AUDITING (Theory) Module 1 RA 9298 PDF

AUDITING (Theory) DR. JACKQUI R. MORENO MODULE 1 RA 9298 AND THE PROFESSIONAL PRACTICE Content:  R.A. 9298  Introduction to assurance engagements  Introduction to auditin...

AUDITING (Theory) DR. JACKQUI R. MORENO MODULE 1 RA 9298 AND THE PROFESSIONAL PRACTICE Content:  R.A. 9298  Introduction to assurance engagements  Introduction to auditing  Responsibilities about fraud and non-compliances Objectives:  Discuss the implementing rules and regulations of the Philippine Accountancy Act of 2004.  Identify and describe the objectives, nature, elements and types of assurance engagements.  Differentiate between assurance and attestation services  Identify and describe the nature, philosophy, and objectives of audit and differentiate among types of audit and auditors  Discuss the extent of responsibilities of auditors with respect to reporting about fraud R.A. 9298 ORGANIZATIONS INFLUENTIAL TO THE ACCOUNTING PROFESSION A. REGULATORY GOVERNMENT AGENCIES 1. PRC-Board Of Accountancy (BOA) Its Composition 1. Chairman and six (6) members to be appointed by the President of the Philippines 2. From a list of three (3) recommended persons for each position and ranked by the Commission, 3. From a list of five (5) nominees for each position submitted by PICPA or APO. (Sec.5, R.A. 9298) Qualifications of Members of the Professional Regulatory Board (a) Must be a natural-born citizen and a resident of the Philippines; (b) Must be a duly registered Certified Public Accountant with at least ten (10) years of work experience in any scope of practice of accountancy. (c) Must be of good moral character and must not have been convicted of crimes involving moral turpitude; and (d) Must 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 the time of his/her appointment to the Board. (e) Must not be a Director or Officer of the APO or PICPA at the time of his appointment (Sec.6, R.A. 9298) Term of Office: 3 years, with maximum of two consecutive completed terms; 1 year interval before reappointment. (Sec.7, R.A. 9298) Powers and Functions of the Board (to know BOA’s functions: “One needs 2 V A CPA and ready to be SCARED”) (1) To prescribe and adopt the rules and regulations necessary for carrying out the provisions of this Act; (A GIVEN) (2) To administer oaths in connection with the administration of this Act; (A GIVEN) (3) To adopt an official seal of the Board; (A GIVEN) (4) TO INVESTIGATE VIOLATIONS OF THIS ACT and the rules and regulations promulgated hereunder and for this purpose, to issue summons, subpoena and subpoena ad testificandumand subpoena ducestecumto violators or witness thereof and compel their attendance to such investigation or hearings and the production of documents in connection therewith: Provided, That the Board upon approval of the Commission may, subject to such rules and regulations that may be promulgated to implement this section, DELEGATE the fact-finding aspect of such investigations to the accredited national professional organization of certified public accountants: Provided, Further, That the Board and/or the Commission may adopt their findings of fact as it may seems fit; CRC-ACE/AT: Module 1 P age |2 (5) The Board may, motupropioin its discretion, make such investigations as it deems necessary to determine whether any person has VIOLATED ANY PROVISIONS OF THIS LAW, ANY ACCOUNTING OR AUDITING STANDARD OR RULES DULY PROMULGATED BY THE BOARD AS PART OF THE RULES GOVERNING THE PRACTICE of accountancy; (6) To supervise the registration, licensure and practice of accountancy in the Philippines; (INCLUDES determination of Admission requirements) (7) To PREPARE, ADOPT, ISSUE OR AMEND THE SYLLABI (OR CONTENTS OF THE EXAMINATION) of the subjects for examinations in consultation with the academe, determine and prepare questions for the licensure examination which shall strictly be within the scope of the syllabi of the subjects for examinations as well as administer, correct and release the results of the licensure examinations; (“CANNOT be delegated, even to Expert Test Writers”, according to IRR of RA 9298, or Board Res. No. 71, Series of 2004) (8) To MONITOR THE CONDITIONS AFFECTING THE PRACTICE OF ACCOUNTANCY. Provided, that domestic accounting and auditing standards, rules and regulations shall include the international accounting and auditing standards, and generally accepted best practices; (9) To CARRY ON RESOLUTIONS, ORDERS, AND TO DECIDE ON ADMINISTRATIVE CASES, that may be subject to the review of the Commission if appealed on. (10) TO ISSUE, SUSPEND, REVOKE, OR REINSTATE THE CERTIFICATE OF REGISTRATION for the practice of the accountancy profession. (11) To PUNISH FOR CONTEMPT OF THE BOARD, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court. (12) To prescribe and/or ADOPT A CODE OF ETHICS for the practice of accountancy. (13) To conduct an oversight into the quality of audits of financial statements through a REVIEW OF THE QUALITY CONTROL MEASURES instituted by auditors in order to ensure compliance with the accounting and auditing standards and practices. (14) To ENSURE, in coordination with the Commission on Higher Education (CHED) or other authorized government offices THAT ALL HIGHER EDUCATIONAL INSTRUCTION AND OFFERING OF ACCOUNTANCY COMPLY WITH THE POLICIES, STANDARDS AND REQUIREMENTS OF THE COURSE