development

Organizational
and Business Knowledge - In addition to the core knowledge in areas
such as economics, quantitative methods and business statistics, organization
behavior, marketing and operations management, the CPA must be conversant
of international business and have an understanding of how the global business
system works. He should also have an appreciation of the importance of ethics
and corporate governance in business. The CPA must demonstrate competence
in the following:
* administrative capability and efficiency
e decision modelling
o risk analysis and management
¢ measurement
industry and sector perspective

Information Technology (IT) Knowledge

- This includes not only being conversant with
IT concepts for business system but sound knowledge on internal control in computer-
based systems, development standards and practices for business systems,
management of the adoption, implementation and use of IT, evaluation of computer
business systems, and managing the security of information.

‘Accounting Knowledge - This includes core knowledge related to accounting and

related areas and must include proficiency ir: the international accounting and auditing
standards, cost management and the latest concepts in management accounting, recent
tax laws, business and commercial laws. It also includes knowledge of corporate finance
and the Philippine capital markets, professional ethics and environmental accounting
and reporting. The CPA should demonstrate competence in the following:
e Basic Accounting and Preparation of Financial Statements, the Accounting
Profession and International Accounting Standards
o Advanced Financial Accounting Practices
o Advanced Financial Reporting Principles
* Management Accounting - Basic Concepts
« Management Accounting-Information for Planning, Decision-Making and Control
e Taxation
* Business and Commercial Laws
® Auditing — Fundamentals
o Auditing Advanced Concepts
» Business Finance and Financial Management

Skills
The skills to be developed include:

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Intellectual - This set of skills includes the ability to carry out abstract logical thinking
and understand critical thinking. It also includes creative thinking or the generation of

new ideas; visualization or “seeing things in the mind’s eye”; and reasoning skills or the
discovery of a rule or principle underlying the relationship between two or more objects
and applying it when solving a problem. The CPA must demonstrate the following skills:
* analysis
* problem solving
e strategic/critical thinking

ml - This involves developing the ability of CPAs to work in groups and being
a team player. Itincludes the skills to participate as member of a team and contributing
to group effort; teaching others new skills; working to satisfy clients’ expectations;
negotiation skills and working with diversity or working well with men and women from
diverse backgrounds. The CPA must demonstrate attributes, such as:
being a team player
* persuasion, confidence and diplomacy
« discreetness, open mind and patience
capability for work and ability to respond well to pressure

‘Communication - This refers to active listening skills and the ability to communicate
effectively one’s points of view, both orally and in writing, at all organization levels;
being able to justify one’s position, deliver powerful presentations and to persuade and
convince others. The CPA must demonstrate skills such as the ability to:
verbally and/or in writing explain financial/statistical/administrative
matters/policies/procedures/regulatory matters/audit results at a level
appropriate to the audience.
o ask clear, concise and relevant questions to obtain desired information to perform
a task.
o Negotiate effectively.

Values

Values must concentrate on:

w— Since the objectives of the accountancy profession are to work in

accordance with the highest standards of professionalism, to attain the higher level of
performance and generally to meet the public interest, the need for CPAs to conform te
the ethical standards of the profession become vital. These include integrity, objectivity
and independence, professional competence and due care, confidentiality, and
professional behavior.

Values
Moral - Beyond ethical rules, there is a need for CPAs to be able to discer?
between what is morally right or wrong.

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The Accountancy Profession and its Development . i dnaniianil -

THE ACCOUNTANCY LAW OF 2004

One of the remarkable developments in the accountancy profession is the signing into
law on May 13, 2004 by her Excellency, Madam President Gloria Macapagal-Arroyo,
R.A. No. 9298 known as "Philippine Accountancy Act of 2004" which repealed
Presidential Decree No. 692 formerly known as the "Revised Accountancy Law" that was
enacted on May 5, 1975 by his Excellency, the late President Ferdinand E. Marcos.

