hi it's Robert today we are going to discuss chapter 2 the professional practice of accountancy in the

Philippines in this presentation we will again be touching on significant portions of the law that is
republic act number 9298 and as well as psa 120. as always in the practice of accountancy we should
remember to be always professional perform effectively and efficiently follow standards and document
our work adequately and properly slide number two lists the topic that will be covered by today's
discussion and we're off to the first topic and slide number three as you can see on the slide a picture of
the face based copy of the law ra9298 this law defines the scope of practice of accountancy in the
philippines ra 9298 is also known by its short title the philippine accountancy act of 2004 they say it's
short but still it's really a mouthful to say article 1 defines the policy objective and scope of practice of
the profession if you have a copy of the law a pdf copy you have downloaded from the internet uh you
can it is best that you follow on the sections that i will mention during the discussion now if you have a
copy with you right now you can see in section four it lists there the extent to what an accountant can
practice his profession the first on the list is one practice of public accountancy i will not read the
entirety of the paragraph in the section as you can read them on your copy of the law but i would just
point out important aspect of its scope of practice when you read this first scope you will notice that it is
a it is very broad in school nature it says you can be a partner or staff of an audit or accounting firm you
can also be an accountant in a private company overseeing bookkeeping on the counter to conduct
review engagement whether internally or externally or as an account done doing consultative function
to clients or management the the phrase other matters related to accounting and accounting
procedures and the recording or end presentation of financial statements pretty much includes most of
the types of job you can apply in when you are becoming you become a registered accountant scope
number two in section 4b is rather an extract from 4a the emphasis of 4b is the is the decision-making
aspect of the use of financial information this precludes that to be involved in the decision making
process such an accountant must be holding management positions in an organization so scope 4b is uh
practically a limited to those accountants who are working in private organizations holding management
or key positions or executive positions in the organization those that are charged with the decision
making scope number three practice in education in academia involves the teaching of accounting and
allied subjects in the academic setting and that is in the colleges or the universities or other schools or
institutions that are recognized by the regulatory bodies or the government an example of an
accountant who is in this profession is of course me scope 4d practice in government relates to practice
of any one of the things mentioned in 4a and 4b except that it is dispensed while the accountant or
auditor is employed by the government either as a state auditor or an employee of any government
organization or a government-owned encore or controlled corporation in one of those positions in the
government organizations has corresponding civil service eligibility which may not be covered by our
a9298 i suppose you are already familiar with this diagram it is one of the diagrams that is very familiar
or any account that can relate to when discussing assurance and auditing services what is our key
takeaway from this diagram that auditing is a kind of attestation service which in turn at the station is a
type of assurance service although that is the case audits are the most common and thus forms the
most significant part of assurance services and that is because you cannot go into other it is hard to go
into other assurance services without being first annotated because companies usually get in contact
and get to know the auditors when they are in audit engagement so while they are in the audit
engagement the auditors can show their expertise in areas of consultancy and after the audit then these
clients may when they need the services of such experts they tend to enlist or hire the services of the
auditors that they have worked with well the focus of our course of course is audit since the cpa board
exam syllabus out of all types of assurance service is mainly focused on the audit of financial statements
that is so because the other types of assurance services can be performed only by auditors if they
already have earned relevant and significant experience

in the field of audit thus in a way we can say that that audit is the stepping stone to performing other
assurance services some of which command higher fees than audit itself what we earn from audit when
you compare to what you can earn when you are doing consultancy services is just a small portion of the
share of the assurance services there's not much money in audit but if you have the expertise you can
earn more when you do consultancy service courses we have already mentioned it is hardtop go into the
consultancy arena without having significant experience in the field of honeys let's talk about the kind of
assurances that outdoors given each type of assurance engagement aside number six shows you small
section of the diagram slide number five presents it in another way and uh we have blown portions of
the other related services into review and then we have agreed upon procedures and then we have