prescribed by CHED or other authorized government offices in the areas of curriculum, faculty, library and facilities. (covers also the CPE providers, IRR) see Box 1.0 (15) To issue a CEASE OR DESIST ORDER TO ANY PERSON, association, partnership or corporation engaged in violation of any provision of this Act, any accounting or auditing standards or rules duly promulgated by the Board as part of the rules governing the practice of accountancy in the Philippines. (Sec. 9, R.A. 9298) OX 1.0 **An Education Technical Council shall assist the Board in this function: Membership: 6 members + 1 Chair (a Senior CPA- Academe) Representation: BOA……………………………………………… 1 APO……………………………………………… 5 6 Public Practice 1 C& Industry 1 Academe 2 (Private; Public) Government 1 Terms of Service: 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 Suspension or Removal of Members of the Board 1. WHO can suspend? The President of the Philippines, upon the recommendation of the PRC 2. WHAT are the grounds for suspension or removal? a. Neglect of duty or incompetence; b. Violation or tolerance of any violation of this Act and its implementing rules and regulations or the Certified Public Accountant’s Code of Ethics and the technical and professional standards of practice for certified public accountants; c. Final judgment of crimes involving moral turpitude; and d. Manipulation or rigging of the CPA’s licensure examination results, disclosure of secret and confidential information in the examination questions prior to the conduct of the said examination or tampering of grades. (Sec. 11, R.A. 9298) Accountability of the BOA The Board submits an annual report… …To the President of the Philippines through the Commission …About: 5. detailed account of its proceedings 6. detailed account of its accomplishments during the year 7. recommendations to upgrade and improve the conditions affecting the practice of accountancy CRC-ACE/AT: Module 1 P age |3 (Sec. 12, R.A. 9298) 2. Commission on Audit (COA) The Commission on Audit (COA) is the Philippines' Supreme State Audit Institution. Reports on the: 1. Accountability of government funds (a) When it examines 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. (b) When it sets accounting and auditing rules and regulations including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures, or uses of government funds and properties. 2. Financial condition and operation of the government to the President and the Congress. 3. Operational efficiency and effectiveness of the government and its agencies. 4. Accountability of government records. 5. Decisions to any case brought before it within 60 days (Article IX-D of the 1987 Philippine Constitution) 3. Securities and Exchange Commission (SEC) The SEC Powers and functions relevant to the Accountancy Profession1 (a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government; (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications; (d) Regulate, investigate or supervise the activities of persons to ensure compliance; (f) Impose sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto; (i) Issue cease and desist orders to prevent fraud or injury to the investing public; (j) Punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court; (l) Issue subpoena ducestecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws; 4. Bangko Sentral ng Pilipinas (BSP) 5. Insurance Commission 6. Bureau of Internal Revenue (BIR) B. STANDARD-SETTING BODIES (per IRR, RA 9298, BR 71, Sec. 9) 7. Financial Reporting Standards Council (FRSC) a. Membership = 14 members + 1 chair (a Senior Accounting Practitioner) b. Representation of sectors: i. BOA……………………………………………...1 ii. SEC………………………………………………1 iii. BSP………………………………………………1 iv. BIR……………………………………………….1 v. Major organization(preparer & user of FS)..….....1 vi. COA……………………………………………...1 vii. APO – CPA……………………………………....8 1. Public Practice 2 2. Commerce & Industry 2 3. Academe 2 4. Government 2 14 c. Selection: i. By appointment of the PRC ii. Upon recommendation of the BOA iii. In coordination with APO d. Term of Service : 3 years, renewable for another term 1 Section 5 of the Securities Regulation Code, Rep. Act. 8799 CRC-ACE/AT: Module 1 P age |4 8. Auditing and Assurance Standards Council (AASC) a. Membership = 14 members + 1 chair (a Senior Public Accounting Practitioner) b. Representation of sectors: i. BOA…………………………………………..…1.1 ii. SEC………………………………………………1 iii. BSP………………………………………………1 iv. Major organization(preparer & user of FS)..….....1 v. COA……………………………………………...1 vi. APO – CPA……………………………………....99 1. Public Practice 6 (S,M,LPs) 2. Commerce & Industry 3. Academe 1 4. Government c. Selection: i. By appointment of the PRC ii. Upon recommendation of the BOA iii. In coordination with APO d. Term of Service : 3 years, renewable for another term e. Objectives: Promulgation of auditing standards, practices, and procedures generally accepted in the Philippines f. Working Procedures i. Assignments are given to working committees ii. Exposure of drafts, if necessary and when appropriate iii. 