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Auditing Theory- 01

Direction: Please study the following concepts embodied in RA 9298, this will serve as your first review topic for
Auditing Theory.
Overview of RA 9298 and its IRR
 The four sectors in the practice of accountancy shall as
much as possible be equitably represented in the
The Republic Act No. 9298, including its implementing Board.
rules and regulations, consists of:
 five Articles (Rules);
The APO shall submit its nominations with complete
 with 44 Sections;
documentation to the Commission not later than 60 days
 has three Annexes; and
prior to the expiry of the term of an incumbent chairman
 was enacted into law on May 13, 2004.
or member with adequate documentation to show the
Rule I – Title, Declaration of Policy, Objective and qualification and primary field of professional activity of the
Scope of Practice nominee
□
Title – the “Philippine Accountancy Act of 2004” If the APO fails to submit its own nominee(s), the
Commission in consultation with the Board shall submit to
Declaration of Policy the President a list of three nominees for each vacant
position.
The State recognizes the importance of accountants in
nation building and development. Hence, it shall develop Qualifications of Members of the PRBOA
and nurture competent, virtuous, productive and well
rounded professional accountants whose standards of To become a member of the PRBOA, a person must meet
practice and service shall be excellent, qualitative, world the following qualifications:
1. A natural-born citizen and resident of the Philippines
class and globally competitive through:
 inviolable, honest, effective, and credible licensure 2. A duly registered CPA with at least 10 years of work
examinations; and experience in any scope of practice of accountancy
 regulatory measures, programs and activities that 3. Of good moral character and must not have been
foster their professional growth and development. convicted of crimes involving moral turpitude
4. Must not have any pecuniary interest , directly or
Objectives indirectly, in any institution (SCU) conferring an
academic degree or CPA review schools
This Act shall provide for and govern: 5. Must not be a Director or Officer of the APO at the time
 The standardization and regulation of accounting of his appointment
education;
 The examination for registration of certified public Term of Office
accountants; and
 The supervision, control, and regulation of the practice  Three years for the chairman and members.
of accountancy in the Philippines.  Any vacancy occurring within the term shall be filled up
for the unexpired portion of the term only (and is not
Scope of Practice considered a complete term).
 No person who has served two successive complete
The practice of Accountancy (or “sector”) include: terms shall be eligible for reappointment until the lapse
a. Practice of Public Accountancy of one year.
 No person shall serve in the Board for more than 12
Industry
years.
b. Practice in Commerce and
 Only for a CPA for business with paid-up capital of Compensation and Allowances of the Board
at least P5.0M and/or annual revenue of at least
P10.0M for functions involving supervision, Comparable to that being received by the Chairman and
preparation of financial statements and members of existing regulatory boards under the
coordination with external audit. Commission as provided for in the General Appropriations
 Not result to deprivation of incumbents Act.
c. Practice in Education/Academe
 Dean or Chair of Accountancy shall be a CPA Powers and Functions of the Board
d. Practice in the Government
The Board acts as a collegial body and shall exercise the
following powers, functions and responsibilities:
Rule II – Professional Regulatory Board of a. To prescribe and adopt the rules and regulations
Accountancy (PRBOA or the “Board”) necessary for carrying out the provisions of RA 9298;
b. To supervise the registration, licensure and practice of
The PRBOA and its Composition accountancy in the Philippines;
 Composed of a chairman and six members appointed c. To administer oaths in connection with the
by the President from a list of three recommendees for administration of this Act;
each position and ranked by the Commission (PRC), d. To issue, suspend, revoke, or reinstate the Certificate
from a list of five nominees for each position submitted of Registration for the practice of the accountancy
by the Accredited Professional Organization (APO). profession;
