Setting Up and Maintaining an Accounting Practice

Sources: Philippine Accountancy Act of 2004, Continuing Professional Development Act of 2016; prc.gov.ph;

Practice of Public Accountancy

Republic Act No. 9298 or the Philippine Accountancy Act of 2004 provides that the following
forms of organization are allowed for the practice of accountancy:
1. Single proprietorships
2. General partnerships and limited liability partnerships

 A sole proprietor or partnership of the CPAs is known as a firm (CPA firm or audit
firm).
 The large CPA firms, in terms of number of personnel and in terms of revenues, have
operations in various parts of the world. These firms usually have affiliations or
correspondent firms in each country.

Requirements for Accreditation for Public Practice of Accountancy

Sole Practitioner
Initial Renewal
Duly accomplished and notarized Application Duly accomplished and notarized Application
Form (affix documentary stamp) Form (affix documentary stamp)
Photocopy of the expired Certificate of
xxx
Accreditation
Photo copy of valid Professional Photocopy of valid professional identification
Identification card card
Duly signed Code of Good Governance of
xxx
the Individual CPA
Duly signed Ethical and technical standards
required of the practice of public xxx
accountancy
Photocopy of valid Professional Tax Receipt Photocopy of valid Professional Tax Receipt
Sworn statement by the CPA, (Please
notarize and affix documentary stamp in the
original copy)
 has a meaningful participation in their respective
internal quality review process;
 has undergone adequate and effective training
(from organizations duly accredited by the Board or
by its duly authorized representatives) on all the
current accounting and auditing standards, code of
ethics, laws and their implementing rules and
regulations, circulars, memoranda, their respective xxx
codes of good governance and other related
documents that are required in the practice of
public accountancy to ensure professional, ethical
and technical standards;
 is of good moral character;
 he/she had not been found guilty by a competent
court and/or administrative body of any case
involving moral turpitude and/or unethical practices;
 has at least three (3) years meaningful experience
in any of the areas of public practice including
taxation as defined in Section 4 Rule 4 of the IRR
 of R. A. 9298.
CPA Integrity Pledge xxx
Photocopy of valid National Bureau of Photocopy of valid National Bureau of
Investigation (NBI) clearance Investigation (NBI) clearance
Detailed description of work xxx
Certificate of Membership in Good Standing Certificate of Membership in Good Standing
from the current Accredited Integrated from the current Accredited Integrated
Professional Organization (AIPO) for the Professional Organization (AIPO) for the
accountancy profession accountancy profession
Certificates of CPD units earned Certificates for CPD credit units earned
Payment of prescribed fee of P1,500.00. (In Payment of prescribed fee of P1,500.00. (In
Cash, Postal Money Order, Manager’s Cash, Postal Money Order, Manager’s
Check or Bank Draft payable to the Check or Bank Draft payable to the
Professional Regulation Commission) Professional Regulation Commission)
Original copy of authority to practice
profession issued by employer, printed in the
xxx
official letter head of the institution/agency
(For Government Employee only)
Short Brown Envelope for the Certificate of Short Brown Envelope for the Certificate of
Accreditation Accreditation
Set of documentary stamps. Set of documentary stamps.

Partnership
Initial Renewal
Duly accomplished and notarized Application Duly accomplished and notarized Application
Form (affix documentary stamp) Form (affix documentary stamp)
Photocopy of the expired Certificate of
XXX
Accreditation
Photocopy of the CPAs’ Board Certificates of
XXX
partners and staff member/s
Photo copy of valid Professional Photo copy of valid Professional
Identification cards of partners and staff Identification cards of partners
member/s
Valid NBI Clearance of the partners Valid NBI Clearance of the partners
Photocopy of valid Professional Tax Receipt Photocopy of valid Professional Tax Receipt
(PTR) of partners (PTR) of partners
Duly signed Code of Good Governance by
XXX
the managing partner
Duly signed Copy of internal quality review
XXX
procedures by the managing partner
Duly signed Ethical and technical standards
required of the practice of public XXX
accountancy by the managing partner
Valid Business permit XXX
Sworn statement by the managing partner
stating that all the partners and staff
member/s, (Please notarize and affix XXX
documentary stamp in the original copy)
(same contents as for individuals)
Original copy of authority to practice
profession issued by employer, printed in the
XXX
official letter head of the institution/agency
(For Government Employee only)
Authenticated copy of the Certificate of XXX
Registration issued by the Securities and
Exchange Commission (SEC)
Authenticated copy of the current Articles of
XXX
Partnership
Certificate of Membership in Good Standing Certificate of Membership in Good Standing
of the partners from the current Accredited of the partners from the current
Integrated Professional Organization (AIPO) Accredited Integrated Professional
for the accountancy profession Organization (AIPO) for the accountancy
profession
Certificates for CPD credit units earned by Certificates for CPD credit units earned by
the partners the partners
Payment of the prescribed fee of P2,000.00. Payment of the prescribed fee of P2,000.00.
(In Cash, Postal Money Order, Manager’s (In Cash, Postal Money Order, Manager’s
Check or Bank Draft payable to the Check or Bank Draft payable to the
Professional Regulation Commission) Professional Regulation Commission)
Short Brown Envelope for the Certificate of Short Brown Envelope for the Certificate of
Accreditation Accreditation
Set of documentary stamps. Set of documentary stamps.