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”). iv. Pronouncements are deemed operational upon approval by the Board C. PRIVATE AGENCIES 9. Philippine Institute of CPAs (PICPA) – Accredited Professional Organization (sec 30) 1. PICPA is the accredited professional organization (although not explicitly stated in the Act ; per PRC Accreditation No. 15, dated October 2,1975) 2. PICPA shall be a nonprofit corporation and recognized by the Board, subject to the approval by the Commission, and registered in the Philippine SEC. 3. PICPA membership shall not prevent CPAs to be members of other association of CPAs. 4. PICPA membership shall award members the privilege to receive benefits upon payment of required fees and dues. 10. Association of CPAs in Public Practice (ACPAPP) SALIENT PROVISIONS PHILIPPINE ACCOUNTANCY ACT OF 2004 (R. A. 9298) Consolidation of: Senate Bill No. 2748 and House Bill No. 6678 Passed in the Senate on: February 6, 2004 Passed in the Congress on: February 7, 2004 Signed into Law by: Pres. Gloria Macapagal-Arroyo Signed into Law on: May 13, 2004 (hence, effective June, 2004) Responsible parties to enforcement(sec 39): a. Primary - Commission and the Board b. Upon Call or request of the Board- duly constituted law enforcement agencies and officers of national, provincial, city or municipal government c. Legal Adviser of the Board- Secretary of Justice or his duly designated representative d. Observance - Any person OBJECTIVES: (same as the repealed P.D. 692) (a) The Standardization and regulation of accounting Education; (b) The Examination for registration of certified public accountants; and (c) The Supervision, control, and regulation of the practice of accountancy in the Philippines.(SEC. 3.) (Memory Aid: The ACT overSEES the accounting profession) ADMISSION REQUIREMENTS FOR EXAMINATIONS No person shall be admitted to the examination unless he is: a. a citizen of the Philippines; b. of good moral character; CRC-ACE/AT: Module 1 P age |5 c. is a holder of the degree of Bachelor of Science in Accountancy conferred by a school, college, academy or institute duly recognized and/or accredited by the CHED or other authorized government offices *; and d. has not been convicted of any criminal offense involving moral turpitude. e. in case of a candidate who has failed two complete certified public accountants examinations, he shall have complied with the requirements for examinations as provided under Section 18 of this Act. *All graduates with a Bachelors Degree, major in Accounting shall be allowed to take the CPA Licensure Examination within two (2) years from the effectivity of this Act under the rules and regulations to be promulgated by the Board subject to the approval by the Commission. (sec 41, Philippine Accountancy Act of 2004) EXAMINATION RATING A candidate for the examination obtaining a general weighted average of seventy-five percent and above shall be entitled to registration as certified public accountant and as such shall receive a certificate of registration from the Board of Accountancy, Provided, That in no case should the rating on any subject be less than sixty-five percent. In the event a candidate obtains the rating of seventy-five percent and above in at least four (4) subjects having a combined weight of eight (8) units as provided for in this Act, he shall receive a conditional credit for the subjects passed: Provided, However, That such candidates shall take an examination in the remaining subjects within two years from the preceding examination: Provided further, That if the candidate fails to obtain at least a general weighted average of seventy-five percent and a rating of at least sixty-five percent in each of the subjects reexamined, he shall be considered as failed in the entire examination (Section 16, Accountancy Act) Any candidate who fails in two complete Certified Public Accountant board examinations shall be disqualified from taking another set of examination unless he submits evidence to the satisfaction of the Board of Accountancy that he has enrolled in and completed at least twenty-four units of subjects given in Certified Public Accountant Examinations. (Section 18, Accountancy Act) REFUSAL TO ISSUE CERTIFICATE OF REGISTRATION AND PROFESSIONAL IDENTIFICATION CARD The BOA may refuse to issue certification to a successful candidate in the following grounds, when the same was found to be: a. convicted by a court of competent jurisdiction of a criminal offense involving moral turpitude (sec. 23) b. guilty of immoral and dishonorable conduct or (sec. 23) c. of unsound mind (sec. 23) SUSPENSION OR CANCELLATION OF CERTIFICATE OF REGISTRATION AND PROFESSIONAL IDENTIFICATION CARD The BOA may suspend or cancel certification to a CPA in the following grounds, upon due notice and hearing: a. for any unprofessional or unethical conduct, (sec 24) b. malpractice (sec 24) c. violation of any of the provisions of this Act (sec 24) d. violation of the Certified Public Accountants Code of Ethics and the technical and professional standards of practice for certified public accountants (sec 24) ADMINISTRATIVE INVESTIGATIONS (not addressed in the R.A. 9298, but included in the P.D. 692) Within five days after the filing of written charges under oaths, respondent Certified Public Accountant shall be furnished a copy thereof requiring him to answer the same. The administrative investigation shall be conducted by the Board of Accountancy or any of its members as may be designated by the Chairman, or maybe conducted by a legal or hearing officer of the Professional Regulation Commission: Provided, however, That the decision