 Elect a vice-chairman from among its members for a e. To adopt an official seal of the Board;
term of one year.
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f. To prescribe and/or adopt a Code of Ethics for the Education Technical Council (ETC)
practice of accountancy;
g. To monitor the conditions affecting the practice of The Commission, upon the recommendation of the Board,
accountancy and adopt measures, including
shall within 60 days from the effectivity of this IRR create
promulgation of accounting and auditing standards, an ETC.
rules and regulations and best practices;
h. To conduct an oversight into the quality of audits of The term of office of the chairman and members of ETC is
financial statements; three years, renewable for another term.
i. To investigate violations of this act and the rules
and regulations; ETC
j. To make such investigations to determine whether any Chairman 1
person has violated RA 9298; Board of Accountancy 1
k. To issue a cease or desist order to any person, APO (PICPA):
association, partnership or corporation engaged in Public Practice 1
violation of any provision of RA No. 9298; Commerce and Industry 1
l. To punish for contempt of the Board, both direct and Academe/Education (Public & Private) 2
indirect, in accordance with the pertinent provisions of Government 1
and penalties prescribed by the Rules of Court; Total 7
m. To prepare, adopt, issue or amend the syllabi of the
subjects for examinations; Administrative Supervisions of the Board, Custodian of its
n. To ensure that schools and other educational Records, Secretariat and Support Services
institutions comply with the policies, standards and
requirements of the course prescribed by CHED; The shall be under the administrative supervision of
Board
and
o. To exercise such other powers deemed necessary.
the Commission.
□
Note that the Board’s decisions are subject to review and
All records of the Board, including applications for
approval of the Commission, except for administrative
examination, examination questions , answer sheets, and
cases.
other records and documents pertaining to the CPA
licensure examinations, and administrative and other
Accounting and Auditing Standard Setting Council
investigative cases conducted by the Board shall be under
the custody of the Commission.
The Commission upon the recommendation of the Board
shall within 90 days from the effectivity of this IRR, create The Commission shall designate the Secretary of the Board
an accounting standard setting body, the “FRSC”, and an
and shall provide the secretariat and other support
auditing standard setting body, the “AASC.”
services to implement the provisions of RA No. 9298.
The
Chairman and the members of the FRSC and AASC
shall have a term of three years renewable for another Grounds for Suspension or Removal of Members of the
term. Board
□ The President, upon the recommendation of the
Any member of any existing accounting and auditing
Commission, after due process, may suspend or remove
standard setting council shall not be disqualified from
any member on the following grounds:
being appointed.
 Neglect of duty or incompetence;
 Violation or tolerance of any violation of this Act and its
FRSC AASC
IRR or the CPA’s Code of Ethics and the professional
Chairman (FRSC: Any sector; AASC: Public
standards of practice for CPAs;
Accountancy) 1 1
 Final judgment of crimes involving moral turpitude;
Board of Accountancy 1 1
and
Securities and Exchange Commission 1 1
 Manipulation or rigging of the CPA’s licensure
Bangko Sentral ng Pilipinas 1 1
examination results, disclosure of secret and
Commission on Audit 1 1
confidential information in the examination questions
Bureau of Internal Revenue 1
prior to the conduct of the said examination or
A major organization composed of
tampering of grades.
preparers and users of financial statements
(FINEX) 1
Annual Report
An association or organization of CPAs in
active public practice of accountancy 1
The Board shall, at the close of each calendar year, submit
APO (PICPA): an annual report to the President of the Philippines through
Public Practice (AASC: Small, medium & big 2 6 the Commission giving a detailed account of its
prac.) proceedings and accomplishments during the year and
Commerce and Industry 2 1 making recommendations for the adoption of measures
Academe/Education 2 1 that will upgrade and improve the conditions affecting the
Government 2 1 practice of accountancy in the Philippines.
Total 15 15

