PSBA - AT Lecture 1 Overview of Auditing (2SAY2021)
PSBA - AT Lecture 1 Overview of Auditing (2SAY2021)
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1. Auditing and Assurance Standards Council (AASC) has its mission to promulgate the auditing standards,
practices and procedures which shall be generally accepted by the accounting profession in the
Philippines.
2. To facilitate the preparation by the AASC of its pronouncements and to attain uniformity of those
pronouncements with international accounting standards , the AASC has approved the adoption of the
International Standards on Auditing (ISAs), International Standards on Assurance Engagements (ISAEs),
International Standards on Review Engagements (ISREs) and International Standards on Related Services
(ISRSs) issued by International Auditing and Assurance Board (IAASB) created by the International
Federation of Accountants (IFAC).
4. AASC was created by the Professional Regulation Commission upon the recommendation of the Board of
Accountancy (BOA) to assist the BOA in the establishment and promulgation of auditing standards in the
Philippines. The AASC replaced the Auditing Standards and Practices Council (ASPC) which was
established by the Philippine Institute of CPAs (PICPA) and the Association of CPAs in Public Practice
(ACPAPP) and previously set generally accepted auditing standards in the Philippines, also based on
International Standards and Practice Statements.
They also represent “pronouncements on generally accepted auditing standards, interpretations and
opinions issued by the AASC to apply whenever an independent examination of financial statements
of any entity, whether profit-oriented or not, for the purpose of expressing an opinion thereon. They
may have application, as appropriate, to other activities of the auditor.
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6. The nature of the Philippine Standards issued by the AASC requires professional accountants to exercise
professional judgment in applying them. In exceptional circumstances, a professional accountant may
judge it to depart from a basic principle or essential procedure of an Engagement Standard to achieve
more effectively the objective of the engagement. When such a situation arises, the professional
accountant should be prepared to justify the departure.
9. Exposure period for the proposed Philippine Standard or Practice Statement is generally not shorter than 90
days. Exposure draft is widely distributed to interested organizations and persons for comment. The
exposure draft shall also be published in the PICPA Accounting Times and ACPAPP Bulletin to give it
further exposure.
10. Issuance of exposure drafts requires approval by a majority of the members of the Council; issuance of the
Philippine Standards and Practice Statements, as well as interpretations, requires approval of at least ten
(10) members.
11. Each final Philippine Standard and Practice Statement, as well as interpretations, if deemed appropriate,
shall be submitted to the Professional Regulation Commission (PRC) through the Board of Accountancy
(BOA) for approval after which the pronouncements shall be published in the Official Gazette. After
publication, the AASC pronouncement becomes operative from the effective date stated therein.
12. Numbering of Philippine Standards and Practice Statements that are Philippine specific and are not
adopted from International pronouncements will be numbered consecutively with suffix “Ph” as follows:
∙ For Philippine Standards – starting from 100Ph
∙ For Philippine Practice Statements – starting from 1000Ph
Philippine Standards and Practice Statements adopted from International pronouncements will use the same
numbers as their counterpart International pronouncements.
Assurance is a broad concept. Assurance services are designed to improve the quality of decision making
by improving confidence in the information on which decisions are made; the process by which that
information is developed, and the context in which the information is presented to users. The field of
assurance services is much broader than the traditional audits of financial statements.
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 practitioner’s
conclusion.
According to Structure
a. An independent audit engagement provides a reasonable (but not absolute) level of assurance that
the subject matter (financial statements) is free of material misstatement.
b. A review engagement provides a moderate level of assurance that the information subject to review is
free from material misstatement; this is expressed in the form of negative assurance (i.e. “nothing has
come to the auditor’s attention”). For the purpose of expressing negative assurance in the review
report, the auditor should obtain sufficient appropriate evidence primarily through inquiry and
analytical procedures to be able to draw conclusions
In direct reporting engagement, the practitioner either 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. The subject matter is provided to the
intended users in the assurance report.
Criteria are made available to the intended users in one or more of the following ways: a.
Publicly
b. Through inclusion in a clear manner in the presentation of the subject matter information c.
Through inclusion in a clear manner in the assurance report
d. By general understanding, for example the criterion for measuring time in hours and minutes.