shall be promulgated by a majority of the members of the Board. The rules and regulations promulgated by the Professional Regulation Commission pursuant to its rulemaking power shall govern the procedure and conduct of administrative investigation before the Board. (Section 18, PD 692) The decision of the Board of Accountancy shall become final thirty (30) days after receipt by the respondent of a copy of the decision, unless during the same period, he has appealed to the Professional Regulation Commission, whose decision shall be final. (Section20,PD692) REINSTATEMENT TO THE ROSTER OF PROFESSIONALS (R & R) The Board may, after the expiration of two (2) years from the date of revocation of a certificate of registration and upon application and for reasons deemed proper and sufficient, reinstate the validity of a revoked certificate of registration and in so doing, may, in its discretion, exempt the applicant from taking another examination.(sec 25) SEAL OF PROFESSION 1. Every time a CPA issues a document in the practice of his profession, the CPA shall indicate (sec. 22, Accountancy Act): 1. certificate of registration number 2. date of its issuance 3. duration of validity (renewable very 3 years) 4. Professional Tax Receipt number CRC-ACE/AT: Module 1 P age |6 2. Auditor’s reports shall be stamped with seal, indicating (sec. 33): 1. registrant’s name 2. registration number and title 3. current Professional Tax Receipt (PTR) number 4. date/place of payment when filed with government authorities or when used professionally ESTABLISHMENT OF PRACTICE OF PUBLIC ACCOUNTANCY (sec 28) Form of organization: Single practitioners and Partnerships Minimum requirement for registration: that such registrant has acquired a minimum of three (3) years meaningful experience in any of the areas of public practice including taxation Registration renewal: every three (3) years on or before September 30 on the year of expiry (sec 31) WORKING PAPERS (sec 29) Composition: All working papers, schedules and memoranda made by a certified public accountant and his staff in the course of an examination, including those prepared and submitted by the client, incident to or in the course of an examination. Ownership rests on the CPA, in the absence of a written agreement between the certified public accountant and the client Safeguarding: They shall be treated confidential and privileged. Exception to confidentiality clause: Confidentiality is waived, only when such documents are required to be produced through subpoena issued by any court, tribunal, or government regulatory or administrative body CONTINUING PROFESSIONAL DEVELOPMENT (CPD) PROGRAM(sec 32)2 Applicability : to ALL CPAs Authorization function: rests on BOA, subject to Commission’s approval Implementing function: rests on CPE council In coordination with: accredited(1) national professional organization of certified public accountants or (2) any educational institutions PENAL AND FINAL PROVISIONS OF THE ACCOUNTANCY ACT OF 2004 (Sec 36) Fine: not less than Fifty thousand pesos and/or Penalty: imprisonment for a period not exceeding two (2) years IMPLEMENTING RULES AND REGULATIONS (sec 37) Within ninety (90) days after the effectivity of this Act the Board, subject to the approval of the Commission and in coordination with the accredited national professional organization of certified public accountants, shall be effective fifteen (15) days following their publication in the Official Gazetteor in any major daily newspaper of general circulation. SCOPE OF PRACTICE According to Section 4 of the REPUBLIC ACT NO 9298 or the “Philippine Accountancy Act of 2004” (repealing P.D 692) which was signed into law on May 13, 2004 by her Excellency, Pres. Gloria Macapagal-Arroyo, the scope of the accounting profession shall concentrate, although not limited, to four areas: Bases of Public Accountancy Commerce & Education/Academe Government comparison Industry In what Individual / General or Individual Individual Individual capacity limited partner/ staff member Of what skilled in the knowledge, Decision Instructional ; Decision-making requiring capacity science and practice of making/ Provided, That professional knowledge in the accounting, and as a managerial members of the science of accounting, or qualified person to render functions, as a Integrated Bar of the where civil service eligibility professional services as a licensed Philippines may be as a CPA is a prerequisite. certified public accountant allowed to teach accountant business law and taxation subjects. To whom to more than one client Private Educational institution Government or a on a fee basis company government–owned and/or controlled corporation To offer (1)Audit or verification involved in teaching of Depending on appointment what kind of financial transaction decision making accounting, auditing, and position of services and accounting records requiring management advisory 2Shift from the CPD learning categories of Thematic to Competence areas, to make it consistent with International Education Standards, with the Competence areas to be categorized into Technical Competence, Professional Skills and Professional Values, Ethics and Attitudes CRC-ACE/AT: Module 1 P age |7 Bases of Public Accountancy Commerce & Education/Academe Government comparison Industry (2)Preparation for clients