The law mentions the revival of the Continuing Professional Development (CPD) for CPAs
which originally took effect in 1987. Tt states that, "All Certified Public Accountants shall
abide by the requirements, rules and regulations on continuing professional education to
be promulgated by the Board, subject to the approval of the Commission, in
coordination with the accredited national professional organizations of certified public
accountants or any duly accredited educational institutions. For this purpose, a CPD
Council is hereby created to implement the CPD program".

Other salient points of the law are as follows:

« The Board of Accountancy and its Composition (Sec. 5)- The Board of Accountancy
(BOA), under the supervision and administrative control of the Professional
Regulation Commission (PRC) shall be composed of a chairman and six (6)' 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 Accountants. The Board shall elect a vice-chairman
from among its members for the term of one (1) year. The chairman shall preside in
all meetings of the Board and in the event of a vacancy in the office of the chairman,
the vice-chairman shall assume such duties and responsibilities until such time that
a chairman is appointed.
Admission Requirements to the CPA Board Examinations (Sec. 14) - Any person
applying for examination shall establish the following requisites to the satisfaction
of the Board that he/she:
1. is a Filipino Citizen
2. has a good moral character
3. is a holder of the degree of Bachelor of Science in Accountancy conferred by a
school, college, academy or institute, duly recognized and/or accredited by
the Commission on Higher Education (CHED) or other authorized government
offices; and
4. has not been convicted of any criminal offense involving moral turpitude
Scope of the CPA Board Examination (Sec. 15) - The licensure examination for CPA
shall cover the following subjects with the corresponding weights in units of two (2)
and maximum number of hours of three (3), viz: Theory of Accounts , Business Law
and Taxation, Management Services, Auditing Theory, Auditing Problems, Practical

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Chapter |

Accounting Problems |, Practical Accounting Problerms |1

The purpose of this CPA Eramination 15 to test the overall knowledge and
competence of the candidates, The contents and coverage of these subjects shall be
in accordance with the outline or syllabus prepared and issued by Board of
Accountancy upon approval by the Professional Re, ulation Commission. The Board
however, subject to the approval of the Commission, may revise or exclude any of
the subjects and their syllabi, and add new ones as the need arises,

However, after having series of consultations with the members of the academe and
other stakeholders, the Board Licensure Examination for Certified Public Accountants
(BLECPA) through the Professional Regulatory Board of Accountancy has resolved and
approved on Dec. 15, 2015, Resolution No. 275 series of 2015 that the following
changes be made to the existing subjects, thereby, reducing the number of the CPA
Examination subjects from seven (7) to siz (6) starting May 2016 examinations and
onwards, viz:

From
1. Theory of Accounts Financial Ar:m;;\ring and Reporting
. Practical Accounting Problems | Advanced Financial Accounting and
3. Practical Accounting Problerms 1i Reporting

4. Management Services Management Advisory Services

S. Audilnng Theory
6. Auditing Problems Auditing

Taxation
7. Business Law and Taxation Regulatory Framework for Business
Transactions T e ™

The approved resolution does not depart radically from the prescribed content of the
BLECPA subjects but serve merely to rationalize and integrate related subjects for better
comprehension and more effective application of the theory into practice.
« Rating in the Licensure Examination (Sec. 16)- To be qualified as having passed the
licensure examination for accountants, a candidate must obtain a general average
of seventy-five (75%), with no grades lower than sixty-five (65%) in any given
subject. In the event a candidate obtains the. rating of seventy-five (75%) and above
in at last a majority of subjects as, provided for in this Act, he / she shall receive a
conditional credit for the subjects passed: Provided, That a candidate shall take an
eramination in the remaining subjects within two years from the preceding
examination: Provided further, That if the candidate fails to obtain at least a general
average of seventy-five (75%) and a rating of at least sixty-five percent (65%) in each
of the subjects re-examined, he/she shall be considered as failed in the entire
examination,

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The Accountancy Profession and its Development

That this approved resolution shall not be deemed to affect those who are eligible to take
the conditional or removal examinations pursuant to Section 16 of R.A. No. 9298, and who,
as such, shall be allowed within a period of two (2) years from the effectivity of this
Resolution to take and pass the particular subject/s in which they have failed under the old
scheme, i.e. original six (6) subjects. Provided, that if an examinee fails to pass the
conditional or removal examination after the lapse of the two (2) year period, he/she shall
considered as having failed in the entire examination, and henceforth, has to take all the
new subjects for the BLECPA as prescribed under this resolution.