Criteria may also be available to specific intended users, for example, the terms of a contract, or criteria
issued by an industry association that are available only those in the industry. When identified criteria are
available only to specific intended users, or are relevant only to a specific purpose, use of the assurance
report is restricted to those users or for that purpose.
In a reasonable assurance engagement, the practitioner expresses the conclusion in the positive form,
for example: “In our opinion internal control is effective, in all material respects, based on XYZ criteria.”
This form of expression conveys “reasonable assurance”.
In a limited assurance engagement, the practitioner expresses the conclusion in the negative form, for
example: “Based on our work described in this report, nothing has come to our attention that causes us
to believe that the internal control is not effective, in all material respects, based on XYZ criteria. This
form of expression conveys a level of “limited assurance” that is proportional to the level of the
practitioner’s evidence –gathering procedures given the characteristics of the subject matter and other
engagement circumstances described in the assurance report
Assurance Engagements
1. Audits – high level of assurance that the financial statements are free of material misstatements
2. Reviews – limited investigation of much narrower scope than the audit and undertaken for the purpose
of providing limited (negative) assurance that the statements are presented in accordance with
identified Financial Reporting Standards. For example, a financial institution may require debtors to
engage CPAs to provide assurance about the debtor’s compliance with certain covenant
provisions stated in the loan agreement. It may also include providing assurance about the
effectiveness of a client’s internal controls over financial reporting,
review of investment performance statistics for organizations such as mutual funds and
computer software review.
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∙ CPA Web Trust – provide assurance to users of web sites in the Internet. The CPA’s electronic Web
Trust Seal is affixed to the website. This seal assures the user that the website owner has met
established criteria related to business practices, transaction integrity and information processes.
Web Trust is an attestation service and Web Trust seal s a symbolic representation of the CPA’s
report on management assertions about its disclosure of electronic commerce practices.
∙ SysTrust – provide assurance on any defined electronic system. The system components include its
infrastructure, software, personnel, procedures and data, In a SysTrust engagement, the CPA is
engaged to examine only that a client maintained effective controls over the system based on the
Trust Services Principles and Criteria. The practitioner performs tests to determine whether those
controls were operating as effectively during the
specified report.
Both WebTrust and SysTrust are designed to incorporate a seal management process by which
a seal (logo) may be included on a client’s Web site as an electronic representation of the
practitioner’s unqualified WebTrust report. If a client wishes to use the seal (logo), the engagement
must be updated at least annually. Also, the initial reporting period must include at least two
months.
∙ Eldercare Plus – focuses on the needs of the elderly and whether caregivers are providing services
that meet the specified objectives or at an acceptable level.
∙ Business Performance Measurement Services – provide assurance about whether financial and
non-financial information being reported from the entity’s performance measurement system (e.g.
balanced scorecard) is reliable and whether the performance measures being used are accurately
leading the entity toward meeting its strategic goals and objectives.
∙ Corporate Sustainability Reporting – also known as triple-bottom line reporting involves reporting
of non-financial and financial information to a broader set of stakeholders than just shareholders.
The reports inform stakeholder groups of the reporting organization’s ability to manage key risks.
∙ Information Reliability Services – provide assurance that information system has been designed
and operated to produce reliable data including tests of the system to determine whether the
system protects against potential causes of data defects
∙ Risk Assessment Services – involves the study of the link between risks and organization’s vision,
mission, objectives and strategies and development of new and relevant measures to address
these risks.
∙ CPA Performance View. This service is intended to demonstrate that the public accountants can
aide client firms in developing an integrated set of financial and non financial performance and
measures to employ in managing the client’s business. It also identifies and measures key
activities that are critical to the entity.
∙ Health Care Performance Measurement – involves the evaluation of the quality of health care,
medical services and outcome.
1. Agreed-upon procedures – an engagement in which the auditor is engaged to carry out those
procedures of an audit nature to which the auditor and the entity and any appropriate third parties have
agreed and to report on factual findings. The recipients of the report must form their own
conclusions from the report issued by the auditor. The report is restricted to those parties who have
agreed to the procedures to be performed since others, unaware of the results may misinterpret the
results.
4. Management consulting and other advisory services – professional services that employ the
practitioner’s technical skills, education, observation, experiences and knowledge of the analytical
approach and procedures used in consulting engagement. Those procedures may involve determining
client objectives, fact-finding definition of problems or opportunities, evaluation of alternatives,
formulation of proposed action, and communication of results, implementation and follow-up.