professional services, finance, of reports of audit knowledge in business law, taxation, (3)Certification for the science of and other technically clients’ financial accounting related subjects statements with offering accompanying schedules, assistance of which are to be used for whatever type publication or for credit to one’s purposes, or to be filed management- with a court or employer 3 government agency, or to be used for any other purpose (3) Design, installation, and revision of accounting system (4) Preparation of income tax returns when related to accounting procedures (5) Client representation before government agencies on tax and other matters related to accounting ACCREDITATION TO PRACTICE IN SOME AREAS Aside from other documentary and experience requirements, it is necessary that the CPA had undergone adequate and effective training (from organization/s duly accredited by the PRC/BOA) on accounting and auditing standards in effect during the time of their application for registration, related laws and their respective implementing rules and regulations, their own code of good governance and other related documents that are required in the practice of public accountancy to ensure professional, ethical and technical standards, preferably supported with certified copies of certificate/s of attendance or any proof of meaningful participation and proof of adequacy and effectiveness of such training. To date, there are three accreditations available, for the areas of public practice, of education/academe, and compilation of FS (for those not accredited for public practice). Note the differences in the list of training CPE requirements. DETERMINATION OF FEES Factors involved in the determination of audit fees: Methods may include the following: risks involved condition per diem (or actual hours) complexity cooperation of staff flat fee time and volume maximum responsibility retainer basis SPECIAL ISSUES ON AUDIT FEES (PER REVISED CODE OF PROFESSIONAL ETHICS, 2004 JANUARY 1 EFFECTIVE) 1. PRICING Situation: A firm obtains a client by offering a significantly lower fee level than that charged by the predecessor firm, or quoted by other firms Threat: Self-interest Safeguard: The firm is able to demonstrate that 1. appropriate time and qualified staff are assigned to the task; and 2. all applicable assurance standards, guidelines and quality control procedures are being complied with. 2. CONTINGENT FEES Situation: Fees are calculated on a PRE-determined basis relating to the outcome or result of a transaction or the result of the work performed. Threat: Self-interest, advocacy threats Non-applicability: When a court or other public authority has established fees Safeguard: There is NO safeguard, except to avoid in such engagements Additional Considerations: 1 The range of possible fee amounts; 2 The degree of variability; 3Any position in any business in the private sector which requires supervising the recording of financial transactions, preparation of financial statements, coordinating with external auditors shall be occupied ONLY by a registered CPA. Provided, its paid-up capital is at least P5M and/or an annual revenue of at least P10M. (has no effect to incumbents to the position prior to effectivity of RA 9298) CRC-ACE/AT: Module 1 P age |8 3 The basis on which the fee is to be determined; 4 Whether the outcome or result of the transaction is to be reviewed by an independent third party; and 5 The effect of the event or transaction on the assurance engagement. Actions on the Additional considerations: 1 Communication to audit committee the extent of nature and extent of fees charged 2 Review of the final fee by an independent party 3 Quality control policies 3. GIFTS Situation: Accepting gifts or hospitality from a client Threat: Self-interest, familiarity threats Safeguard: There is NO safeguard, except if value of the same is insignificant Additional Considerations: The value of gift or offer of hospitality QUALITY CONTROL SYSTEM IN PA FIRM QUALITY CONTROL (QC) STANDARDS are internal policies designed to assure consistent performance and achievement of standards within an individual public accounting firm (i.e. GAAS, refer to PSA 220 for full length discussion) QUALITY CONTROL (QC) The policies and procedures adopted by a firm (and communicated to the firm’s personnel) designed to provide it with reasonable assurance that all audits done by the firm and its personnel comply with professional standards and regulatory and legal requirements, and that reports issued by the firm or engagement partners are appropriate in the circumstances are being carried out in accordance with the Objective and General Principles Governing an Audit of Financial Statements, as set out in Philippine Standard on Auditing 220 “Quality Control for Audit Work.” 4 QUALITY ASSURANCE REVIEW (QAR), in accordance to the IRR of RA 9298, is a “study, appraisal, or review by the Board or its duly authorized representative, of the quality control measures instituted by an Individual CP”A, Firm or Partnership of CPAs engaged in the practice of public accountancy to ascertain his/her/its compliance with prescribed professional, ethical, and technical standards of public practice” A QUALITY ASSURANCE REVIEW COMMITTEE (QARC) shall 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. (Annex