CHALLENGES OF ACCOUNTING PROFESSION AMIDST THE

COVID-19 PANDEMIC IN NAGA CITY C/Y 2020-2021

A Thesis Presented to
The Faculty of the College of Business and Accountancy
University of Nueva Caceres
City of Naga

In Partial Fulfillment
Of the Requirement for the Degree
BACHELOR OF SCIENCE IN ACCOUNTANCY

Adrias, Dave Anthony C.

Albus, Charlene C.

Amoroso, Jessica R.

Azuela, Janice A.

Lustre, John Cy B.

Nares, Mary Jane L.

December 2021
 CHAPTER I

INTRODUCTION

The COVID 19 pandemic made 2020 the most challenging year in ways that no one

could have predicted. It caused the most disruption in a century, with unprecedented changes

affecting worldwide economies. Its impact has been multidimensional at the personal,

organizational, and societal levels. It has disrupted people’s lives psychologically, emotionally,

physically, and professionally. Organizations in all sectors have been focusing on their

immediate survival only. World economic output had the most significant drop in over 75 years

and affected people’s daily routines in almost every country. However, the same disruptive forces

of the pandemic accelerated the digital transformation and innovation and caused business

practices in accounting to leapfrog decades ahead. The pandemic caused many organizations to

adopt the innovative changes that would normally have taken many decades before full

implementation.

Nowadays, the accounting profession involves the provision of a wide range of services,

pertaining to fields of accounting and finance, to both legal entities and individuals. The

importance of the accounting profession is undoubtedly high to both business and individuals,

but also to the state in itself and its economy. The role of professionals in the accounting field is

to ensure that the professional and economic activity of both business and individuals is in

accordance with the applicable legislation and that their clients accurately.

The accountant's ability to adapt to changes and meet such challenges is dependent on

factors such as the length of the adjustment period provided and the level of training accessible

to them. It shows that the COVID-19 pandemic significantly affected the activity of accounting
professionals, who were forced to change their work routines. It arises as to how the accounting

profession may be affected in cases where the state has to address emergencies, when the

daily-life routine is disrupted and immediate action, adaptability and responsibility are called for

or when accountants have to deal with emergency changes. Such questions are of particular

importance, given the rare occurrence of such incidents in human history.

The World Health Organization (WHO) has declared a global pandemic, which resulted

in the majority of countries around the world taking emergency measures aiming both at the

protection of civilians and at the protection and support of the economy. It is worth noting here

that an emergency as the one caused by the virus outbreak is unprecedented on a worldwide scale

and that explains the limited number of similar studies found in the relevant literature on a global

scale.

Since Naga City is one of the places in Bicol that became affected by this Coronavirus

pandemic particularly in terms of the operation of businesses and organizations, this research

seeks to determine the impact of the Covid-19 pandemic on the accounting profession and the

accountants' challenges during this time of the pandemic.

SIGNIFICANCE OF THE STUDY

The findings of the study will benefit the following:

Certified Public Accountants - As they are the respondents of the study, this research may help

them to know some of the effective ways that may help them to solve the various dilemmas and

challenges in their work and easily adapt to the changes brought by the pandemic.
Public and Private Organization/Businesses - this will aid the organization determine the

challenges of accountants amidst the pandemic and it will help them in implementing new

strategies to assure the quality of their financial report.

Accountancy Students - The information presented will enable them to act accordingly on the

different accounting subjects, because as early as now, through this research study, they will be

able to see the challenges of accountants especially amid pandemic and further see the

importance of being efficient, diligent and flexible on their work.

Professors - The outcome of the study will facilitate them to formulate efficient strategies and

worthwhile approaches to make learning more comprehensive and retentive since they are

considered as the backbones and pillars of knowledge, skills and attitudes needed to be proficient

accountants in the future. Also, the results may signal them to realize their noble tasks in

preparing the BSA students as future accountants to become flexible and efficient in their job.

University - The situation portrayed in this study will assist academic administrators, college

curriculum, and accountancy program developers in assessing and evaluating the current status

in the university with regards to the performance of the BSA students, particularly the graduating

students. In this manner, they may implement new strategies to enhance the performance of the

aspiring accountants and make them ready for the possible challenges they may face due to the

pandemic.

Future researchers - The ideas presented may be used as reference data in conducting new

research or in testing the validity of other related findings. This study will also serve as their

cross-reference that will give them a background overview of the challenges encountered by

accountants during the pandemic.

STATEMENT OF THE PROBLEM

This study aims to determine the challenges that the accounting profession has encountered

during the pandemic in Naga City C/Y 2020-2021. Specifically, it answered the following

questions:

1. What is the impact of the Covid-19 pandemic on the accounting profession in Naga

City in terms of preparation of financial statements and auditing?