Assurance engagement risk is the risk that the practitioner expresses an inappropriate conclusion when
the subject matter information is materially misstated.
In general, assurance engagement risk can be represented by the following components, although not
all of these components will necessarily be present or significant for all assurance engagements:
a) The risk that the subject matter information is materially misstated, which in turn consists of: i)
Inherent risk: the susceptibility of the subject matter information to a material misstatement,
assuming that there are no related controls; and
ii) Control risk: the risk that a material misstatement that could occur will not be prevented, or
detected and corrected, on a timely basis by related internal controls. When control risk is
relevant to the subject matter; some control risk will always exist because of the inherent
limitations of the design and operation of internal control; and
b) Detection risk: the risk that the practitioner will not detect a material misstatement that exists.
The degree to which the practitioner considers each of these components is affected by the
engagement circumstances, in particular by the nature of the subject matter and whether a
reasonable assurance or a limited assurance engagement is being performed.
Introduction to Auditing
Auditing is a systematic process of objectively obtaining and evaluating evidence regarding selected
assertions about economic actions and events to ascertain the degree of correspondence between
those assertions and established criteria and communicating the results to interested users.
Key elements:
5. Degree of correspondence between those assertions and established criteria – the purpose of the audit is to
determine conformity with some specified criteria. To have unbiased and clear communication, criteria
must exist whereby independent observers can assess whether or not such assertions are appropriate.
When management prepares financial statements, they assert those statements are fairly presented with
GAAP. Generally accepted accounting principles become the criteria by which “fairness” of a financial
statement presentation is judged. Other criteria exist for other types of audits.
6. Communicating the results – the results must be communicated to interested parties. Communication of
audit results to management and interested third parties completes the audit process. To minimize
understandings, this communication generally follows a prescribed format by clearly outlining the nature of
the work performed and the conclusions reached. Most audits result in audit reports that do not contain any
reservations about the fairness of the organization’s presentation of its financial statements. This is
referred to as an unqualified audit report.
b. Is independent of management and the third-parties, and can thus provide an objective opinion on the
fairness of financial statements.
PSA 200 Revised and Redrafted, “Overall Objectives of the Independent Auditor and the Conduct of an
Audit in Accordance with PSAs” sets out the overall objective of the independent auditor, and explains the
nature and scope of an audit designed to enable the independent auditor to meet those objectives.
The general purpose of an audit is to enhance the credibility of the financial statements, thus ensuring the user
of the financial statements can make reasonable, informed decisions about an entity. This is achieved by the
expression of an opinion by the auditor on whether the information contained within the financial statements is
presented fairly, in all material respects, in accordance with applicable financial reporting framework. Auditors
who follow the PSAs and the ethical guidelines will be able to form an opinion provided evidence is available to
support their opinion. If the evidence is lacking, the auditor will not able to form an opinion and should modify
their report accordingly.
In conducting an audit of financial statements, the overall objectives of the auditor are:
a. To obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether
the financial statements are prepared, in all material respects, in accordance with an applicable financial
reporting framework,
b. To report on the financial statements, and communicate as required by the PSAs, in accordance with the
auditor’s findings.
- The financial reporting framework adopted by management and, where appropriate, those charged with
governance in the preparation and presentation of the financial statements that is acceptable in view of the
nature of the entity and the objective of the financial statements, or that is required by law or regulation.
“Fair presentation framework” is used to refer to a financial reporting framework that requires
compliance with the requirements of the framework and
1. Acknowledges explicitly or implicitly that, to achieve fair presentation of the financial statements, it may
be necessary for management to provide disclosures beyond those specifically required by the
framework.
2. Acknowledges explicitly that it may be necessary for management to depart from a requirement of the
framework to achieve fair presentation of the financial statements. Such departures are expected to be
necessary only in extreme rare circumstances.
“Compliance framework” is used to refer to a financial reporting framework that requires compliance with
the requirements of the framework, but does not contain the acknowledgements in 1 or 2 above.
Scope of an Independent Audit
The term “scope of the audit” refers to the audit procedures deemed necessary in the circumstances to achieve
the objective of the audit. The procedures required to conduct an audit in accordance with PSAs should be
determined by the auditor having regard to the requirements of PSAs, relevant professional bodies, legislation,
regulations and where appropriate, the terms of the audit engagement and reporting requirements.
