AUDITING

ORGANIZATIONS INFLUENTIAL TO THE ACCOUNTING PROFESSION (R.A. 9298)

A. REGULATORY GOVERNMENT AGENCIES

1. PRC – Board of Accountancy (BOA)
2. Commission on Audit (COA)
3. Bangko Sentral ng Pilipinas (BSP)
4. Insurance Commission (IC)
5. Bureau of Internal Revenue (BIR)

B. STANDARD-SETTING BODIES (per IRR, RA 9298, BR 71, Sec. 9)

1. Financial Reporting Standards Council (FRSC)
2. Auditing and Assurance Standards Council (AASC)

C. PRIVATE AGENCIES
1. Philippine Institute of Certified Public Accountants (PICPA)
2. Association of Certified Public Accountants in Public Practice (ACPAPP)

PRC – Board of Accountancy (BOA)

Composition:
 Chairman and six (6) members to be appointed by the President of the Philippines
 From a list of three (3) recommended persons for each position and ranked by the Commission
 From a list of five (5) nominees for each position submitted by PICPA or APO

Term of Office:
 Three (3) years, with maximum of two consecutive completed terms
 One (1) year interval before reappointment

Qualification:
 A natural-born citizen and a resident of the Philippines
 A duly registered CPA with at least ten (10) years of work experience in any scope of practice of accountancy
 Good moral character and not have been convicted of crimes involving moral turpitude
 Not have any pecuniary interest, directly or indirectly, in any school, college, university or institution conferring an academic
degree necessary for admission to the practice of accountancy or where review classes in preparation for the licensure
examination are being offered or conducted, nor shall he/she be a member of the faculty or administration thereof at time of
his/her appointment to the board
 Not be a director or officer of the APO or PICPA at the time of his/her appointment

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 An Educational Technical Council shall assist the BOA in its functions:

MEMBERSHIP: 6 Members + 1 Chair (a senior CPA – Academe)

REPRESENTATION:
BOA 1
APO:
Public Practice 1
Commerce and Industry 1
Academe (Private; Public) 2
Government 1 5
6

TERMS OF SERVICE: Three (3) years, renewable for another term

Its primary functions concentrate on developing and improving:

1. A minimum standard curriculum for BSA program
2. Teaching standards and qualifications
3. Quality of accountancy education
4. Periodic school performance evaluation

FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)

MEMBERSHIP: 14 members + 1 chair (a senior accounting practitioner)

REPRESENTATION OF SECTORS:
Board of Accountancy (BOA) 1
Securities and Exchange Commission (SEC) 1
Bangko Sentral ng Pilipinas (BSP) 1
Bureau of Internal Revenue (BIR) 1
Major organization (preparer and user of FS) 1
Commission on Audit (COA) 1
APO – CPA:
Public Practice 2
Commerce and Industry 2
Academe 2
Government 2 8
14

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 OBJECTIVE: Promulgation of accounting standards
SELECTION:
 By appointment of the PRC
 Upon recommendation of the BOA
 In coordination with APO
TERM OF SERVICE: Three (3) years, renewable for another term

AUDITING AND ASSURANCE STANDARDS COUNCIL (AASC)

MEMBERSHIP: 14 members + 1 chair (a senior public accounting practitioner)

Representation of Sectors:
Board of Accountancy (BOA) 1
Securities and Exchange Commission (SEC) 1
Bangko Sentral ng Pilipinas (BSP) 1
Major organization (preparer and user of FS) 1
Commission on Audit (COA) 1
APO – CPA:
Public Practice (S,M,LPs) 6
Commerce and Industry 1
Academe 1
Government 1 9
14

SELECTION:
 By appointment of the PRC
 Upon recommendation of the BOA
 In coordination with APO
TERM OF SERVICE: Three (3) years, renewable for another term
OBJECTIVES: Promulgation of auditing standards, practices, and procedures generally accepted in the Philippines
WORKING PROCEDURES:
 Assignments are given to working committees
 Exposure of drafts, if necessary and when appropriate
 Revised drafts are voted by a “majority” of the council members (in its rules of procedures, amended
November 2000, it is approved by “at least 10 members of the council”)
 Pronouncement are deemed operational upon approval by the Board

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 QUALITY ASSURANCE REVIEW COMMITTEE (QARC)

NUMBER OF MEMBERS: six (6) Members + one (1) Chairman = seven (7)

QUALIFICATION OF THE CHAIRMAN: Had been or presently a Senior Practitioner in Public Accountancy

REPRESENTATIVES:
Board of Accountancy (BOA) 1
APO (or PICPA):
Public Practice 2
Commerce and Industry 1
Academe 1
Government 1 5
6

TERM OF MEMBERS AND CHAIR: Three (3) years, renewable for another term

FUNCTIONS:
 Conduct QR on applicants for registration and render a report thereon
 Recommend to the Board the revocation of professional registration of CPAs who has not observed the QC

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SOURCE:
 Reviewer: Dr. Jackqui R. Moreno, CPA
CRC – ACE Review School, Inc.
Booklet ― May 2017 Batch

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(Based on Dr. Moreno’s discussion)