« Reports of Rating (Sec. 17) — The Board shall submit to the commission the ratings
obtained by each candidate within ten (10) calendar days after the examination,
unless extended for just cause . Upon the release of the results of the examination,
the Commission shall send by mailing the rating received by each examinee at
his/her given address using the mailing envelope submitted during the examination.
« Failing Candidates to Take Refresher Course (Sec. 18) - Any candidate who fails in
two (2) complete Certified Public Accountant Board Examinations shall be
disqualified from taking another set of examinations unless he/she submits
evidence to the satisfaction of the Board that he/she enrolled in and completed at
least twenty-four (24) units of subject given in the licensure examination. For
purposes of this Act, the examination in which the candidate was conditioned
together with the removal examination on the subject in which he/she failed shall
be counted as one complete examination.

The Accountancy Law of 2004's declaration of policy provided that "the state recognizes
the importance of accountants in nation building and development. Hence, it shall
develop and nurture competent, virtuous, productive and well-rounded professional
accountant whose standards of practice and service shall be excellent, qualitative, word
class and globally competitive through regulatory measures, programs and activities
that fasten their professional growth and development."

THE BIRTH OF THE PHILIPPINE ACCOUNTING STANDARDS (PAS)

Accounting Standards are authoritative statements of how particular types of

transactions and other events should be reflected in the financial statements.

The Accounting Standards Council (ASC) was created by Philippine Institute of Certified
Public Accountants (PICPA) on November 18, 1981. It is a standard-setting body which
15 tasked to establish and improve the “Generally Accepted Accounting Principles”
(GAAP) in the Philippines. The approved statements and the relative interpretations of
the ASC are known as “Statement of Financial Accounting Standards” or SFAS which will
be effective only upon approval by the Professional Regulation Commission (PRC) and
unless indicated to the contrary, shall not be retroactive,

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 Chapter 1 _— = SO TSy RESSMRE
-2 S0 S St

The ASC is composed of eight (8) members with four (4) members nominated by PICPA
and one (1) each from Securities and Exchange Commission (SEC), Bangko Sentral ng
Pilipinas (BSP), Professional Regulation Commission (PRC) specifically the Board of
Accountancy (BOA) and the Financial Executive Institute of the Philippines (FINEX). The
term of office of the members is two (2) years which can be renewed.

At present, however, Section 9 (A) of the Rules and Regulations Implementing R.A. 9298
otherwise known as ‘the Philippine Accountancy Act of 2004, created the new
accounting standard-setting body known as the Philippine Financial Reporting Standards
Council (PFRSC) to replace the Accounting Standards Council. Consequently, the
Statement of Financial Accounting Standards (SFAS) are now known as the Philippine
Accounting Standards (PAS).

The PFRSC is created by the Professional Regulation Commission (PRC) upon

recommendation of the Board of Accountancy (BOA) to assist the Board of Accountancy
in carrying out its powers and functions.

The PFRSC is composed fifteen (15) members with a Chairman who has been or is
presently a senior accounting practitioner and fourteen (14) representatives from the
following:
Board of Accountancy

R R
Securities and Exchange Commission
Bangko Sentral ng Pilipinas

PRRERB
Bureau of Internal Revenue
Commission on Audit
N

Major organization of preparers and users of financial Statements

Accredited National Professional Organization of CPAs:
Public Practice

HZINNNN
Commerce and Industry
Academe or Education
Government
Total

The Chairman and members of the Council shall have a term of three (3) years
renewable for another term. Any member of the ASC shall qualify for appointment to
the PFRSC. However, the ASC shall continue to function until the full creation of PFRSC.

INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) REPLACES THE

INTERNATIONAL ACCOUNTING STANDARDS COUNCIL (IASC)

With the growing and seemingly unstoppable internationalization of business and

trade, the IASC, a private independent standard-setting body was created with the
objective of achieving uniformity in accounting principles which are used by business
and other organizations for financial reporting around the world by formulating and
publishing for the public interest, the accounting standards to be observed in the

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The Accountancy Profession and its Development P NP S p—

presentation of financial statements, to promote their worldwide acceptance and to

work for the improvement and harmonious application of accounting standards and
procedures.

The approved statements of the IASC are known as International Accounting Standards
(1AS).

The IAS was founded in 1973 through an agreement made by the professional
accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, the
Netherlands, the United Kingdom, Ireland and the United States of America.

In 1997, after nearly 25 years of achievements, the IASC concluded that if it were to
effectively continue to perform its task, it must find a way to bring about convergence
between national accounting standards and practices and high quality global accounting
standards. And as a result, not too long after, on July 1, 2000, the IASC was replaced by
International Accounting Standards Board (J1ASB). The IASB has come out with new
reporting standards that are called /nternational Financio! Reporting Standards (IFRS).
Although the IASB has no legal authority to impose the standards that it promulgates,
many countries support them. For the meantime, the pronouncements of the IASC will
continue to be designated as International Accounting Staiidards (1AS).

PHILIPPINE ASC HAS SHIFTED TO IAS

In an effort to improve and harmonize the accounting standards relative to the

preparation and presentation of financial statements, the Philippine Accounting
Standards Council which in many decades nostly based its Accounting Standards from
the United States or American Accounting Standerds has shifted to International
Accounting Standards (IAS) in 1997 but it was only in the year 2000 wherein the
Philippine ASC made a sweeping revision of its old "Statement of Financial Accounting
Standards" (SFAS) to conform with its counterpart, the IAS.

Currently, the IASB has revised its IASs which the ASC adopted and are called Philippine
Accounting Standards (PASs). The IASB has also formulated new standards and are
called International Financial Reporting Standards (IFRS) which the ASC adopted and are
called Philippine Financial Reporting Standards (PFRS). In short, Philippine Accounting
Standards (PASs) corresponds to the adopted International Accounting Standards (1ASs)
and Philippine Financial Reporting Standards (PFRSs) corresponds to the adopted
International Financial Reporting Standards (IFRSs).

The move of Philippine ASC to shift to IAS could be attributed to the following factors:
1. The Philippine organizations, such as the Securities and Exchange Commission,
Board of Accountancy and Philippine Institution of Certified Public Accountants
(PICPA) support the IASB standard;
2. The removal of free choice of accounting alternative treatment under the IASB

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Cheoptety .

standards which will redound to having a uniform financial reporting around the
world and;
3. The IASB standard was recognized by Asian Development Bank (ADB), World Bank
and World Trade Organization (WTO).

GOVERNMENT SECTOR ADOPTS INTERNATIONAL ACCOUNTING STANDARDS

Meanwhile, in the government sector, the Commission on Audit (COA) adopted the
International Accounting Standards on January 1, 2014 and they call it, Philippine Public
Sector Accounting Standards (PPSAS) and was fully implemented on January 1, 2015
after the creation of the Philippine Public Sector Accounting Standards Board (PPSASB)
on October 10, 2008. The role of the PPSASB is to assist the omission in formulating
and implementing the public sector accounting standards which will redound to
establishing and maintaining linkages with internationa! bodies, professional
organizations and academe on accounting related fields on financial management.