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Types of Procedures
Types of Audits
2. Operational Audit
- Also known as Management Audit and Performance Audit are examination of all or part of an
organization for the purpose of determining the effectiveness and/or efficiency of its operations. -
Management implies that the information obtained in the audit process is useful to management. -
Performance implies an evaluation of the performance of persons or units executing the entity’s
objectives.
- Effectiveness is the measure of how well an entity or unit of an entity achieves its goal or purpose.
- Efficiency is the measure of minimization of cost in the achievement of its objective.
Characteristics:
a. Auditors performing the audit are independent of the activity they audit.
b. The audit report is directed to an official or department within the organization that employs the auditor.
3. Compliance Audit
- Determination of whether the auditee is following specific procedures or rules set down by some higher
authority.
- Are performed by auditors independent of the activity being audited.
- Results are generally reported to someone within the organization/unit audited rather than a broad
spectrum of users.
4. Government audit – determination of whether government funds are being handled properly and in
compliance with existing laws and whether the programs are being conducted efficiently and economically.
▪ Financial and compliance audit – determines whether financial operations are properly conducted, the
financial reports of an audited entity are presented fairly, and the entity has complied with applicable
laws and regulations.
▪ Economy and efficiency audit – determines whether the entity is managing and utilizing its resources
economically and efficiently, the causes of inefficiencies or uneconomical practices and whether the
entity has complied with laws and regulations concerning matters of economy and efficiency.
▪ Programs results – determines if the desired results and benefits are being achieved, if the objectives
established by the legislative or other authorizing body are being met and if the agency has considered
alternatives which might yield results at a lower cost.
The Commission on Audit (formerly General Auditing Office) is recognized as the Supreme Audit
Institution in the Republic of the Philippines. It is the highest and final authority in state auditing,
Three Main Divisions of State Audit (based on 1984 Primer on Government and Auditing in the
Philippines)
a. Compliance Audit - examination, audit, and settlement in accordance with laws and regulations. b.
Financial Audit – audit of the accounting, and financial system and controls to ensure reliability of recorded
financial data. The objective of this audit is the expression of an opinion on the fairness with which the
financial condition and results of operation are presented
c. Performance audit – objective examination of the financial and operational performance of an
organization, program, activity or function and is oriented towards opportunities for greater economy,
efficiency and effectiveness.
5. Internal audit – an independent, objective assurance and consulting activity designed to add value and
improve an organization’s operations. It helps an organization to accomplish its objectives by bringing a
systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control
and governance processes.
a. Management audit - future-oriented, independent, systematic evaluation of the activities of all levels of
management performed by internal auditor for the purpose of improving the organizational profitability
and increasing attainment of other organizational objectives.
b. Operational audit – future-oriented, independent, systematic evaluation performed by internal auditor for
management of the operational activities controlled by top, middle and lower-level management for the
purpose of improving organizational profitability and increasing attainment of other organizational
objectives.
c. Financial audit – historically oriented, independent evaluation performed by the internal auditor for the
purpose of ensuring the fairness, accuracy, and reliability of the financial data.
6. Comprehensive audit – usually includes the components of compliance, performance and financial
statements audit.
7. Integrated audit - covers financial statements audit and internal control audit.
8. Environmental audit – covers environmental issues which may have an impact on the financial statements.
9. Forensic audit (Fraud Audit) – refers to the examination of evidence regarding an assertion to determine
its correspondence to established criteria carried out in a manner suitable to the court.
Types of auditors
1. External (independent) auditors – public accountants, both individuals and firms, who perform audit, tax,
consulting and other types of services for external clients.
2. Internal auditors – perform services for a single organization for which they are employed on a full time basis,
typically reporting to the board of directors who are the primary users of their work. 3. Government auditors –
are full-time employees of the government tasked to determine compliance with laws, statutes, policies and
procedures.
4. Forensic auditors – financial auditing specialists who focus on unearthing the truth and/or providing evidence
in a legal/financial disputes and/or irregularities (including fraud), as well as providing preventive advice on
the subject.