Well Known CPA Firms in the Philippines (and their international counterparts)
Local Firm International Counterpart
SGV & Co. (SyCip Gorres Velayo & Co.) Ernst & Young
Manabat Delgado Amper & Co. (formerly
Deloitte Touche Tohmatsu (DTT)
C.L. Manabat & Co.)
Manabat Sanagustin & Co. (formerly Laya
KPMG
Mananghaya & Co.)
Isla Lipana & Co. (formerly Joaquin Cunanan
PricewaterhouseCoopers
& Co.)
BDO Alba Romeo & Co. BDO (Binder Dijker Otto) International
Punongbayan & Araullo Grant Thornton International Ltd.

Meaningful Experience
A meaningful experience shall be considered as satisfactory compliance with the
requirements of RA No. 9298 if it is earned in:

(a) Commerce and Industry

 shall include significant involvement in general accounting, budgeting, tax
administration, internal auditing, liaison with external auditors, representing
his/her employer before government agencies on tax and matters related to
accounting or any other related functions; or
(b) Academe / Education
 shall include teaching for at least three (3) trimesters or two (2) semesters
subjects in either financial accounting, business law and tax, auditing
problems, auditing theory, financial management and management services.
Provided, That the accumulated teaching experience on these subjects shall
not be less than three (3) school years; or
(c) Government
 shall include significant involvement in general accounting, budgeting, tax
administration, internal auditing, liaison with the Commission on Audit or any
other related functions; and
 (d) Public Practice
 shall include at least one year as audit assistant and at least two years as
auditor in charge of audit engagement covering full audit functions of
significant clients.

Provided, That if the Board finds such experience inadequate to the minimum requirements
for the public practice of accountancy in the course of its evaluation of his/her application for
accreditation to practice public accountancy, the registrant shall be required to make up such
inadequacy from competent sources. Provided, further, that such meaningful experience
shall be certified under oath by the employer where such meaningful experience was
obtained.

Implementing Rules and Regulations Clarified

 Continuing Professional Development
o International Education Standard No. 7
o Framework for International Standard
 Required 120 units of CPD may be earned in 3 years
o Effective august 6, 2016
o PRC Resolution No. 2016-990 (issued June 23, 2016)

CPAs in public practice are also required to obtain accreditation with the Bureau of Internal
Revenue submitting at least 18 CPD units on taxation obtained w/in one year prior to
application for accreditation.

CPAs in public practice who have publicly listed entities and public interest entity clients are
required to obtain accreditation with Securities and Exchange Commission.

Renewal of Accreditation
 The accreditation shall be for a period of three years
 Failure to renew on the expiration date will entail the payment of surcharges at an
amount prescribed by the Board
 PRBOA shall require as a condition to registration or any renewal to undergo quality
review.

Quality Review Committee (QRC)

As authorized by Annex B of the Rules Covering the Accreditation of CPAs in the Practice of
Public Accountancy, the BOA created a Quality Review Committee (QRC) to conduct an
oversight into the quality of audits of financial statements by CPA practitioners to determine
their compliance with accounting and auditing standards. The QRC is composed of the
following:
 Chairman, who had been or is presently a
senior practitioner in public accountancy 1
Six members coming from:
BOA 1
PICPA
Public practice 2
Academe 1
Commerce and Industry 1
Government 1
Total 7

Functions of the QRC are:

a. to conduct quality review on applicants for registration to practice public
accountancy and render a report which shall be attached to the application for
registration
b. to recommend to the BOA the revocation of the Certificate of Registration and the
professional identification card of the CPA practitioner who has not observed
quality assurance measures and who has not complied with the standards of
quality prescribed for the practice of public accountancy.

The need for a quality assurance review system to be implemented arises mainly from three
main sources:
 the Accountancy Law, RA 9828
o The law gives the BOA the power 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.
 the auditing standards in the Philippines
o Philippine Standards of Auditing (PSA) No. 220, Quality Control for an Audit
of Financial Statements. This standard deals with specific responsibilities of
personnel of CPA practitioners regarding quality control procedures for an
audit of financial statements.
o Philippine Standards for Quality Control (PSQC) No. 1, Quality Control for
Firms that Perform Audits and Review of Financial Statements, and Other
Assurance and Related Services Engagements.
 a requirement by the international accounting profession (IFAC) to have member
institutes (e.g. PICPA) implement a quality assurance review program as a
membership obligation

Sources of Clients
 The Code of Ethics prohibits solicitation of clients by CPAs.