The PPSAS will align with prevailing international standards, provide quality accounting
standards thereby enhancing the quality and uniformity in financial reporting by the
Philippine public sector entities, and ensuring accountability, transparency and
comparability of financial information with other public sector entities around the
world. It sets out the recognition, measurement, presentation and disclosure
requirements for financial reporting in the Philippine Government. PPSAS shall apply to
all National Government Agencies (NGAs) which refer to departments, agencies,
bureaus, state universities and colleges, government instrumentalities and commission$
including judiciary and constitutional commission, Local Government Units and
Government-Owned and/or Controlled Corporation.

AIMING TOWARDS GLOBALIZATION

Globalization has resulted in business enterprises entering into transactions that extend
beyond the borders of their home country as evidence by multinational corporations
which have grown widely with their subsidiaries and affiliates located in other parts of
the world. It has also awakened the need for accounting principles and standards to
have international acceptability. It is toward this trend of accounting practice where we
are in now. This gives opportunity to Filipino accountants to be able to practice
accounting freely in other parts of the world. Just imagine, we will be competing with
other accountants from other parts of the world! The worst scenario is, what if these
yreign investors bring along with them their own accountants for reason that we are
not o farailiar with their nature of business? It is like the "rules” in playing basketbalt
e 1o not brow when s a shot to be counted as "two or three points”, how many
| player <hould make before he "takes off for a twinner" or when is 3
1l foul” or flugrant foul” he called, etc. There are rules of the game which are
St and s cwrules emerged are adopted.

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Chapter 1

Review Questions-------

1-1. Why is accountancy profession considered as less expensive and what made it
unpopular as compared- to medicine, law, engineering, etc.?

1-2. How does the World Trade Organization's policy on liberation of services affect
the practice of accountancy profession?

What are the career opportunities of a CPA? Differentiate and explain.

Can a CPA in the government service be allowed to practice public accounting ?

Can a CPA in the government service be allowed to teach accounting and the
related subjects in colleges and universities?

What is a CPA?

Why is continuing professional development

for CPA's important?

Is attending a formal CPA review a must requirement in taking the CPA Board
Examination? Explain?

Does the accreditation requirements of staff and partners of a CPA firm aimed to
limit the number of CPA practitioners? Explain.

What is the main purpose of the CPA Examination?

What are the admission requirements to the CPA Exam?

What is the required passing grade of CPA candidate?

When is a CPA candidate considered "conditioned"?

How many times a CPA candidate should fail before he/she be allowed to take
refresher course? Explain.

Is it necessary for a CPA candidate to pass all the six (6) subjects given by the
Board of Accountancy? Explain.

1-16. Why was the Accounting Standards Council (ASC) of the Philippines created?

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 The Accountancy Profession and its Development

1-17. What is ASC? What attributed Accounting Standards Council to totally shift to
International Accounting Standards?

1-18. What do you call the government’s version of International Accounting

Standards that was adopted by COA?

1-19. What was the effectivity of the full implementation of the International
Accounting Standards by the government sector?

1-20. What replaces the Accounting Standards Council?

Quizzers----------- ssssssisasisiassnndisessanens —

1-1
Identification of Acronyms

Instructions: Give the full text of the following acronyms which are related to business,
government offices and accountancy profession.

PRC
WTO
O

ACPAPP
o

GACPA
T

ACPAE
L

ACPACI
R

PICPA fai
BSA "
R

cPD (or t Orif(s 1yt Oove] oph

B

10. SEC piu Oy Lo =

11. BSP . hy, PWPRY —
12. NBI potima) 4 _tnyitnad .
13. BIR . - - -

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 Chapter 1

15 on
16

17

18
19.

20.

21
22.

23.

24.

25.

26
27.

28

29.
30.

31

32.
33.
34

35.

36

37.
38
39
40

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The Accountancy Profession and its Development

True or False

Instruction: Write letter Tif the statements are correct and F if the statement is wrong.

Accountancy is not only one of the modest, less expensive but also the
most prestigious profession in the country today.

It was in 1923 that accountancy profession was first recognized through

the passing of the accountancy law.