B, IRR of RA 9298, BR 71) Number of Members: Six (6) + A chairman = 7 Qualification of Chairman: (a) Had been or (b) Presently a Senior Practitioner in Public Accountancy Representatives: Board of Accountancy 1 APO (or PICPA) -Public Practice 2 -Academe 1 -Commerce 1 -Government 1 5 Total 6 Term of QARC members and chair: Three (3), renewable for another term Functions: (a) Conduct QR on applicants for registration and render a report thereon (b) Recommend to the Board the revocation of professional registration of CPAs who has not observed the QC. For Individual Audit Engagements5 Careful consideration of the following elements: 1. Direction – (a) involves informing assistants of their responsibilities and the objectives of the procedures they are to perform (b) Tools: 4 As set out in ISQC 1, “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements” 5The Revised PSA 220 (for INDIVIDUAL audits) enumerates: Leadership Responsibilities for Quality on Audits, Ethical Requirements, Independence, Acceptance and Continuance of Client Relationships and Specific Audit Engagements, Assignment of Engagement Teams, Engagement Performance( direction, supervision, review), Consultation, Differences of Opinion, Engagement Quality Control Review, Monitoring CRC-ACE/AT: Module 1 P age |9 1. The overall audit plan 2. Time budgets and 3. The audit program 2. Review – (a) Should be performed by personnel of at least equal competence (b) Preferably performed by an independent person from the engagement team (c) Must be done prior to issuance of report (d) Matters of review: 1. The overall audit plan and the audit program 2. The assessments of inherent and control risks 3. The documentation of the audit evidence with the conclusions arising from results of tests performed 4. The results of consultations and its documentation 5. The financial statements, proposed audit adjustments and the proposed auditor’s report 3. Supervision – (a) usually involves both direction and review (b) involves tracking of progress of the engagement, addressing issues of concern, and resolution of conflicts MODULE 1 RA 9298 AND THE PROFESSIONAL PRACTICE QUIZZER 1. Which of the following is not a valid ground for suspension or removal of a member of the Board of Accountancy? a. Being investigated of a crime involving moral turpitude. b. Neglect of duty or incompetence c. Manipulating the CPA licensure examination results. d. Violating RA9298. 2. The standard setting body created by the PRC to promulgate accounting standards that will be generally accepted in the Philippines is known as a. Financial Reporting Standards Council (FRSC) b. Auditing Standards and Practices Council (ASPC) c. Accounting Standards Council (ASC) d. Auditing and Assurance Standards Council (AASC) 3. The Financial Reporting Standards Council shall be composed of a chairman and a. 14 members b. 17 members c. 8 members d. 15 members 4. The sector that is most represented in the Auditing and Assurance Standards Council is the a. Commerce and Industry b. Academe c. Public Practice d. Government 5. Which of the following is not represented in the FRSC? a. ACPAPP b. FINEX c. Commission on Audit d. Securities and Exchange Commission 6. The Professional Regulatory Board of Accountancy shall be composed of a chairman and (LIST A) members to be appointed by the President of the Phils. from a list of (LIST B) recommendees for each position and ranked by the Commission, from a list of five (5) nominees for each position submitted by. LIST A LIST B LIST C a. 6 5 BOA b. 7 5 PRC c. 7 3 PICPA d. 6 3 APO 7. The PICPA shall submit its nominations with supporting documentation a. Within 60 days prior to the expiry of the term of an incumbent member or chairman b. Within 90 days prior to the expiry of the term of an incumbent member or chairman c. Not later than 60 days prior to the expiry of the term of an incumbent member or chairman d. Not later than 90 days prior to the expiry of the term of an incumbent member or chairman 8. Which of the following statements about the composition of the Board of Accountancy is incorrect? a. The four sectors in the practice of accountancy shall as much as possible be equitably represented in the Board. b. The Board shall be composed of a chairman and six members. CRC-ACE/AT: Module 1 P a g e | 10 c. The members of the Board shall be appointed by the President of the Philippines from a list of three recommendees for each position and ranked by the Commission, from a list of five nominees for each position submitted by Accredited Professional Organization (APO). d. The Board shall elect a vice- chairman from among its members to serve for a term of three years. 