1. Pre-engagement
2. Audit Planning
3. Study and Evaluation of Internal Control
4. Substantive Testing
5. Completing the Audit
6. Issuance of the Audit Report
7. Post-audit Responsibilities
a. The auditor should comply with the “Code of Professional Ethics for Certified Public Accountants”
promulgated by the Board of Accountancy and approved by Professional Regulations Commission.
Part A of the Code sets out the fundamental ethical principles that all professional accountants are
required to observe, including: (P O P I C)
1. Professional competence and due care;
2. Objectivity;
3. Professional behavior;
4. Integrity and
5. Confidentiality
b. The auditor should conduct an audit in accordance with Philippine Standards on Auditing.
c. The auditor should plan and perform the audit with an attitude of professional skepticism recognizing that
circumstances may exist which may cause the financial statements to be materially misstated.
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Information Risk – risk that information upon which a business decision is made is inaccurate,
Core Values are the essential and enduring beliefs that a CPA professional upholds over time. These enable
the CPAs to retain their unique character and value as they embrace the changing dynamics of the global
economy.
1. Integrity
2. Competence
3. Lifelong Learning
4. Objectivity
5. Commitment to Excellence
6. Relevance in the Global Marketplace
Core Competencies are the unique combination of human skills, knowledge and technology that provides
value and results to users.
1. Communication Skills
2. Leadership Skills
3. Critical Thinking and Problem – Solving Skills
4. Anticipating and Serving Evolving Needs
5. Synthesizing Intelligence to Insight
6. Integration and Collaboration
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1. Sole Proprietorships
2. Partnerships.
1. Partner
- Concerned about the overall quality of each audit and ultimately responsible for the resolution of technical
matters, such as application of accounting principles or which auditing procedures are to be performed. An
audit partner signs the audit report and is generally involved in maintaining client relationships, planning
audits and evaluating the audit findings.
2. Manager/Supervisor
- Administers important aspects of audit engagements, scheduling the audit work to be done with client
personnel, assigning work to audit staff, supervising audit staff and reviewing staff work. 3. In Charge (Senior)
Auditor
- Works under the direction of audit managers and assist in the administration of audit. He participates in
the audit planning and provides supervision to staff auditors.
4. Junior or staff assistant
- Performs various audit procedures that relate to a variety of aspects of a client’s activities and gathers
audit evidence to use as a basis for the audit reports
Factors That Influence the Setting of Audit Fees - (Fair reflection of the value of work)
1. Risks involved.
2. Complexity.
3. Time and volume involved.
4. Responsibility involved.
5. Conditions of accounting records and supporting documents.
6. Cooperation to be extended by the client’s staff.
1. Per Diem or hourly rate basis. (also known as Actual Time charge basis)
- Billing is done on the basis of actual time spent by the staff multiplied by the hourly rates agreed upon.
2. Flat fee basis (Lump-sum).
- Client is billed a flat but all-inclusive pre-arranged amount for the entire engagement. 3. Maximum fee
basis (similar to per diem or hourly rate but a maximum limit is imposed by the agreement between the client
and the auditing firm).
4. Retainer fee basis
- Uniform monthly retainer fee and an additional amount as annual charge upon submission of the
audit report).
The agency that administers implements and enforces regulatory policies of the National Government with
respect to the regulation and licensing of the various professions under its jurisdiction including the
maintenance of professional standards and ethics and the enforcement of the rules and regulations
thereto. It derives its authority from RA 8981 or PRC Modernization Act of 2000.
It is the body that regulates the practice of accountancy in the Philippines and empowered to administer
the Philippine Accountancy Act of 2004 or RA 9298.
a. It is composed of a chairman and six (6) members to be appointed by the President of the Phils. from a
list of three (3) recommendees for each position ranked by the Commission from a list of five (5)
nominees for each position submitted by the APO.
b. The chairman and members of the BOA shall hold office for a term of three (3) years.
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c. Any vacancy occurring within the term shall be filled for the unexpired portion of the term only. No
person who has served two (2) successive complete terms as chairman or member shall be eligible for
reappointment as chairman or member until the lapse of one (1) year.
d. Appointment to fill up an unexpired term is not to be construed as a complete term. e. No
person shall serve the BOA for more than twelve (12) years.
Qualifications
1. Must be a natural-born citizen and resident of the Philippines.
2. Must be a duly registered CPA with at least ten (10) years of work experience in any scope of practice of
accountancy.
