NOTES AT

RA 9298 person violating the

provisions of the
 Consolidation of Senate Bill 2748 and same.
House Bill 6678 was finally passed by the Secretary of Justice or He or she shall act as
Senate and the House of Representatives his duly designated legal adviser to PRC
on February 6, 2004 and February 7, 2004, representative and BOA and shall
respectively. render legal
Also, the Act was signed and approved on assistance as may be
May 13, 2004 by the Pres. Of the Phils. necessary in carrying
 Sec. 37 provides that w/in 90 days after out the provisions of
the effectivity of the Act, the Board, RA 9298.
subject to the approval of the Commission Aside from the fine and imprisonment,
and in accordance w/ the accredited violators may be penalized by:
national professional org. of CPA, shall  Injunction. A court order to do or not
adopt and promulgate such rules and to do
regulations to carry out the provisions of  Payment of damages
the Act and w/c shall be effective 15 days  Permanent or temporary loss of
following their publication in the Official license. Violating CPA’s
Gazette or in any major daily newspaper certificate/license may be suspended
of general circulation. or revoked
To regulate the accountancy profession, the GENERAL APPROPRIATIONS ACT Sec. 8.
ff. is a list of organizations and their Compensation and Allowances of the Board
corresponding duties as mandated by RA states that, the chairman and the members of the
9298: Board shall receive compensation and allowances
comparable to that being received by the
Organization Duty chairman and members of existing regulatory
Professional It is the primary duty boards under the Commission.
Regulation of PRC and BOA to IRR of RA 9298 provides that if the ff. documents
Commission (PRC) effectively enforce or
are satisfactory to the Board, the foreign
and Professional implement the
applicant shall be allowed to practice
Regulatory Board of provisions of RA
Accountancy (BOA) 9298. Also, BOA shall accountancy in the Phils.
assist PRC in filing the  The letter or doc. requesting the Board to
appropriate charges allow the foreign CPA to practice in the
for cases of illegal Phils.; and
practice or violations  The copy of law (authenticated official
of RA 9298 through copy) submitted by the foreign CPA
the concerned Furthermore, the foreign CPA is required to file
prosecution office in an application and by attaching the necessary
accordance w/ law doc. w/c includes choices
and rules of court  Original or authenticated copy of TOR or
All duty constituted Upon the call or equivalent doc. of the course for licensure
law enforcement request of the
exam where he/she studied, duly
agencies and officers Commission or the
authorized or accredited by his/her
of national, Board, these
provincial, city or organizations shall country/state
municipal gov’t or of render assistance in  The orig. or certified copy of official doc.
any political enforcing the issued by
subdivision. provisions of this Act
and to prosecute any
 NOTES AT
 the Bureau of Immigration and  Approve, reject, suspend, revoke or
Deportation allowing the applicant to require amendments to registration
enter and reside in the Phils. statements, and registration and
 Certificate of Registration or its equivalent licensing applications
stating that the foreign applicant is duly The BSP Monetary Board is composed of
registered or licensed CPA or its equivalent 7 members appointed by the Pres. Of the
in his/her country Phils. for a term of 6 yrs.
And the ff: The Commission Proper of COA is
1. Present his passport for examination and appointed by the Pres. of the Phils. for a
for photocopying of pertinent info. about term of 7 yrs.
himself/herself; QUALIFICATIONS OF THE SEC
2. Other doc. w/c may be required to be COMMISSIONERS
submitted by the Board.  The commissioners must be natural-
NOTE: If the foreign applicant desires to practice born citizens of the Phils.
public accountancy in the Phils. he/she has to  The commissioners must be good
apply for accreditation, moral character, of unquestionable
*Unless otherwise exempted, registered CPAs in integrity, of known probity, and
the practice of accountancy who have not patriotism, and w/ recognized
completed the CPE requirements provided herein competence in social and economic
shall not be allowed to renew their professional disciplines.
licenses. Those who failed to renew their  The majority of the commissioners,
professional licenses for a period of 5 continuous including the Chairperson, shall be
yrs. from initial registration, or from last renewal members of the Phil. Bar
date shall be declared delinquent and shall, after  The chairperson must be at least 40
due notice, through the website and publication yrs. of age. The other commissioners
in the newsletters of PICPA or any newspaper of must be at least 35 yrs. of age.
general circulation, be dropped from the roster of QUALIFICATIONS OF THE CHAIRMAN AND 2
CPAs COMMISSIONERS OF THE COA
* FRSC, AASC, QRC and ETC are all created by PRC  Must not have been candidates for any
thru the powers grated by RA9298. The chairmen elective position preceding
and members of these org. are appointed by the appointment
Commission. On the other hand, PRC-CPE Council  Must be natural-born citizens and
was established by BOA resident of the Phils.
REPORTORIAL RESPONSIBILITY OF COA  Chairman and commissioners of COA
 Operational efficiency and must be at least 35 yrs. of age
effectiveness of the gov’t and its  Chairman and commissioners of COA
agencies must have at least 10 yrs. of work
 Accountability of gov’t records experience
 Accountability of gov’t funds PROFESSIONAL STANDARDS
SEC POWERS AND FUNCTIONS RELEVANT TO  Are established to measure the
PUBLIC ACCTNG. PROFESSIONS quality of performance of individuals
 Issue cease and desist orders to and organizations.
prevent fraud or injury to the investing - The BOA promulgated 10 GAAS that establish
public; required level of quality for performing FS audits.
 Impose sanctions for the violation of - PSA are issued to clarify the meaning of these 10
laws and the rules, regulations and GAAS.
orders issued pursuant thereto;
 NOTES AT
GENERALLY ACCEPTED AUDITING STANDARDS maintaining an outlook w/c is essentially
(GAAS) objective, and
 Represent measures of the quality of  Acceptance of a duty to society as a whole
the auditor’s performance. Adoption of the Code: The Board has the power
 Should be looked at as a min. standard and function to prescribe and/or adopt a Code of
of performance that auditors should Ethics for the practice of accountancy.
follow.
10 GAAS are grouped into general, fieldwork and PICPA Recommended to
BOA
reporting standards.

