RA 9298

The Philippine Accountancy

Act of 2004
Main Points Emphasized
The Professional Regulatory
Board of Accountancy
-the Body authorized by law to promulgate rules and regulations affecting the practice of
accountancy profession in the Philippines.
-it is under the supervision and control of the Professional Regulation Commission.

-Shall be composed of a Chairman and 6 Members.

-The Chairman shall be the presider in all the meetings of the Board, In case of vacancy, the
Vice-Chairperson shall do his duties.
-The Chairman and Members of the Board shall hold a term of 3 years.
-No person who has served 2 successive complete terms shall be eligible for reappointment
until a lapse of one year.

-The Board shall exercise the following specific powers, functions and responsibilities, as stated
in Art. 2 Sec. 9 of RA 9298
-The policies resolution, rules and regulations issued or promulgated by the Board shall be
subject to review and approval of the Commission.

Composition and Terms of Office

Powers and Functions of the Board

-The Board shall, at the close of each calendar year, submit an annual report to the President of
the Philippines.

Annual Report

Examination
Registration
Licensure
-the person who would be taking the exam should be: a Filipino Citizen, is of Good Moral
Character, Has a Bachelors Degree in Accountancy, and has not committed any criminal
offence involving Moral Turpitude.
-all applicants for registration for the practice of accountancy shall be required to Undergo and
Pass the CPA Licensure Exam.

-the scope of the examination shall cover the following topics: Theory of Accounts, Business
Law and Taxation, Management Services, Auditing Theory & Problems, Practical Accounting 1
& 2.
-a candidate must have a Gen. Ave. of 75% with no grade lower than 65% on subject, failure to
reach the cut-off grade would mean a retake for the candidate, after failing twice the candidate
is required to take a refresher course which would be a minimum of 24 units of the Board Exam
Subjects.
Practice of Accountancy
-no person shall practice accountancy or have the title of CPA in the Philippines, unless such
person has received his/ her Certificate of Registration or Professional License that is given by
the Board.
-CPAs registered before and at the time this law is passed shall be automatically registered
under the provision hereof.

-the practice of accountancy in the Philippines has also its limitations, which is elaborated on
Art. 4 Sec. 28 of RA 9298.
-firms, partnerships of CPAs and CPAs shall register with the Commission and the Board, which
is to be renewed every 3 years.
-all licensed CPAs shall obtain and use a seal of a design prescribed bearing the name,
registration number and the title.

Penal and Final Provisions

-any person who shall violate the provisions in this act or the provisions implemented by the
Board, shall upon conviction, be punished by a fine not less than P50,000 or be imprisoned for a
period not greater than 2 years.
-nothing in this act shall be construed to effect or prevent the practice or any legally recognized
profession.

-It shall be primary duty of the Commission and the Board to effectivity enforce the provisions of
this Act.
-The chairperson of the Professional Regulation Commission shall immediately include the
Commission's programs the implementation of this Act, the funding of which shall be included in
the annual General Appropriations Act.

CPA AUDITING NOTES - Philippine Framework for Assurance Engagements

Philippine Framework for Assurance Engagements provides the basic principles and guidance
with regards to the conduct of assurance engagements in the Philippines. The Framework is
divided into six major parts:
(1) Introduction,
(2) Definition and Objective of an Assurance Engagement,
(3) Scope of the Framework
(4) Engagement Acceptance
(5) Elements of an Assurance Engagement
(6) Inappropriate Use of the Practitioner's Name
I. INTRODUCTION

The framework provides a frame of reference for professional practitioners and others involved
in assurance engagements in the usage of assurance engagement standards (Philippine
Standards on Auditing (PSAs), Philippine Standards on Review Engagements (PSREs), and
Philippine Standards in Assurance Engagements (PSAEs)) and in determining which standard
apply to a particular engagement.

The Framework also guides the International Auditing and Assurance Standards Board (IAASB)
in the development of these standards and in clarifications and interpretations of standards.

The Framework in itself DOES NOT establish standards or provide procedural requirements for
the performance of assurance engagements. A practitioner must still refer to relevant PSAs,
PSREs or PSAEs in the conduct of assurance engagements.

In addition to this Framework and relevant practice standards (PSAs, etc), practitioners
performing assurance engagements are governed by the Code of Ethics for Professional
Accountants in the Philippines and Philippine Standards on Quality Control (PSQCs).

The Code of Ethics sets out the fundamental ethical principles that all professional accountants
are required to observe. Philippine Standards on Quality Control establish standards and
provide guidance on a firms system of quality control (systems to ensure that the firm's
performance of each assurance engagements complies with the minimum requirements set by
the standards).