Rule III - Examination, Registration and Licensure

The Certified Public Accountant Examinations

All applicants for registration for the practice of

accountancy shall be required to undergo a licensure
examination to be given by the Board in such places and
dates as the Commission may designate.
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The places/venues and dates of examinations shall be which he/she failed shall be counted as one complete
included in the Schedule of Professional Licensure examination.
Examinations for the year issued by the Commission.
Oath
Qualifications of Applicants for Examinations
All successful candidates in the examination shall be
Any person applying for examination shall establish the required to take an oath of profession before any member
following requisites to the satisfaction of the Board that of the Board or before any government official authorized
he/she: by the Commission or any person authorized by law to
a. Filipino citizen administer oaths upon presentation of proof of his/her
b. Of good moral character qualification, prior to entering upon the practice of the
c. Holder of the degree of BSA conferred by a school, profession.
college, academy or institute duly recognized and/or □
accredited by the CHED or other authorized An oath shall also be required for CPAs admitted in the
government offices practice of accountancy without examination under
d. Has not been convicted of any criminal offense reciprocity or other international agreements.
involving moral turpitude
Issuance of Certificate of Registration (CoR) and
Scope of Examination Professional Identification Card (PIC)

The licensure examination for CPAs shall cover the A CoR shall be issued to examinees who pass the licensure
following subjects: examination, or are admitted without examination under
a. Theory of Accounts reciprocity subject to payment of fees prescribed by the
b. Business Law and Taxation Commission.
c. Management Services
d. Auditing Theory The CoR shall bear the signature of the Chairperson of the
e. Auditing Problems Commission and the Chairman and Members of the Board,
f. Practical Accounting Problems I stamped with the official seal of the Commission and of the
g. Practical Accounting Problems II Board.
□
The Board, subject to the approval of the Commission, A PIC bearing the registration number, date of issuance,
may change any of the subjects and their syllabi, and add expiry date, duly signed by the chairperson of the
new ones, not be more often than every three years. Commission. Provided, that the registrant has paid the
prescribed fee for the annual registration (reissuance or
Rating in the Licensure Examination renewal) for three years.

 General average of 75%, with no grades lower than Roster of Certified Public Accountants
65% in any subject.
 If a candidate obtains 75% and above in at least a A roster showing the names and place of business of all
majority of subjects, he/she shall receive a conditional registered CPAs shall be prepared and updated by the
credit for the subjects passed (remaining subjects to Board, and copies thereof shall be made available to any
be taken within two years). party as may be deemed necessary.
 If the candidate fails to obtain at least a general □
average of 75% and a rating of at least 65% in each of The preparation of this roster may be delegate to the APO,
the subjects reexamined, he/she shall be considered and the Board and/or the Commission may adopt the
as failed in the entire examination. APO’s report as it may deem fit;
□
Report of Ratings Posting of the roster at the internet shall be deemed
compliance with this requirement.
The Board shall submit to the Commission the ratings
obtained by each candidate within ten (10) calendar days Indication of CoR, PIC and Professional Tax Receipt
after the examination, unless extended for just cause.
□ The CPA shall be required to indicate the numbers of
Upon the release of the results of the examination, the his/her CoR and PIC with its date of issuance and the
Commission shall send by mailing the rating received by duration of validity, including the PTR No. on the
each examinee at his/her given address using the mailing documents he/she signs, uses or issues in connection with
envelope submitted during the examination. Provided, that the practice of his/her profession.
the report of rating may be distributed to the successful
examinees during their mass oath taking as new registered Refusal to Issue CoR and PIC
CPAs.
The Board shall not register and issue a CoR and PIC to
Failing Candidates to Take Refresher Course any successful examinee (with due process):
 convicted by a court of competent jurisdiction of a
Any candidate who fails in two complete CPA Board criminal offense involving moral turpitude; or
Examinations shall be disqualified from taking another set  guilty of immoral and dishonorable conduct; or of
of examinations unless he/she submits evidence to the unsound mind; or
satisfaction of the Board that he/she enrolled in and  has falsely sworn or misrepresented himself/herself in
completed at least 24 units of subjects given in the his/her application for examination.
licensure examination. □
□ Registration shall not be refused and a name shall not be
The examination in which the candidate was conditioned removed from the roster of CPAs on conviction for a
together with the removal examination on the subject in political offense or for an offense which shall not disqualify
a person from practicing accountancy.
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Suspension and Revocation of CoR and PIC and Cancellation Partnerships may be carried as a general partnership (GP) or a limited
of Special Permit liability partnership (LLP).