INTERNATIONAL STANDARD ON QUALITY CONTROL 1 HUMAN RESOURCES

 reasonable assurance that the firm and its personnel comply with professional  Such policies and procedures address the following personnel issues:
standards 1. Recruitment 5. Performance evaluation
 reports issued by the firm or engagement partners are appropriate 2. Capabilities 6. Promotion
3. Competence 7. Career development
ELEMENTS OF QUALITY CONTROL SYSTEM (LEAHEM) 4. Compensation 8. The estimation of personnel needs
(1) Leadership responsibilities for quality within the firm
ENGAGEMENT PERFORMANCE
(2) Ethical requirements
 Consultation
(3) Acceptance and continuance of client relationships and specific engagements
 Differences in opinion
(4) Human resources
 Quality review
(5) Engagement performance
(6) Monitoring COOPERATIVE AUDITORS
 All CPAs duly accredited by PRC-BOA are authorized to render external audit
FUNDAMENTAL PRINCIPLES OF PROFESSIONAL ETHICS (POPCI) of cooperatives
(1) Professional competence and due care
(2) Objectivity LIMITATION OF PUBLIC PRACTICE (CPAs)
(3) Professional behavior  Single practitioners and partnerships
(4) Confidentiality  Minimum of 3 years meaningful experience
(5) Integrity  Shall not include fictitious name nor specialization nor misleading as to
organizations
LEADERSHIP OF THE FIRM  SERVICES: Auditing, Tax Services, Management Services, Accounting
 Education and training Services
 Monitoring
 Process for dealing with non-compliance WORKING PAPERS
 Retained by CPAs
CONSIDERATION PRIOR TO ACCEPTANCE  Preferred for a period of 7 years (SEC)
 Integrity of the clients’
 Auditor’s competence to perform the engagement and capabilities, time and TEMPORARY EXEMPTION
resources to do so  CPA who have been out of the country for studies/work for at least 2 years
 Auditor’s compliance with ethical requirements prior to year of renewal

CRITICAL POINTS PERMANENT EXEMPTION

 Before accepting an engagement with a new client  65 year old registered professionals
 When deciding whether to continue an existing engagement FOREIGN POLICY
 When considering acceptance of a new engagement with an existing client  A person who is not a Filipino citizen may practice accountancy in Philippines
DOCUMENTATION  is necessary on how the issues were resolved. if his/her country admits Filipino citizens to the practice of same profession
without restriction

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SPECIAL PERMITS TO PRACTICE GROUP D
 Foreign CPA called for consultation, provided, that there is no Filipino CPA  Registered Corporations
qualified for such consultation ― Mandated by other regularity agencies
 Foreign CPA engaged as professor, lecturer or critic and his/her engagement is ― Have an external auditor accredited by the commission
confined to teaching only
 Foreign CPA who is an internationally recognized expert or with specialization BIR – CPAs ACCREDITATIONAS TAX PRACTITIONER
and his/her service is essential for the advancement of accountancy in the I. Qualifications
Philippines. (1) CPA with current professional license from PRC
(2) Good moral character as certified by at least 2 disinterested Lawyer or CPA
AUDITING STANDARDS & PRACTICES COUNCIL (ASPC) (3) Not have been convicted by final judgment of crime/moral turpitude
 Objective: Promulgation of auditing standards, practices and procedures which (4) Citizen of the Philippines
shall be generally accepted by the accounting profession in the (5) Completed at least 6 hours per year or total 18 hours for 3 years of CPE in
Philippines taxation from trainings/seminars conducted by BIR and obtained not more
 Established by PICPA and ACPAPP than a year prior to the application/renewal for accreditation
BOA = 1 PA firms = 7
SEC = 1 APO-PP INSURANCE COMMISSION
COA = 1 APO-CI (1) External auditors for consecutive period of 5 years/more shall have a one
ACPAPP = 2 APO-ED year period
Ex-officio from IAPC = 1 (2) External auditor shall have at least 5 years’ experience in regular audit of
which no less than 2 years thereof must have been in insurance commission
GROUP B audit.
 Pre-need companies (3) PRC license and Certificate of Registration as a public practitioner issue by
 Issues of registered timeshares, propriety and non-propriety membership BOA and PRC
certificates (4) No pending administrative and/or criminal case nor was previously convicted
for crime involving moral turpitude or fraud
 Investment Houses
 Brokers and Dealers of Securities
 Investment Companies IFAC
― International Federation of Accountants
 Government Securities Eligible Dealers (GSEDs)
― PICPA is a member
 Universal Banks Registered as Underwriters of Securities
― COE for Professional Accountants in Philippines is based on IFAC-COE
 Investment Company Advisers for PA
 Clearing Agency
In audit, everything is verifiable.
GROUP C
Assertion Based Assurance Report opposite Direct Reporting
 Financing Companies
 Lending Companies ASSURANCE – with conclusion/final say
 Transfer Agents NON-ASSURANCE – opinion/suggestions

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ASSURANCE ENGAGEMENT

ELEMENT 1 – Three-party Relationship

ELEMENT 2 – Subject Matter (information) – FS
ELEMENT 3 – Suitable Criteria
 Relevant
 Complete
 Reliable
 Neutral
 Understandable
COSO – Internal Control
Du Pont Analysis
ROA = ×
Edward Attman Z Correlation – FS Ratio
ELEMENT 4 – Evidence
 Evidence obtained directly by the practitioner is more reliable than
the evidence obtained indirectly or by inference
 Obtained from independent sources
 Exist in documentary form (paper, electronic, or other media)
PSA 580 APPENDIX – Management Representation
ELEMENT 5 – Written Report or Conclusion
 Long-form Reports
 Short-form Reports

 END 

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