GAAS IFAC

Work Groups
General Standards of Standards of
Standards Fieldwork Reporting Discussion Exposure
Public
papers drafts

*Technical *Planning *GAAP

Training and *Internal *Inconsistency Comments
Proficiency Control *Disclosures
*Independence Consideration *Opinion Suggestions
*Professional *Evidence Recommendations
Care matter Work Groups will consider these in
creating FINAL DRAFT and before releasing it to
BOA for approval it needs to vote of majority if
Why is there a need for a Code of Ethics? FRSC and at least 10 members if AASC
 A distinguishing mark of the accountancy Note: Before exposing to the public, if acctng.
profession is its acceptance of its standards it needs a vote of majority of FRSC w/
responsibility to act in the public interest exposure period of 60 days as GR. XPN: 30 days if
w/c is the collective well-being of the urgently needed while auditing standards
community of people and institutions the majority of AASC w/ exposure period of at least
CPA serves. 90 days
 All recognized professions have developed Code as “Basic Principles”: It is not practical to
codes of professional ethics establish ethical requirements w/c apply to all
 The profession’s attempt to achieve a situations and circumstances that professional
number of common interests and by its accountants may encounter. Therefore,
objectives professional accountants should consider the
4 Basic needs to be met ethical requirements as the basic principles w/c
 Credibility they should follow in performing their work.
 Professionalism Conflicting requirements of 2 countries: When a
 Quality of service Pas performs services in a country other than the
 Confidence home country and differences on specific matters
Characteristics of a profession exist b/in ethical requirements of the 2 countries,
 Mastery of a particular intellectual skill, apply the requirements w/ stricter provisions
acquired by training and education Conflict w/ local laws: In those instances where a
 Adherence by its members to a common national req. is in conflict w/ a provision in the
code of values and conduct established by Code, the national/local requirement will prevail.
its administrating body, including
 NOTES AT
Responding to NOCLAR in Audits of FS Direct Financial Interest – must not accept the
Determining engagement if ever you accept you need to
whether to Docume disposed your financial interest.
discose to ntation Indirect Financial Interest – independence is only
appropriate
Becoming authority impaired if material.
aware of Loans and guarantees:
the matter Determining If the bank is the lender, was it normal lending
whether procedure? If YES, the amount is immaterial to
Obtaining an further action
understanding needed both parties – acceptable.
of the matter Material – need a proper safeguard
Not a bank, immaterial to both parties – clearly
Communicate w/
Addressing insignificant
respect to groups
the matter
Long association of Self-interest; Familiarity
personnel (including
Note: Basic documentation is the procedure partner rotation) w/ an
performed, info. obtained and Conclusion audit client
reached. Provision of non- Self-interest, self-
Responding to NOCLAR in Non-audit of FS assurance services to review; familiarity;
Seeking Docume an audit client intimidation
Becoming advice ntation Reposrts on special ALL
aware of the
purpose FS that include
matter Determining restriction on use and
Obtaining an whether
further action
distribution (audit and
understanding of review engagement)
the matter needed
OBJECTIVES OF ASSURANCE SERVICE
Addressing the Communicate
to the entity's  For a practitioner to evaluate or measure
matter w/
external a subject matter that is the responsibility
management and
TCWG auditor of another party against identified suitable
criteria and express a conclusion that
Independence requirement: Audit and Review provides the intended user w/ a level of
Period during w/c independence is required assurance about that subject matter.
Engagement failure – practitioner did not attain
Engagement Period
the objective of assurance service or wrong
Period Covered by the FS conclusion because of wrong procedure.
Start of Audit Instances where the engaging party is not the
Audit work report date responsible party:
Start of period End of period  1 requirement. Provided that the
of the FS of the FS responsible party must be willing to be