The Board shall have the power to suspend or revoke the

The SEC shall not register any corporation organized for
practitioner’s CoR and PIC or suspend him/her from the
the practice of public accountancy.
practice of his/her profession or cancel his/her special
permit for any of the causes or grounds Meaningful Experience
 convicted by a court of competent jurisdiction of a Commerce Significant involvement in general
criminal offense involving moral turpitude; or and industry accounting, budgeting, tax administration,
 guilty of immoral and dishonorable conduct; or of internal auditing, liaison with external
unsound mind; or auditors, representing his/her employer
 has falsely sworn or misrepresented himself/herself in before gov’t agencies on tax and matters
his/her application for examination; or related to accounting or any other related
 unprofessional or unethical conduct, malpractice, functions; or
violation of any of the provisions of RA No. 9298 , and
its IRR, the CPA’s Code of Ethics and professional Academe teaching for at least three trimesters or
standards of practice for CPAs. / two semesters accounting related
□ Education subjects. The accumulated teaching
Suspension/revocation of the CoR and PIC shall not experience on these subjects shall not be
prejudice prosecution for criminal liabilities and meted the less than three school years; or
penalties under the Revised Penal Code.
Government significant involvement in general
Reinstatement, Reissuance and Replacement of Revoked accounting, budgeting, tax administration,
or Lost Certificates internal auditing, liaison with the
Commission on Audit or any other related
The Board may, after the expiration of two years from the functions
date of revocation of a CoR and upon application, and Public practice At least one year as audit assistant and
after being convinced of applicant’s remorse and at least two years as auditor in charge of
rehabilitation, reinstate the validity of a revoked certificate audit engagement covering full audit
of registration and may exempt the applicant from taking functions of significant clients.
another examination.
□ Ownership of Working Papers
A new CoR to replace lost, destroyed, or mutilated
Certificate may be issued, subject to the rules promulgated Confidential and privileged and remain the property of
by the Board and the Commission, upon payment of the such CPA in the absence of a written agreement between
required fees. the CPA and the client, to the contrary unless such
documents are required to be produced through subpoena
issued by any court, tribunal, or government regulatory or
Rule IV – Practice of Accountancy
administrative body in accordance with Philippine laws.

Prohibition in the Practice of Accountancy Accredited Professional Organization

No person shall practice accountancy in this country, or

use the title “Certified Public Accountant”, or use the  Known as the PICPA
abbreviated title “CPA” or display or use any title, sign,  Registered with the SEC as a non-profit corporation
card, advertisement, or other device to indicate such and recognized by the Board and the Commission.
person practices or offers to practice accountancy, or is a  Recognized by the Commission as the APO on
certified public accountant, unless such person shall have 10/2/1975 per Acc. No. 15. Certificate of Accreditation
(CoA) once every three years.
received from the Board a CoR and be issued a PIC or a  With 15 national directors apportioned according to
valid temporary/special permit duly issued to him/her by sectors in the four geographic areas (eg. NCR, Luzon,
the Board and the Commission. Visayas and Mindanao) based on the ratio of latest
available number of members in good standing from
Vested Rights: CPAs Registered When this Law is Passed those areas;

All CPAs registered at the time this law takes effect shall The PICPA’s CoA shall be cancelled or suspended by the
automatically be registered under the provisions hereof, Commission upon recommendation by the Board after due
subject however, to the provisions herein set forth as to process if:
future requirements.  It has ceased to possess any of the qualifications for
□ accreditation.
Certificates of Registration held by such persons in good  It no longer serves the best interest of the CPAs.
standing shall have the same force and effect as though  It did not achieve its plan to enlist into active
issued after the passage of this Act. membership within three years, majority of the CPAs
in the practice of accountancy.
Limitation of the Practice of Public Accountancy  It has committed acts inimical to its members and to
the profession.
Single practitioners and partners of partnership organized  It has not renewed its CoA after a lapse of an
for the practice of public accountancy shall be registered unreasonable period.
CPAs in the Philippines;  It has not submitted the required audited FSs.