3. Must be of good moral character and must not have been convicted of crimes involving moral turpitude.
4. Must not have any pecuniary interest, directly or indirectly, in any school, college, university or institution
conferring an academic degree necessary for the admission to the practice of accountancy.
5. Must not be a Director or Officer of the APO at the time of his appointment.
The government agency that regulates the registration and operations of corporations, partnerships, and
other forms of associations in the Philippines.
The overall objective of SEC is to assist in providing investors with reliable information upon which to make
investment decisions. It has considerable influence in setting financial reporting standards for specifying
reporting requirements considered necessary for fair disclosure to investors. It is represented in standard-
setting bodies such as PFRSC, AASC, and in the Philippine Interpretations Committee (PIC). The SEC has
power to establish roles for any CPA associated with audited financial statements submitted to the
Commission.
SEC is composed of a chairman and four (4) commissioners for a term of seven (7) years. 4.
This constitutional commission has the power, authority, and duty to examine, audit, and settle all accounts
pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in
trust by, or pertaining to, the government, or any of its subdivisions, agencies, or instrumentalities,
including government-owned or controlled corporations and recommend measures to improve the
efficiency and effectiveness of government operations.
The COA is composed of a chairman and two (2) commissioners. Together they are called the
“Commission Proper” appointed by the President of the Philippines with the consent of Commission on
Appointment for a term of seven (7) years.
The primary objective of this government agency is to maintain price stability conducive to a balanced and
sustainable economic growth. It also aims to promote and preserve monetary stability and the convertibility
of the peso.
The powers and functions of the BSP shall be exercised by the BSP Monetary Board composed of seven
(7) members appointed by the President of the Philippines for a term of six (6) years.
This agency aims to raise revenues for the government through the effective and efficient collection of
taxes, provide quality service to taxpayers and enforce tax laws in an impartial and uniform manner.
7. Insurance Commission
Its mandate is to regulate and supervise the insurance industry for the promotion of national interest.
Professional Organizations
This is the accredited national professional organization of CPAs in the Philippines (October 2, 1975 SEC
Accreditation No. 15). It serves all members in the different sectors of the accounting profession which
include public practice, education, government and commerce and industry, through a set of technical and
social services. It aims to maintain a responsive organizational structure, committed leadership, effective
professional development programs abreast with state-of-art technology, strict implementation of
professional ethics, promotion of high standards of accounting education and advocacy and participation in
relevant national issues.
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PICPA, being a member body of the International Federation of Accountants (IFAC) had initiated through
PFRSC the adoption of IASs in the Philippines.
On December 26, 2004, the PRBOA upon the recommendation of the PFRSC’s approved adoption in the
Philippines of all the new, revised and improved IASs and IFRSs effective January 1, 2005 and designated
them as Philippine Financial Reporting Standards (PFRSs).
Sectoral Organizations
a. Association of CPAs in Public Practice (ACPAPP)
b. Association of CPAs in Education (ACPAE)
c. Association of CPAs in Commerce and Industry (ACPACI)
d. Government Association of CPAs (GACPA)
A new standard setting body that is intended to replace the Accounting Standards Council (ASC) through
the Interpreting Rules and Regulations (IRR) of the Philippine Accountancy Act of 2004. It is responsible
for the promulgation of generally accepted accounting principles in the Philippines.
The PFRSC shall be composed of fifteen (15) members with a Chairman who had been or presently a
senior accounting practitioner in any of the scope of accounting practice and fourteen (14)
representatives/members from the following:
Chairman 1
Representatives/Members
a. Board of Accountancy 1
b. Securities and Exchange Commission 1
c. Bangko Sentral ng Pilipinas 1
d. Bureau of Internal Revenue 1
e. A major organization composed of preparers
and users of financial statements 1
f. Commission on Audit 1
g Accredited National Professional Organization of CPAs
Public Practice 2
Commerce and Industry 2
Academe/Education 2
Government 2 8
____ ____
Total 15
____
Term is three (3) years and renewable for another term
This is also an independent body. Its main task is to define the auditing standards and procedures that will
govern the examination of financial statements and shall guide the members of the profession in the
Philippines.