All must be independent subjected in an assurance engagement.
 Engagement team SUFFICIENT APPROPRIATE EVIDENCE
 Other members of the firm who will have ↑ Quality of Evidence ↓ qty. evidence gathered
participation in rendering the service ↓ Quality of Evidence – poor quality doesn’t
 Network firm compensate the qty. evidence gathered, once the
OTHER THAN AUDIT AND REVIEW: same w/ the evidence is poor quality look for other evidence.
requirements above, the only difference is to the RoMM Procedure
independence of Network firm because it LOWER materiality level leads to
depends to the firm judgment. obtaining MORE audit evidence
 NOTES AT
SUMMARY OF KEY CHANGES TO PSA 250
LOWER acceptable level of audit Revised
risk MORE evidence must be  Clarify the requirement regarding the
obtained
auditor’s determination of whether to
report identified or suspected NOCLAR to
Cost-benefit Consideration − cost > benefit, look an appropriate authority outside the
for alternative procedure, if none, performed entity and the auditor’s duty od
regardless of the cost. confidentiality, in order to recognize the
Fraud → Error of Commission different provisions of laws, regulations, or
Error → Error of Omission relevant ethical requirements; and
 Highlight that the auditor may have addt’l
Incentive or Pressure
responsibilities under law, regulation or
relevant ethical requirements, including
Fraud
Triangle possible documentation requirements and
communicating to other auditors.
Opportunity Rationalization CATEGORIES OF LAWS AND REGULATIONS
Category Ex. Auditor’s
responsibilitie
s
GR: The auditor is not and cannot be held Laws and - Tax laws To obtain
responsible for not preventing fraud pr error. regulations -Pension laws sufficient
w/ direct appropriate
XPN: If the auditor failed to comply w/ the
effect on the evidence
requirements of PSAs
determinatio regarding
Auditor identified Fraud Risk Factor: n of material compliance w/
1. Document the identified FRF and what is amounts and the provisions
his responses disclosures in of those laws
RAP the FS and
 FRF regulations
 Analytical Procedure Do not have a -compliance Limited to
 Other info. direct effect w/ the terms undertaking
SUSPECTED FRAUD but of an specific audit
1) Effects to the FS compliance operating procedures to
2) Regardless of materiality, discuss w/ w/ w/c may license help identify
appropriate level of management (@ least be -compliance non-
fundamental w/ regulatory compliance w/
1 level higher)
to the solvency req. those laws and
3) If material, obtain Sufficient Appropriate
operating -compliance regulations
Evidence aspects of the w/ that may have
IDENTIFIED business, to environmenta a material
1) Request for adjustments an entity’s l regulations effect on the
2) If not approved, Modify the auditor’s ability to FS
report as appropriate continue its
Qualified/Adverse – don’t want to change even business, or
you know it is wrong to avoid
material
Qualified/Disclaimer - You don’t know whether it penalties
is right or wrong because you don’t have Non-
evidence - scope limitation compliance
w/ such laws
 NOTES AT
and reg. may Mgmt. don’t want to prepare & sign confirmation
therefore request. Q: Are there Alternative Procedure?
have a YES – Perform
material NO – Scope of Limitation
effect on the Qualified or Disclaimer
FS Confirming Party did not reply:
ASSERTION Positive confirmation req.
Presentation & disclosure 1. Discuss w/ mgmt.
Existence 2. Send 2nd confirmation request (more
Rights & Obligations specific)
Completeness 3. Perform alternative procedures (more)
Valuation Negative
Measurement 1. Conclusion: confirming parties agrees w/
Occurrence the request
Revised 2. Perform alternative procedures (less)
Transaction & Events (OCCAC) AR alternative procedures
Account balances (CERV) 1. Subsequent collection
Presentation & disclosure (POCAC) 2. Examine source docs. (Sls. invoice,
shipping doc, sls.order)
"Assertions"
AP
1. Subsequent disbursement
Targets Means
2. Source docs. (Vendors invoice, receiving
"Audit Audit
objectives" receipt, Purchase order)
Procedures
DID NOT REPLY DIRECTLY TO AUDITOR
 May be acceptable/valid source and needs
EVRO to established that the reliability of the
Records Docs. info. has not been compromise
CTDU Summary of key changes to PSA 540
Significant amendments include enhancement to
Completeness – there is no way but to start to the ff. procedures:
docs.  RAP