II. DEFINITION AND OBJECTIVE OF AN ASSURANCE ENGAGEMENT

An ASSURANCE ENGAGEMENT means an engagement in which a practitioner (1)

EXPRESSES A CONCLUSION designed to (2) ENHANCE THE DEGREE OF CONFIDENCE of
the intended users (3) OTHER THAN THE RESPONSIBLE PARTY (4) about the OUTCOME
OF EVALUATION OR MEASUREMENT of a subject matter AGAINST CRITERIA.

An example of an assurance engagement is a financial statements audit in which the external

auditor (the practitioner) reports on whether the company's financial position, performance and
cash flows (the subject matter) as expressed in its financial statements (the outcome) is free
from mistatements due to error or fraud in all material respects (the expression of the
conclusion) in accordance with PFRS (the criteria upon which the subject matter is being
evaluated) which is addressed to the company's board of directors and/or government agencies
(the intended users of the report other than the responsible party which in this case is the
company's management).

Assertion-based engagements vs Direct reporting engagements

Assertion-based engagements are assurance engagements wherein the responsible party has
performed the measurement or evaluation of subject matter and the subject matter information
is in the form of an assertion by the responsible party that is made available to the intended
users.

Direct reporting engagements are assurance engagements wherein the practitioner directly
performs the evaluation or measurement of the subject matter or obtains a representation from
the responsible party that has performed the evaluation or measurement that is not available to
the intended users.

Assertion-based engagements differ from direct reporting engagement in terms of who has
performed the evaluation or measurement of a subject matter.

Reasonable assurance engagements vs Limited assurance engagements

The objective of a reasonable assurance engagement is a reduction in assurance engagement

risk to an acceptably low level in the circumstances of the engagement as the basis for a
positive form of expression of the practitioners conclusion.

The objective of a limited assurance engagement is a reduction in assurance engagement risk

to a level that is acceptable in the circumstances of the engagement, but where that risk is
greater than for a reasonable assurance engagement, as the basis for a negative form of
expression of the practitioners conclusion.

A reasonable assurance engagement differ from limited assurance engagement in the

confidence level being expressed in the practitioner's conclusion and hence, conclusions of
each engagement are different.

A reasonable assurance is less than absolute assurance. Achieving absolute assurance is

rarely attainable or cost beneficial due to:
1. Use of selective testing
2. Inherent limitations of internal control
3. Evidence available to practitioner is more likely to be persuasive rather than conclusive
4. Use of judgment in planning, gathering and evaluating evidence and forming conclusion.

III. SCOPE OF THE FRAMEWORK

Not all engagements performed by practitioners are assurance engagements. Other frequently
performed engagements that do not meet the above definition (and therefore are not covered by
this Framework) include:

Engagements covered by Philippine Standards for Related Services, such as agreed-upon

procedures engagements and compilations of financial or other information.

The preparation of tax returns where no conclusion conveying assurance is expressed.

Consulting (or advisory) engagements, such as management and tax consulting.

When an assurance engagement is part of a larger consultancy engagement, this Framework is

relevant only to the assurance portion of the engagement.

The following engagements, which may meet the definition of an assurance engagement, NEED
NOT be performed in accordance with this Framework:

(a) Engagements to testify in legal proceedings regarding accounting, auditing, taxation or other
matters; and

(b) Engagements that include professional opinions, views or wording from which a user may
derive some assurance, if ALL of the following apply:
(i) Those opinions, views or wording are merely incidental to the overall engagement;
(ii) Any written report issued is expressly restricted for use by only the intended users specified
in the report;
(iii) Under a written understanding with the specified intended users, the engagement is not
intended to be an assurance engagement; and
(iv) The engagement is not represented as an assurance engagement in the professional
accountants report.

Reports on Non-assurance Engagements

A practitioner reporting on a non-assurance engagement (within the scope of this

Framework), clearly distinguishes that report from an assurance report.

This can be achieved by avoiding, for example:

Implying compliance with this Framework, PSAs, PSREs or PSAEs.
Inappropriately using the words assurance, audit or review.
Including a statement that could reasonably be mistaken for a conclusion designed to enhance
the degree of confidence of intended users about the outcome of the evaluation or
measurement of a subject matter against criteria.

When the practitioner and the responsible party agree to apply this Framework to an
engagement when the responsible party are the only intended users, the practitioners report
includes a statement restricting the use of the report to the responsible party.