9. The following statements relate to the term of office of the chairman and the members of the Board of Accountancy (BOA). I. No person who has served two (2) successive complete terms shall be eligible for reappointment until the lapse of one (1) year II. Appointment to fill up an unexpired term is not to be considered a complete term III. A person may serve in the Board of Accountancy for eight consecutive years. IV. A person may serve in the Board for more than 12 years. a. All statements are true c. Only IV is false b. All statements are false d. Only I and II are true 10. Which of the following is not among the qualifications of a member of the Board of Accountancy? a. He/ She must have at least 10 years of experience in the practice of accountancy b. He/ She must be a natural-born CPA and a resident of the Philippines c. He/ She must not be a director or officer of the accredited national professional organization at the time of appointment. d. He/ She must not have any direct or indirect pecuniary interest in any school offering BS Accountancy degree 11. How many credit units per hour will be earned by a participant in a CPE seminar? a. 1 CU per hour c. 3 CU per hour b. 5 CU per hour d. 2 CU per hour 12. Who is not permitted by RA 9298 to practice public accountancy? a. A general partnership. b. A limited liability partnership. c. A sole proprietorship. d. A corporation, whose stockholders are all CPAs. 13. According to RA 9298, if a partner in a two-member partnership dies, the surviving partner may continue to practice as an individual under the existing firm title which includes the deceased partner’s name a. For a period of time not to exceed five years. b. For a period of time not to exceed two years. c. Indefinitely. d. Until the partnership pay-out to the deceased partner’s estate is terminated. 14. A CPA shall not practice under a firm name that includes or indicates the following, except a. Fictitious name b. Specialization c. Misleading as to the type of organization d. Name(s) of past partner(s) in the firm name of the successor partnership. 15. Below are names of four CPA firms and pertinent facts relating to them. Unless otherwise indicated, the individuals named are CPAs and partners and there are no other partners. Which firm name and related facts indicate a violation of the Philippine Accountancy Act of 2004? a. Binhi, Binti and Bigti, CPAs (Bigti died about 5 years ago; Binhi and Binti are continuing the firm.) b. Tiu and Ramos, CPAs ( The name of R. Hermosilla, CPA, a third partner is omitted from the firm name.) c. Bitay and Bigo, CPAs (Bitay died about three years ago; Bigo is continuing the firm as a sole practitioner.) d. R. Hermosilla and Co., CPAs (R. Hermosilla has ten other partners who are all CPAs) 16. CPAs, firms and partnerships of CPAs engaged in the practice of public accountancy including partners and staff members thereof, shall register with the Commission and the Board, such registration to be renewed every three years on or before a. Apr 15, Notary date of Articles b. Sep 30, SEC Registration month c. Dec 31, BIR Registration month d. May 31, license expiry of Gen.Manager 17. Which of the following is not one of the functions of the Board of Accountancy? a. To supervise the registration, licensure and practice of accountancy in the Philippines b. To issue, suspend, revoke, or reinstate the certificate of registration for the practice of the accountancy profession c. To prescribe and/or adopt a code of ethics for the practice of accountancy d. To adopt an official seal of the Commission. CRC-ACE/AT: Module 1 P a g e | 11 18. The letters “CPA” shall be engraved in what part of the CPA’s seal? a. Upper portion of the space between the bigger and smaller circle. b. Lower portion of the space between the bigger and smaller circle. c. Left and right portion of the space between the bigger and smaller circle and in the middle of the smaller circle. d. Middle of the smaller circle. 19. Which of the following is not one of the functions of the Board of Accountancy as specified in the RA 9298? a. To look from time to time into the conditions affecting the practice of the accountancy profession. b. To appoint members of the AASC c. To investigate violations of RA 9298 and its IRRs. d. To determine and prescribe minimum requirements leading to the admission of candidates to the CPA examination. 20. A CPA certificate is evidence of a. Independence as a professional. b. Basic competence at the time of certification. c. Membership in the accredited association. d. Completion of continuing professional education program. 21. The term of office of each member of AASC and FRSC is a. 2 years, renewable c. 3 years, non-renewable b. 4 years, non-renewable d. 3 years, renewable 22. Which of the following statements about Accounting Standard Setting Council is correct? a. The accounting standard setting body is known as Accounting Standards Council (ASC). b. The accounting standard setting body is composed of a chairman and fifteen members. c. The chairman and members of the standard setting council shall be appointed by the Commission upon the recommendation of the Board in coordination with the accredited national professional organization. d. The public accounting practice is the sector that is most represented in the accounting standard setting council. 