Vouching – can either start on source docs. or to  FAP and professional skepticism
the records but conceptually it should start on  Documentation
record  Communicating w/ those charged w/
Existence – can established in docs governance
Primary sources of info. – management REQUIRED: To perform separate inherent risk
Other sources – external parties and control risk assessments at the assertion
How you obtained info.? Through performance level to form the basis for designing and
of audit procedures during the course of the audit performing further audit procedures to respond
to the RoMM.
Inherent risk factors introduced and formalized
include:
 Estimation uncertainty: susceptibility
Mgmt. Confirming Party to an inherent lack of precision in the
measurement of an acctng. estimate;
 Subjectivity: inherent limitations in
the data or knowledge that is
 NOTES AT
reasonably available about valuation  Significant judgments made in the
attributes; and determination of whether the acctng.
 Complexity: the complexity inherent estimates and related disclosures are
in the process of making an acctng. reasonable, or are misstated, in the
estimate context of the applicable financial
REQUIRED: To design and perform FAP in a reporting framework.
manner that is biased towards obtaining audit COMMUNICATION TO TCWG
evidence that may be corroborative or towards The auditor is required to communicate w/ TCWG
excluding audit evidence that may be or mgmt. about certain matters, including
contradictory.  Significant qualitative aspects of the
- “Stand-back” and evaluate the audit entity’s acctng. practices; and
evidence obtained regarding the acctng.  Significant deficiencies in internal control
estimates, including both corroborative APPROACHES OF GATHERING EVIDENCE
and contradictory audit evidence 100% examination is commonly used when
- Use of stronger language (challenge, performing test of details. However, it is unlikely
question & reconsider) in application to be used in test of controls because of
material to reinforce the importance of impracticability.
exercising professional skepticism  While selective examination of specific
The auditor should adopt 1 or a combination of items from a class of transactions or
the ff. approaches in the audit of an acctng. account balance will often be an efficient
estimate: means of obtaining audit evidence, it does
 Comparison, when possible, of estimates not constitute audit sampling.
made for prior periods w/ actual results of Audit sampling & selecting specific items
those periods. distinction: manner of selecting items for testing.
 Consideration of mgmt. approval In selecting specific items, once set criterion not
procedures all units of the population will have an
 Use an independent estimate (auditor’s opportunity to meet that criterion while in audit
point estimate or range) for comparison sampling all sampling units have a chance of
w/ that prepared by mgmt. (performed as selection.
part of Substantive testing) AUDIT SAMPLING
 Review subsequent events w/c confirm Requirements Conclusion
the estimates. reached
DOCUMENTATION – ENHANCED (Revised) Test of The control to be Whether
 The key elements of the auditor’s Controls tested leaves controls are
understanding of the entity and its documentary effective or
environment, including internal evidence or ineffective
control relating to acctng. estimates; audit trail
Documents – can
 The linkage of FAP w/ the assessed
inquire & inspect
RoMM at the assertion level;
No Docs. –
 The response to situations where inquire &
mgmt. has not taken appropriate steps observe
to understand and address estimation Substantive The auditor Whether the
uncertainty; Testing applies test of account bal.
 Indicators possible mgmt. bias, if any, details (either tested is fairly
& the auditor’s evaluation of the test of stated or addt’l
implications for the audit; and transactions & procedures are
events or test of required to be
bal. is used performed
 NOTES AT
Note: Do not associate audit sampling w/
analytical procedures.
Sampling risk
As a TEST OF CONTROL
procedures
Risk of assessing control risk
TOO HIGH
Risk of UNDER reliance
Affects auditor's efficiency

TOO LOW
Risk of OVER reliance
Affects auditor's effectiveness

As a SUBSTANTIVE TEST
procedures
Risk of incorrect rejection
Affects auditor's efficiency
TYPE 1 ERROR & ALPHA ERROR

Risk of incorrect acceptance

Affects auditor's effectiveness
TYPE 2 ERROR & BETA ERROR