compilation the services they are extensively discussed in spa 120.so this is a combination of the
previous diagram and that one that is found in page two we might want to look at the page of the
Philippine standards on audit it's in on page two also enhanced it so that it looks more professional you
may read about the definitions objectives and scope of work required for auditing and other assurance
services in pages six to eights one thing our focus is about here in this slide will be about the level of
assurance that auditor provides in each of assurance that in the context of this framework refers to the
this framework the auditor's satisfaction as to the reliability of an assertion being made by one party for
use by another partner to provide such assurance the auditor assesses the evidence that was provided
by the party preparing the information later collects the evidences result of the procedures conducted
and then analyzes this evidence and expresses a conclusion the degree of satisfaction achieved and
therefore the level of assurance which may be provided is determined by the procedures performed and
the results in slide number seven in an engagement audit engagement when the auditor provides
youkan seeing the blue box below hold it high but not absolute level of assurance that the information
subject only usually the financial statements free of material misstatement this is expressed as a positive
opinion in the auditor audit report as reasonable assurance in a review engagement the auditor
provides a moderate level of assurance that the information subject to review is free of material
misstatement this is expressed in the form of negative assurance a negative assurance is an auditor's
written statement that the audit did not uncover any signs of fraud or violations of laws or accounting
rules the negative assurance tells shareholders that the auditor could noting auditor could not find any
evidence of material misstatements in evidence of the real world negative assurances occur most often
when an auditor is interrupted to review another auditor’s work for a company the usual proponents of
this service the ones who usually hire auditors for negative assurances are underwriters as a condition of
closing our underwriters as securities so this underwriters they’re actually involved in thein ills why do
we give unweight to a negative assurance well it is it's actually a very good thing it is important to know
that a negative insurance does not mean that the audited company has not committed fraud or violated
not committed a negative assurance does not mean that the audited company has not committed fraud
or violated accounting rules they may but the auditor may not have found it out it simply means that the
auditor could not find evidence of those the auditor might suspect that there is probably fraud that has
been committed by people within the organization but if he cannot find any evidence to support such a
suspicion then the auditor will simply issue a negative assurance but he will not say in the report that he
suspects that there is probably fraud committed within the organization we cannot say that in the report
he can only say that he could not find any evidence supporting ordinance activity negative assurances
also helped establish and defends the claims that investors might bring under certain specific lawsuit
stands for agreed upon procedures in this engagement the auditor simply provides a report of factual
findings and no assurance is expressed instead users of the report assess for themselves the procedures
and findings and reported by the auditor and draw their own conclusion from the auditor's work so this
is uh similar to audit andreview except that the auditor himself will not provide any report on the level
of insurance it will be the users of the report who will draw their own evaluation they will have their
own evaluation of their level of assurance based on the procedures performed by the auditor and the
findings in the report issued by the auditor in a compilation engagement the last box although the users
of the compiled information derive some benefit from the accountant’s involvement like in the
agreement procedures no assurance is expressed in the reports the a up and compilation these are
simply procedural engagement that the auditor performs and in the end any conclusions not reported
there is no conclusion and therefore there is no level of insurance included in the auditor's report we
discuss now the types of auditors first of course the ones we are most familiar with are the external
auditors of course these are the ones who audit the published historical financial statements their main
objective is doing audits as set up in psa 200 is to obtain reasonable assurance about whether the
financial statement as a whole is reformatories misstatements these type of auditors must have no
connection to the organization they already independent in mind as well as in appearance the works
performed by these auditors are those typically required by investors and lenders who rely on
information and data that is accurate and fairing most cases the auditor of an organization’s financial
statement leads to the auditors being hired in other engagements such as management consultancy in
the areas of operation and compliance to company governance policies and loss and regulations so as
we already mentioned later you can go into the more lucrative market of public affairs that is
management consultancy after you have been engaged in an audit audit engagement and of course you