23. Which of the following best describes the function of Auditing and Assurance Standards Council? a. To monitor full compliance by auditors to PSAs b. To promulgate auditing standards, practices and procedures that shall be generally accepted by the accounting profession in the Philippines c. To assist the Board of Accountancy in conducting administrative proceedings on erring CPAs in public practice d. To undertake continuing research on both auditing and financial accounting in order to make them responsive to the needs of the public 24. The following are represented both to the Financial Reporting Standards Council (FRSC) and Auditing and Assurance Standards Council (AASC), except a. Commission on Audit b. Bureau of Internal Revenue c. Securities and Exchange Commission d. Board of Accountancy 25. The following statements relate to the RA9298. Which statement is true? a. Within two years, subject to certain conditions, the Board of Accountancy may order the reinstatement of a CPA whose certificate of registration has been revoked. b. The Professional Regulation Commission has the authority to remove any member of the Board of Accountancy for negligence, incompetence, or any other just cause. c. Insanity is not a ground for proceeding against a CPA. d. No person shall be appointed as a member of the Board of Accountancy unless he has been in the practice of accountancy for at least 10 years, among others. 26. The following statements relate to roster of CPAs. Identify the incorrect statement. a. A roster showing the names and place of business of all registered CPAs shall be prepared and updated by the Board. b. Copies of the roster shall be made available to any party as may be deemed necessary. c. The Board, upon approval of the Commission, may delegate the preparation of this roster to the APO. d. The publication of the roster in the official gazette or in any major newspaper of public circulation shall be deemed compliance with the requirement of RA 9298. 27. Any person who shall violate any of the provisions of the Accountancy Act or any of its implementing rules and regulations promulgated by the Board of Accountancy subject to the approval of the PRC, shall upon conviction , be punished by a. Lethal injection b. A fine of not more than P50,000 c. An imprisonment for a period not exceeding two years CRC-ACE/AT: Module 1 P a g e | 12 d. Both b and c. 28. PRC- CPE Council differs from AASC and FRSC in that a. PRC-CPE Council members are appointed by the Commission. b. PRC-CPE Council is composed of a chairman and 14 members c. The chairperson of PRC-CPE Council is elected by the members of the Board from among themselves. d. PRC-CPE Council members are co-terminus with the President of the Philippines. 29. Which statement is correct regarding CPE requirements for renewal of professional license? a. The total CPE credit units required for CPAs shall be sixty (60) units for three (3) years, provided that a minimum of twenty (20) credit units shall be earned in each year. b. A registered professional shall be permanently exempted from CPE requirements upon reaching the age of 60 years old. c. A registered professional who is working abroad shall be temporarily exempted from compliance with CPE requirement during his/her stay abroad, provided that he/she is has been out of the country for at least one year immediately prior to the date of renewal. d. Those who failed to renew professional licenses for a period of five (5) continuous years from initial registration, or from last renewal shall be declared delinquent. 30. Unless otherwise exempted, registered CPAs in the practice of accountancy who have not completed the CPD requirements shall a. Be dropped from the roster of CPAs. b. Not be allowed to renew their professional licenses. c. Present evidence to the satisfaction of the Board that they have the necessary knowledge, skills and experience to discharge their professional responsibility. d. Submit a letter addressed to the Board indicating the reasons for not complying with the CPE requirements. 31. The following are the qualifications of applicants for CPA Examinations, except I. Must be a natural born Filipino citizen II. Must be a BS Accountancy degree holder III. Must be of good moral character IV. Must be at least 21 years old a. I only b. II and IV c. IV only d. I and IV 32. Which of the following statements is correct? a. Any candidate who fails in two (2) complete CPA board examinations will no longer be allowed to take another set of examination. b. Any candidate who fails in two (2) complete CPA board examinations shall be disqualified from taking another set of examinations unless he/she submits evidence to the satisfaction of the Board that he/she enrolled in and completed at least 21 units of subjects given in the licensure examination. c. The examination in which the candidate was conditioned and the removal examination on the subject in which he/she failed shall be counted as one complete examination. d. The refresher course should be completed within two (2) years from the preceding examination. 33. The Board of Accountancy shall submit to the PRC the ratings obtained by each candidate within _____ days after the examination, unless extended for just cause. a. 10 b. 5 c. 2 d. 3 34. Which of the following shall be issued to a candidate who passes the CPA licensure examination? a. Certificate of accreditation to practice public accountancy and PRC ID. b. Personal identification card and a certificate of accreditation to practice public accountancy c. Certificate of registration and professional identification card d. Certificate of full compliance and PRC ID. 35. The Board of Accountancy may issue certificate of registration and professional identification card to any successful examinee: a. Of unsound mind b. Convicted by a court of political offense. c. Guilty of immoral or dishonorable conduct. d. Who has falsely represented himself/ herself in his /her application for examination. /jrm