Certificate of Accreditation shall be issued to CPAs in public Accreditation to Practice Public Accountancy
practice after a minimum of three years meaningful
experience; Within 90 days from effective date of IRR, Individual CPAs,
firms and partnerships of CPAs engaged in the practice of
public accountancy, including the partners and staff
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members thereof, shall register with the Commission and The Board, upon approval by the PRC, shall create a
the Board. Council within thirty (30) days from the effectivity of this
□
resolution.
The registration shall be valid for a period of three years
and may be renewed every three years on or before PRC CPE Council
September 30 on the year of expiry. The registration of Chairman (from BOA) 1
applicants approved during any month of the year shall 1st Member (President or Officer of PICPA) 1
expire on December 31 on the third year following its 2nd Member (Academician) 1
approval. Total 3
Name of the Individual CPA, Firm or Partnership
Common Sources of CPE Credit Units
Type Basis Example
Seminar/Convention:
Individual CPA BOA and PRC “Juan de la Cruz, Participant 1 CU per hour
Registered Name CPA” Resource speaker 5 CU per hour
Firms DTI Registered “Juan de la Cruz Panelist/reactor 3 CU per hour
Name and Associates” Facilitator/moderator 2 CU per hour
Partnerships SEC Registered “Cruz, Isidro, Master’s Degree 1 CU per academic unit;
Name Martin, and additional 30 CU upon
Company" completion
Doctoral Degree 2 CU per academic unit;
Not allowed firm names include: additional 45 CU upon
 fictitious name; completion
 indicates specialization; or Inventions 10-30 CU per invention
 is misleading as to the type of organization
(proprietorship or partnership). Note: refer to Annex C of IRR of RA 9298 for the complete
□ list of sources of CPE credit units.
A partner surviving the death or withdrawal of all the other
partners in a Partnership may continue to practice under Exemption from CPE Requirement
the Partnership name for a period of not more than two
years after becoming a sole proprietor.
a. Permanent Exemption
 Upon reaching the age of 65 years old.
Quality Review Committee b. Temporary Exemption
 Working or practicing his/her profession or
 Conducts quality review on applicants for registration
furthering his/her studies abroad shall be
to practice public accountancy
temporarily exempted during the period of his/her
 Appointed by the Commission upon the
stay abroad, provided that he/she has been out of
recommendation of the Board in coordination with the
the country for at least two years immediately
APO
prior to the date of renewal.
 A term of three years renewable for another term
 Recommends to the Board the revocation of the
Sanctions applicable to CPAs
Certificate of Registration and the professional
identification card
Unless otherwise exempted, registered CPAs in the practice
of accountancy who have not completed the CPE
QRC Composition
requirements provided herein shall not be allowed to renew
Chairman 1
their professional licenses.
Board of Accountancy 1
□
APO (PICPA):
Those who failed to renew their professional licenses for a
Public Practice 2
period of five continuous years from initial registration, or
Commerce and Industry 1
from last renewal date shall be declared delinquent and
Academe/Education 1
shall, after due notice, through the website and publication
Government 1
in the newsletters of PICPA or any newspaper of general
Total 7
circulation, be dropped from the roster of CPAs.