 Possible Sources of clients:

o Referrals from businessmen through active participation in civic and
community affairs.
 o Referrals from clients by maintaining his integrity and rendering prompt and
efficient services to them.
o Referrals from financial and government institutions by keeping his standards
high.
o Referrals from other CPAs by active involvement in professional
organizations of CPAs.
o Referrals from legal and other professional firms.

Advertising for the Philippine Accountancy Profession

Generally, advertising and publicity in any medium are acceptable provided:
(a) It has as its objective the notification to the public or such sectors of the public as are
concerned, of matters of fact (e.g., name, address, contact numbers, services
offered) in a manner that is not false, misleading or deceptive;
(b) It is in good taste;
(c) It is professionally dignified; and
(d) It avoids frequent repetition of, and any undue prominence being given to the name
of the firm or professional accountant in public practice.

The following however shall not be allowed:

(a) Self-laudatory statements
(b) Discrediting, disparaging, or attacking other firms or CPA practitioners
(c) Referring to, using or citing actual or purported testimonials by third parties
(d) Publishing and comparing fees with other CPAs or CPA firms or comparing those
services with those provided by another firm or CPA practitioner
(e) Giving too much emphasis on competitive differences
(f) Using words or phrases which are hard to define and even more difficult to
substantiate objectively
(g) Publishing services in billboard (e.g., tarpaulin, streamers, etc.) advertisements

Circumstances in which publicity is acceptable and the matters to be considered in

connection therewith subject always to the overriding requirements mentioned in the
preceding rules:

(a) Awards
 It is in the interests of the public and the accountancy profession that any appointment or
other activity of a professional accountant in a matter of national or local importance, or the
award of any distinction to a professional accountant, should receive publicity and that
membership of the professional body should be mentioned. However, the professional
accountant should not make use of any of the aforementioned appointments or activities for
personal professional advantage.

(b) Professional Accountants Seeking Employment or Professional Business

 Publicity seeking subcontract work may be acceptable if placed only in the professional press
and provided that neither the accountant’s name, address or telephone number appears in
the publicity.

(c) Directories
 Entries may include name, address, telephone number, professional description, services
offered and any other information necessary to enable the user of the directory to make
contact with the person or organization to which the entry relates.

(d) Books, Articles, Interviews, Lectures, Radio and Television Appearances

 Professional accountants who author books or articles on professional subjects, may state
their name and professional qualifications and give the name of their organization but shall
not give any information as to the services that firm provides.
 Similar provisions are applicable to participation by a professional accountant in a lecture,
interview or a radio or television program on a professional subject.
 What professional accountants write or say, however, should not be promotional of
themselves or their firm but should be an objective professional view of the topic under
consideration.

(e) Training Courses, Seminars, etc.

 A professional accountant may invite clients, staff or other professional accountants to attend
training courses or seminars conducted for the assistance of staff. Other persons should not
be invited to attend such training courses or seminars except in response to an unsolicited
request.
 Undue prominence should not be given to the name of a professional accountant in any
booklets or documents issued in connection therewith.

(f) Booklets and Documents Containing Technical Information

 Booklets and other documents bearing the name of a professional accountant and giving
technical information for the assistance of staff or clients may be issued to such persons,
other professional accountants or other interested parties.

(g) Staff Recruitment

 Genuine vacancies for staff may be communicated to the public through any medium in which
comparable staff vacancies normally appear. There should not be any suggestion that the
services offered are superior to those offered by other professional accountants in public
practice as a consequence of size, associations, or for any other reason.
 In publications such as those specifically directed to schools and other places of education to
inform students and graduates of career opportunities in the profession, services offered to
the public may be described in a business-like way.
 More latitude may also be permissible in a section of a newspaper devoted to staff vacancies
than would be allowed if the vacancy appeared in a prominent position elsewhere in a
newspaper on the grounds that it would be most unlikely that a potential client would use such
media to select a professional adviser.

(h) Publicity on Behalf of Clients

 A professional accountant in public practice may publicize on behalf of clients, primarily for
staff. However, the professional accountant in public practice should ensure that the
emphasis in the publicity is directed towards the objectives to be achieved for the client.

(i) Brochures and Firm Directories

 A professional accountant in public practice may issue to clients or, in response to an
unsolicited request, to a non-client:
o A factual and objectively worded of the services provided; and
 o A directory setting out names of partners, office addresses and names and address
of associated firms and correspondents.

(j) Stationery and Nameplates

 The designation of any services provided by the practice as being specialist nature should not
be permitted. Similar provisions, where applicable, should apply to nameplates.