IV. ENGAGEMENT ACCEPTANCE

A practitioner accepts an assurance engagement ONLY where his/her preliminary knowledge of

the circumstances indicates that:
1. Relevant ethical requirements are met
2. Engagement exhibits ALL:
a. Subject matter is appropriate.
b. Criteria is suitable and available to intended users.
c. Practitioner has access to sufficient evidence to support his/her conclusion.
d. Conclusion is in the form appropriate to the engagement and is in a written report.
e. There is rational purpose for the engagement. Engagements with scope limitations or
negotiated in inappropriate manner is unlikely to have a rational purpose.

PSAs, PSREs and PSAEs include additional requirements which need to be satisfied before
accepting an assurance engagement.

When a potential engagement cannot be accepted as an assurance engagement, the

practitioner may still accept such as a consulting or agreed upon procedures engagement.

The practitioner cannot change an assurance engagement to non-assurance or a reasonable

assurance to a limited assurance without reasonable justification. If such change is made,
evidence gathered is not disregarded.

V. ELEMENTS OF AN ASSURANCE ENGAGEMENT

1. Three-party relationship
An assurance engagement involves 3 separate parties - practitioner, responsible party and
intended users. The responsible party and intended users may be from same or different
entities. The responsible party in a direct reporting engagement is responsible for the subject
matter or in an assertion-based engagement is responsible for the assertions.

Intended users are the persons to whom the report is being addressed. Practitioner is
responsible for determining the nature, timing and extent of procedures and is required to
pursue any matter in question whether material modification should be made to the subject
matter information.

When engagements are designed for specified intended users or a specific purpose, the
practitioner shall consider including a restriction in the report that limits its use to those users or
purpose.

2. Appropriate subject matter

An appropriate subject matter identifiable and capable of consistent evaluation or measurement

against the criteria and can be subjected to procedures for gather sufficient and appropriate
evidence to support conclusion.

3. Suitable criteria

A criteria is suitable if it is relevant (can assists users in decision making), complete (relevant
factors that can affect a conclusion are not omitted), reliable (allows for evaluation or
verification), neutral (free from bias) and understable (comprehensive, clear and not subject to
different interpretations).

Criteria need to available to intended users, either publicly, inclusion in presentation of subject
matter information, inclusion in the assurance report or by general understanding, to allow them
to understand how subject matter was measured or evaluated.

4. Sufficient appropriate evidence

Practitioner plans and performs the engagement with professional skepticism to obtain sufficient
appropriate evidence about whether subject matter information is free from mistatement.
Practitioner considers materiality, assurance engagement risk and the quality and quantity of
available evidence when determining nature, timing and extent of evidence-gathering
procedures.

Professional skepticism means practitioner makes critical assessment, with a questioning mind,
of the validity of evidence obtained and is alert to anything that might contradict or bring into
question the reliability of the evidence.

Sufficiency of evidence is affected by the risk of the subject matter (i.e., more risk = more
number of evidence) or quality of the evidence (i.e., higher evidence quality = lesser number of
evidence).

Appropriateness of evidence is influenced by its reliability and relevance. In general, evidence

is more reliable if obtained from independent sources as compared to internally-generated
evidence, evidence obtained from internal process where contols are effective are more reliable
that those obtained from processes where controls are not effective, evidence obtained directly
by practitioner is more reliable than evidence obtained indirectly or by inference, evidence in
documentary form is more reliable than those in oral representations, and evidence in original
form are more reliable than evidence provided by photocopies or facsimiles.

5. Written assurance report in appropriate form

PSAs, PSREs and PSAEs establish basic elements for reports in a particular assurance
engagement. In addition, practitioner considers other reporting responsbilities when
appropriate. A practitioner does not express unqualified (clean) conclusion when these
circumstances exist and impact to the conclusion is material:
a. Scope limitation - practitioner expresses either qualified or disclaimer depending on
materiality of the limitation. In some cases, practitioner considers withdrawing from the
engagement.
b. Subject matter information or assertion is not fairly stated as against criteria - practitioner
expresses either qualified or adverse opinion.
c. When it is discovered after accepting the engagement that the criteria is unsuitable or subject
matter is inappropriate, the practitioner expresses qualified, adverse or disclaimer of opinion
depending on the pervasiveness of the issue. In some cases, the practitioner considers
withdrawing from the engagement.

VI. INAPPROPRIATE USE OF PRACTITIONER'S NAME

If the practitioner learns that a party is inappropriately using the practitioner's name in a subject
matter, he/she should requires the party to cease doing so. Practitioner also considers other
steps needed such as informing third party users of the inappropriate use or seeking legal
advice.