Until today, the accountancy profession maintains the highest mortality

rate among courses that require board examinations.

Accountancy is the first among the professions here in the Philippines to

be included under the World Trade Organization's policy liberalization of
services,

- Accountancy is considered a profession because it has a body of

principles, assumptions and a set of ethical standards.

. Republic Act 7160 which is known as the "Local Government Code of

1991" created cities, provinces and municipalities as Local Government
Units.

. The Board of Accountancy employs strictness, whereby before a CPA can

engage into public practice, he has to obtain accreditation with
Professional Regulatory Commission and Board of Accountancy.

. All CPAs employed in the government agencies are considered as public

practitioners,

The knowledge of accounting is important and beneficial to those who are

engaged in business only.

10 A CPA who is teaching in the subjects of taxation in a college or university

is not considered to be in the exercise of profession.

11, A CPA is not allowed by law to engage in any lawful business activity if he
is a public practitioner.

12. R. A. 9298 known as "Philippine Accountancy Act of 2004" repealed P.D.

692 formerly known as the "Revised Accountancy Law".

13. The Board of Accountancy shall be composed of a chairman and 6

members to be appointed by the President of the Philippines.

14. The purpose of the CPA Board Examination is to test the overall

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 14 The purpose of the CPA Board Examination is to test the overall
knowledge and competence of the candidates.

15 Under the new accountancy law, the Professional Regulatory Commission,

subject to the approval of the Board of Accountancy may revise or gxclude
any of the subjects in their syllabi and add new ones as the need arises.

__16. To be qualified as having passed the CPA Board Exam, the candidate must
obtain a general average of 75% and above with no grades lower than
65% in any given subject.

17. A conditional candidate shall automatically become a CPA two years after
without taking examinations on the remaining subjects that he/she failed.

18. Any candidate who failed in 2 complete CPA Board shall be disqualified
from taking another set of examination unless he/she has enrolled and
completed at least 24 units of subject given in the licensure examination.

19. The Philippine Financial Reporting Standards Council is the new standard
setting-body which is tasked to establish and improve the Generally
Accepted Accounting Principles in the Philippines.

20. The objective of International Accounting Standard is to achieve

uniformity in the accounting principles which are used by business and
other organizations for financial reporting around the world.

1-3

Multiple Choice

Instructions: Encircle the letter of the corresponding correct answer.

1. When was the year that accountancy profession was first recognized through
the passing of accountancy law?

a. 1910 c. 1945
b. 1923 d. 1975

2. It is in this field of professional practice where CPAs are considered as

“independent entity” vested with freedom to exercise his own judgment and
impartiality of the reports he prepared -

a. Government Accounting c. Private Accounting

b, Management Accounting d. Public Accounting

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The Accountancy Profession and its Development

3. A CPA who chooses to join in the academe as a university professor, CPA

Reviewer, Researcher, etc. is a member of what sector—
a. Association of CPAs in Commerce and Industry
b. Government Association of CPAs
c. Association of CPAs in Public Practice
d. Association of CPAs in Education

4. Many accountants are employed in business enterprise as chief accountant or

comptroller. Said accountants are engaged in-

a. General Accounting c. Private Accounting

b. Government Accounting d. Public Accounting

5. The accredited national professional organization of CPAs is-

Association of CPAs in Commerce and Industry

oo

Association of CPAs in Education

Government Association of CPAs
ao

Philippine Institute of CPAs

6. A CPA in public practice who is engaged in the design and installation of general
accounting system is said to be performing a/an-

a. management services work c. tax servicing work

b. auditing work d. none of the above

7. A CPA in public practice who carefully examines, tests and checks accuracy of
accounting data —

a. Auditor c. accountant
b. Bookkeeper d. budget officer

8. A CPA in public practice who examines financial statements and renders opinion
that is free from bias is said to be engaged in-

a. management accounting c. bookkeeping

b. auditing d. none of the above

9. Presidential Decree 692 which was previously known as the “Revised

Law” which was re-enacted May 5, 1975 was repealed by the
Accountancy
Republic Act No. 9298 is known as -