(k) Announcements
 Such announcements should be limited to a bare statement of facts and consideration given
to the appropriateness of the area of distribution of the newspaper or magazine and number
of insertions.

(l) Inclusion of the Name of the Professional Accountant in Public Practice in a

Document Issued by a Client
 When a client proposes to publish a report by a professional accountant in public practice
dealing with the client’s existing business affairs or in connection with the establishment of a
new business venture, the professional accountant in public practice should take steps to
ensure that the context in which the report is published is not such as might result in the
public being misled as to the nature and meaning of the report.
 The professional accountant in public practice should ensure that this information is not used
in such a way as might lead the public to believe that there is a connection with organization
in an independent professional capacity.

(m) Anniversaries
 Such undertaking should be done only every five years of celebration.

(n) Websites
 A professional accountant may develop and maintain a website in the Internet in such suitable
length and style which may also include announcements, press releases, publications and
such other necessary and factual information like firm’s name, partners/principals’ name and
brief description of their educational attainment, brief listing of services, postal address,
telephone, fax and e-mail addresses.

Marketing Professional Services

A professional accountant in public practice should not bring the profession into disrepute
when marketing professional services. The professional accountant in public practice should
be honest and truthful and should not:
 Make exaggerated claims for services offered, qualifications possessed or
experience gained; or
 Make disparaging references to unsubstantiated comparisons to the work of another.

Professional Fees
When entering into negotiations regarding professional services, a professional accountant
in public practice may quote whatever fee deemed to be appropriate. The fact that one
professional accountant in public practice may quote a fee lower than another is not in itself
unethical. Nevertheless, there may be threats to compliance with the fundamental principles
arising from the level of fees quoted. For example, a self-interest threat to professional
competence and due care is created if the fee quoted is so low that it may be difficult to
perform the engagement in accordance with applicable technical and professional
standards for that price.

In view of these potential threats, safeguards should be considered and applied as

necessary to eliminate them or reduce them to an acceptable level. Safeguards which may
be adopted include:
 Making the client aware of the terms of the engagement and, in particular, the basis
on which fees are charged and which services are covered by the quoted fee.
 Assigning appropriate time and qualified staff to the task.

Fees charged for assurance engagements should be a fair reflection of the value of the work
involved and should take into account, among others:
(a) the skill and knowledge required for the type of work involved;
(b) the level of training and experience of the persons necessarily engaged on the work;
(c) the time necessarily occupied by each person engaged on the work; and
(d) the degree of responsibility and urgency that the work entails.

Contingent fees are widely used for certain types of non-assurance engagements. They
may, however, give rise to threats to compliance with the fundamental principles in certain
circumstances. They may give rise to a self-interest threat to objectivity. The significance of
such threats will depend on factors including:
 The nature of the engagement.
 The range of possible fee amounts.
 The basis for determining the fee.
 Whether the outcome or result of the transaction is to be reviewed by an independent
third party.

Safeguards:
 An advance written agreement with the client as to the basis of remuneration.
 Disclosure to intended users of the work performed by the professional accountant in
public practice and the basis of remuneration.
 Quality control policies and procedures.
 Review by an objective third party of the work performed by the professional
accountant in public practice.

Referral Fees
 In certain circumstances, a professional accountant in public practice may receive a
referral fee or commission relating to a client.
o Where the professional accountant in public practice does not provide the
specific service required.
o Commission from a third party (e.g., a software vendor) in connection with the
sale of goods or services to a client.
 A professional accountant in public practice may also pay a referral fee to obtain a
client.
o where the client continues as a client of another professional accountant in
public practice but requires specialist services not offered by the existing
accountant
  A professional accountant in public practice should not pay or receive a referral fee
or commission, unless the professional accountant in public practice has established
safeguards to eliminate the threats or reduce them to an acceptable level. Such
safeguards may include:
o Disclosing to the client any arrangements to pay a referral fee to another
professional accountant for the work referred.
o Disclosing to the client any arrangements to receive a referral fee for referring
the client to another professional accountant in public practice.
o Obtaining advance agreement from the client for commission arrangements in
connection with the sale by a third party of goods or services to the client.
 A professional accountant in public practice may purchase all or part of another firm
on the basis that payments will be made to individuals formerly owning the firm or to
their heirs or estates. Such payments are not regarded as commissions or referral
fees

Methods of Billing Clients

 Actual Time Charges basis or Per Diem basis
o Billing is done on the basis of actual time spent by the staff multiplied by the
hourly rates agreed upon.

 Flat or fixed fee basis

o Client is billed a flat but all-inclusive pre-arranged amount for the entire
engagement.

 Maximum fee basis

o Client is charged on a per diem basis, with the arrangement that the total
charges will not exceed a certain agreed maximum amount.

 Retainer basis
o The auditor is paid a fixed pre-determined fee for all services rendered during
a designated period of time either on a monthly, semi-annual or annual basis.