have shown your competence to the client organization and the second type of auditors are the internal
auditors of auditors who are not really independent of the organization that hired them as employees
their services are primarily for the top management of the organization who may want appraisal of
aspects of the operations of the organization some aspects of the areas of the organizations we have the
areas of management and then areas of performance and compliance with government policies the
independence of these auditors are only with regards to the division and the departments that they
audit slide number 10slide number 10discusses about government auditors in the Philippines they are
divided into three uh subcategories first one the state auditors of cola second the examiners of bar and
the last one the regulatory auditors of the various regulatory agencies of governments such as the sec
bouffes are insurance commission another agencies that has oversight of private as well as public
businesses and individuals the most ones we are familiar with are again the commission on audit state
auditors we're not much familiar with the examiners of the bureau of internal revenue and then we
have of course the ones that are almost invisible are the regulatory body editors the purpose of their
owns related to the oversight functions that they dispense slide 11 is about the forensic monitor these
are auditors that are specially trained to detect and investigate and deter fraud and white-collar crimes
and then we also have forensic auditors that are hired to reconstruct account balances for example
when fire happens during some warehouse and then they have to they have to submit to the insurance
company the value of the inventory that has been destroyed by fire then forensic auditors sometimes
they are hired to perform reconstruction of the account balances also if you arena insurance company
who wants to investigate the veracity of an insurance claim then you can also hire forensic monitors
slide number 12discussesthe types of audit and so we have the audit of financial statement and defining
spa 120it says in page six paragraph 20the objective of the audit of financial statement is to enable the
auditor to express an opinion whether the financial statements are prepared in all material respects in
accordance with unidentified financial reporting framework the phrase used to express the author's
opinion is present fairly in all material respects similar objective applies to all the financial or other
information prepared in accordance with appropriate criteria so those are the words from psc-
128financial statement audit is concerned with a question is the financial statement fairly presented by
management internal audit is an independent objective assurance and consulting activity within the
organization designed to earn value and improve on organizations operationist goes beyond the
examination of accounting and financial records in the evaluation of corporate governance policies and
processes and it does the review with the aim of evaluating and recommending to management ways in
which their policies and procedures or the policies and the accompanying business processes ways that
they may be either improved to add value or they maybe removed to free up and redirect significant
resources to other value chains that they need that need resources the question is that the internal
auditors are most interested in is are management controls and processes effective efficient and are
they being complied with compliance audits are all added that athe degree of compliance of
anorganization to national and local lawsand regulationsit provides an assurance to governmentthat
businesses are following the rulesand regulation of a specific agreementfor example sec requires
thatcorporation publish the salaries andbenefits of executivesbe disclosedmaking sure that the investing
publicthose thatthose people who haveshares in the company is provided withfull and fair disclosure of
materialinformation which is of coursethe material information here is thesalaries and benefits of
executiveson which to base inform investing andespecially votinginvesting and especially
votingdecisions on the part of theshareholdersthus invariably an auditor engaged incompliance audit
asks the questiondoes the entity follow established rulesand regulationsoperational audit is almost
exclusivelyperformed by internal auditorsand because they have the in-depthknowledge of the business
processes aswell as the supporting systems of anorganizationand because they are there in
theorganization every day because they areemployees of the organization they canseethe inner
workings of the operationsso they are the best uh the bestauditors in position to perform aprofessional
auditit is the operator that is theoperational audit is future oriented inthe sense that the
recommendations ofthe internal auditors on how to improveeffective and efficient use of resourcesare
recommended nowand plan then planned and then executedlater by managementin the futurethey will
improve the operations byuh implementing the recommendations thatwere whereproposed by the
internal auditors themain question that internal auditorshave when they do compliance all it isare the
company resources being usedeffectively and efficientlyand lastly forensic audit is a highlyspecialized
auditthat involves tracing and tracking ofevidences of wrongdoing orirregularities therefore the
foremostconcern of the auditor is how do wedetect fraudand deter the condition of itso there it is
chapter 2 thanks for listening and stay safe always