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 Chapter 1 - -

a. Philippine Accountancy Act of 2004

b Revised Accountancy Law of 2004
¢. PICPA Law of 2004
d. Professional Accountancy Act of 2004

10, The CPA Board Examination covers how many subjects?

a. 6 subjects c. 8subjects
b. 7 subjects d. 9subjects

shall be composed of a chairman and how many

11. The Board of Accountancy
members?

a. 3 members c. 6 members
.

b. 5members d. 7 members

12. The Board of Accountancy shall elect a Vice-Chairman from among its members
for the term of-

a. 1lyear c. 3years
b. 2years . d. 4years

13. Any person applying for examination shall establish the following requisites to
the satisfaction of the Board that he/she —

is a Filipino citizen
b

. has good moral character

o

c. has not been convicted of any criminal offense involving moral

[Link]
d. all of the above

14. How many calendar days that the Board of Accountancy shall submit to the
professional Regulatory Commission the ratings that the candidate obtained
during the board exam?

a. 8calendar days c. 10 calendar days

b. 9 calendar days d. 11 calendar days

15. A conditioned candidate, shall take an examination in the remaining subjects-

a. within 2 years from the preceding examination

b. 2 years from the last day of release
¢. 2 years after date the review course started
d. no need to take the exam as already considered "passed"

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The Accountancy Pyofe s sion and its Development il

16. The new standard setting body created in 2005 to replace the Accounting
Standards Council (ASC)

a. International Standards Committee

b. Financial Reporting Standards Council
¢. ‘Financial Accounting Standards Board
d. Statement of Financial Accounting Standards

17. Due to the creation of FRSC, the Accounting Standards Council's Statement of
Financial Accounting Standards (SFAS) are now being renamed as-

a. Philippine Accounting Standards

b. International Accounting Standard
c. PICPA Standard
d. Standards of Reporting

18. The chairman of the Philippine Financial Reporting Standards Council (PFRSC)
must have been or presently a-

a. asenior accounting practitioner

b. a member of PICPA
a member of the Board of Accountancy
oo

a chairman of the Professional Regulation Commission

19. What do you call the approved statements of the International Accounting
Standards Board (IASB)?

a. International Accounting Standards

b. International Financial Reporting Standards
c. International Financial Statements
d. none of the above

20. The members of the Professional Regulatory Board of Accountancy shall be

appointed by the-

a. Association of CPAs in Public Practice

b. Professional Regulation Commission
c. Philippine Institute of CPAs
d. President of the Philippines

21. Which of the following is not a qualification of an applicant for the CPA licensure
examination?

a. He/she is of good moral character

b. He/she is at least 21 years of age

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 Chapter 1
3 He/she ds a Filipino citizen
d He/she s a holder of the degree of Bachelor of Sclence in Accountancy

22, Which of the following statements i correct?

a. The examination in which the candidate was conditioned and the

removal examination on the subject in which he/she failed shall be
counted as two (2) complete examination
L Any candidate who fails in two (2) complete CPA board examinations wif|
no longer be allowed to take another set of examinations.
C. Any candidate who fails in two (2) complete CPA board examinations
shall be disqualified from taking another set of examinations unless
he/she submits evidence to the satisfaction of the Board that he/she
enrolled in and completed at least twenty-four (24) units of subjects
given in the licensure examination.
d. None of the above

23. Which among the following is the work of a public practitioner which has a
4

purpose of expressing an opinion on financial statements?

taxation
management advisory services
external auditor
o

internal auditor

24. Aprofessional accountant in public practice is prohibited from divulging any

confidential information as a result of professional and business, relationship to
third parties without specific authority from the management.

objectivity
aroe

confidentiality
due care
none of these

25. A professional accountant should not allow bias, conflict of interest or under
influence of others to override professional or business judgments.

objectivity
aroe

integrity
professional competence
none of these

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