The AASC shall be composed of seventeen (17) members with a Chairman who had been or presently a
senior practitioner in public accountancy and sixteen (16) representatives/members from various sectors of
the profession:
Chairman 1
Representatives/Members
a. Board of Accountancy 1
b. Securities and Exchange Commission 1
c. Bangko Sentral ng Pilipinas 1 d. An association or organization of CPAs in active
public practice of accountancy 1
e. Commission on Audit 1 f Accredited National Professional Organization of CPAs
Public Practice 9
Commerce and Industry 1
Academe/Education 1 11
____ ____
Total 17 *** ____
*** In 2009, the Board of Accountancy amended the composition of the AASC.
It is the worldwide organization for the accountancy profession. Founded in 1977, it is comprised of 175
members and associates in 130 countries worldwide, representing approximately 3 million accountants in
public practice, industry and commerce, the public sector, and education. Primary activities:
a. Serving the public interest.
b. Contributing to the efficiency of global economy
c. Providing leadership and spokesmanship
This board is began its operations in 2001 and is based in London. It is composed of fourteen board (14)
members of whom are full-time and is committed to developing in the public interest, a single set of high
quality, global accounting standards that require transparent and comparable information in general-
purpose financial statements.
In April 2001, the IASB assumed from the IASC the responsibility for setting international accounting
standards. IASB adopted the IASs issued by the IASC and retained designation and format of the
Standards. New standards issued by the IASB were designated as International Financial Reporting
Standards (IFRS). In December 2003, the IASB issued 15 revised IASs, withdrew IAS 15, “Information
Reflecting the Effects of Changing Prices” and issued IFRS 1 to 5.
It is a standing committee of the Council of IFAC and is responsible for the development and issuance on
behalf of the Council, standards and statements on a variety of audit and attest functions in order to
improve the degree of uniformity of auditing practices and related services throughout the world. IASPC
issues the International Standards in Auditing (ISAs) that are to be applied in the audit of financial
statements, audit of other information and related services.
Other Bodies
1. Education Technical Council
This council was created by PRC upon the recommendation of BOA to assist the Board in carrying out its
powers and functions provided in the RA 9298 in the attainment of objective of continuously upgrading the
accountancy education in the Philippines to make the Filipino CPAs globally competitive.
The ETC shall be composed of seven (7) members with a Chairman who had been or presently a senior
practitioner in the academe/education and six (6) representatives from the following: Chairman 1
Representatives/Members
a. Board of Accountancy 1
b Accredited National Professional Organization of CPAs
Public Practice 1
Commerce and Industry 1
Academe/Education 2
Government 1 5
____ ____
Total 7
____
Term is three (3) years and renewable for another term
2. Quality Review Committee
This committee is created by PRC upon the recommendation of BOA to conduct an oversight into the
quality of audit of financial statements through a review of the quality control measures instituted by
Individual CPAs, Firms or Partnerships in order to ensure compliance with accounting and auditing
standards and practices.
The QRC shall be composed of seven (7) members with a chairman, who had been or presently a senior
practitioner in public accountancy and six (6) representatives from the following:
Chairman 1
Representatives/Members
b. Board of Accountancy 1
b Accredited National Professional Organization of CPAs
Public Practice 2
Commerce and Industry 1
Academe/Education 1
Government 1 5
____ ____
Total 7
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The Board upon approval by PRC, shall create a Council which shall assist the Board in implementing its
CPD program.
It shall be composed of a chairperson and two (2) members. The chairperson of CPD Council shall be
chosen from among the members of the Board by the members themselves. The first member shall be the
president or, in his or her absence or incapacity, any officer chosen by the Board of Directors of PICPA.
The second members shall be the president or, in his or her absence or incapacity, any officer of the
organization of deans or department heads of schools, colleges or universities offering the degree requiring
licensure examination.
The term of the office of the Chairman of the PRC-CPD Council shall be co-terminus with his/her
incumbency in the PRC. The terms of the members will be co-terminus with their respective terms in the
PICPA and in the organization of deans or department heads.
The chairperson, first member and second member shall continue to function as such in the PRC CPD
Council until the appointment or election of their respective successors in the BOA, PICPA or organization
of deans or department heads.
The PRC CPD Council may delegate if the need arises to the PICPA CPD Council the processing of
application, keeping of all records for CPD providers and their respective programs and credit units earned
by each CPA who avails of the CPD program and related functions.
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