Continuing Professional Education (CPE) Program Seal and Use of Seal

refers to the
Continuing professional education (CPE) All registered CPAs shall obtain and use a seal of a design
inculcation, assimilation and acquisition of knowledge,
prescribed by the Board bearing the registrant’s name,
skills, proficiency and ethical and moral values, after the
registration number and title.
initial registration of a professional that raise and enhance
□
the professional’s technical skills and competence.
The auditor’s reports shall be stamped with said seal,
indicating therein his/her current Professional Tax Receipt
The total CPE credit units for registered accounting (PTR) number, date/place of payment when filed with
professionals shall be 60 credit units for three years, government authorities or when used professionally.
provided that a minimum of 15 credit units shall be earned
in each year. Circular in form with a smaller circle within and in the
upper portion of the space between the circles shall be
Any excess credit units in one year may be carried over to engraved the name of the individual CPA, firm or
the succeeding years within the three-year period. Excess partnership as the case maybe, the lower portion thereof
credit units earned shall not be carried over to the next shall be engraved the CPA Registration Number of the
three-year period except credit units earned for doctoral individual CPA, proprietor of the firm and the signing
and master’s degrees.
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partner of the partnership and in the middle of the Enforcement of RA No. 9298 and its IRR
smaller circle shall be engraved the letters “CPA”.
□
Primary duty of the Commission and the Board to
Affixing the CPA’s seal and signature is an indication of effectively enforce RA No. 9298 and its IRR.
compliance by the CPA of the requisite accounting and
auditing standards and rules. All duly constituted law enforcement agencies and officers
of the government or any political subdivisions shall render
Foreign Reciprocity assistance in enforcing the provisions of RA No. 9298 and
this IRR and to prosecute any person in violation.
Subjects or citizens of foreign countries may be allowed to
practice Accountancy in the Philippines in accordance with The Secretary of Justice or his duly designated
the provisions of existing laws, international treaty representative shall act as legal adviser to the Commission
obligations including mutual recognition agreements and the Board and shall render legal assistance as may be
entered into by the Philippine government with other necessary in carrying out the provisions of RA No. 9298
countries. and this IRR.
□
Provided, he files an application and by submitting the Funding Provision
necessary documents provided for in this sections.
The chairperson of the Commission shall immediately
Coverage of Temporary/Special Permits include in the Commission’s programs the implementation
of RA No. 9298 and this IRR the funding of which shall be
May be issued by the Board subject to the approval of the included in the annual General Appropriations Act.
Commission to the following persons: Provided, That the amount necessary to carry out the
 A foreign CPA called for consultation or for a specific initial implementation of RA No. 9298 shall be charged
purpose essential for the development of the country. against the current year’s appropriation of the
His/her practice shall be limited only for the particular Commission. Thereafter, sums as maybe necessary for the
work that he/she is being engaged and there is no continued implementation of RA No. 9298 shall be included
Filipino CPA qualified; in the succeeding General Appropriations Act (GAA).
 A foreign CPA engaged as professor, lecturer or critic
in fields essential to accountancy education and is Transitory Provision
confined to teaching only; and
 A foreign CPA who is an internationally recognized The incumbent chairman and members of the Board shall
expert or with specialization in any branch of continue to serve in their respective positions without the
accountancy and his/her service is essential for the need of new appointments, not be disqualified for
advancement of accountancy. appointment.
□
All graduates with a Bachelor’s Degree, major in
Rule V – Penal and Final Provisions Accounting shall be allowed to take the CPA Licensure
Examination within two (2) years from the effectivity of RA
Penal Provision No. 9298 (or until May, 2006).

Any person who shall violate any of the provisions of RA Separability Clause
No. 9298 or this IRR as promulgated by the Board subject
to the approval of the Commission, shall, upon conviction,
If any clause, provision, paragraph or part of RA No. 9298
be punished by:
and this Implementing Rules and Regulations shall be
 a fine of not less than P50,000.00 or
declared unconstitutional or invalid, such judgment shall
 by imprisonment for a period not exceeding two years
not affect, invalidate or impair any other part hereof, but
or
shall be merely confined to the clause, provision,
 both.
paragraph or part directly involved in the controversy in
which such judgment has been rendered.
Implementing Rules and Regulations
Repealing Clause
Within ninety (90) days after the effectivity of RA No.
9298, the Board, subject to the approval of the
Any rule and regulation or resolution or part/s thereof
Commission and in coordination with the APO, shall adopt
inconsistent with the provisions of this Implementing Rules
and promulgate such rules and regulations to carry out the
and Regulations are hereby repealed or modified
provisions of RA No. 9298 and which shall be effective
accordingly.
fifteen (15) days following their publication in the Official
Gazette or in any major daily newspaper of general
Effectivity
circulation.
RA 9298 shall take effect after fifteen (15) days following
Interpretation of RA No. 9298 and its IRR
its publication in the Official Gazette or in any major daily
newspaper of general circulation.
Nothing in the RA No. 9298 and this Implementing Rules
and Regulations shall be construed to effect or prevent the
IRR was promulgated in September 2004 (within 90 days
practice of any other legally recognized profession.
from the effective date of RA 9298) and took effect after
fifteen (15) days following its publication in the Official
Gazette or in any major daily newspaper of general
circulation.
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