2. What are the challenges that the accountants have encountered during the pandemic

specifically in terms of timeliness of report, frequency of meeting, accessibility of

accounting information/audit evidence, internal control and quality of financial

reports and how do they respond to these challenges?

3. Is there a significant relationship between the impact of the Covid-19 pandemic on the

accounting profession and the accountants’ challenges during the year 2020-2021?

SCOPE AND DELIMITATION

This study focused on determining the challenges that the accounting profession

encountered during the Covid-19 pandemic in Naga City C/Y 2020-2021. The respondents of

this study were twenty(20) Certified Public Accountants employed in public and private

organizations in Naga City. The research is being conducted during the pandemic, thus, the

researchers will use online platforms for data gathering.

THEORETICAL FRAMEWORK

Figure 1. Overview of Theoretical Framework

The figure above illustrates the paradigm of the theoretical context of this

research, which will be used specifically to explain the theories that underpin the study.
 Stress Theory (Finsterbusch, 1982) describes the process whereby environmental

events or forces threaten an individual's well-being and the individual response. The threatening

event is the stressor and the response is coping behavior which, if successful, leads to adaptation

and/or adjustment and, if unsuccessful, leads to additional coping efforts. If the stress condition

continues for a long enough time without relief it can lead to physical or mental disorders.

Transition-Adaptation Theory (Schlossberg,1981), describes the developmental

changes or trajectories in experiences and behavior that take place before and after employees

are exposed to a transition event. Accordingly, a transition occurs if an event or nonevent results

in a change in assumptions about oneself and the world and thus requires a corresponding change

in one’s behavior and relationships and adaptation is the process during which individual moves

from being too occupied with the transition to integrating the transition into his or her life. The

extent to which individuals adapt successfully to a transition depends on the interplay between

event characteristics and individual difference characteristics. This adjustment/adaptation

includes employees’ personal development of the capacity to deal with new demands and role

development through the self-initiated redesign of work demands. This theory is relevant for

studying employee experiences and behavior in times of crisis, because crisis events may require

that employees transition to new work roles with different demands and resources. Importantly,

research suggests that employees differ in their dispositional tendency to resist such changes

within organizations. Employees with higher cognitive rigidity, a greater preference for routines,

stronger negative emotional reactions to imposed changes, and a short-term focus should

generally have more difficulty adjusting to work-related changes due to a crisis.

 Event System Theory (Morgeson, 2015), aims to explain the nature of events, as well as

the consequences of events over time and within and across multiple hierarchical levels, ranging

from the individual level to the broader societal level. The theory defines events as discrete,

discontinuous, and observable circumstances or actions in the environment. An “event system”

involves the interaction of event strength, space, and time. First, the theory suggests that event

strength, or the likelihood that the event becomes salient and leads to changes in employee

experiences and behavior, is determined by the extent to which the event is novel, disruptive and

critical. Second, the notion of event space entails that events occur in a specific location and

hierarchical level. Effects of events that originate at a certain hierarchical level can affect

outcomes at a higher, lower, or the same level. Event system theory predicts that strong events

are more likely to change employee experiences and behavior when they occur at higher levels,

and when they have an impact on a larger number of different levels. Finally, event time refers to

the timing of an event and how long its effects last. Event system theory proposes that strong

events are more likely to change employee experiences and behavior when they have a longer

duration and when their strength increases over time. Due to its relatively broad scope, event

system theory is well-suited to investigate the effects of crisis events on employee experiences

and behavior.
CONCEPTUAL FRAMEWORK

The conceptual framework below shows the relationship between the level of impact of

the Covid-19 pandemic on the accounting profession and the accountants’ challenges in their

work.

Figure 2. Conceptual Paradigm Illustrating the Challenges Of Accounting Profession Amidst the

Covid-19 Pandemic in Naga City C/Y 2020-2021

ASSUMPTION AND HYPOTHESIS

Assumption:

The impact of the Covid-19 pandemic on the accounting profession as well as the

challenges that accountants have encountered during the year 2020-2021 are measurable.

Hypothesis:

H1: There is a significant relationship between the level of impact Covid-19 pandemic on

the accounting profession and the accountants’ challenges during the year 2020-2021.

DEFINITION OF TERMS

The following terms are conceptually and operationally defined for the better

understanding of the variable of the study:

Accounting Profession - The one who performs accounting functions such as account analysis,

auditing, or financial statement analysis. This type of profession can find employment with an

accounting firm or a large company with an internal accounting department, or they can set up an

individual practice.

Auditing - involves the examination of transactions and systems that underlie an organization’s

financial reports, with the ultimate goal of providing an independent report on the

appropriateness of financial statements.

Coronavirus Disease (COVID-19) - An infectious disease caused by the SARS-CoV-2 virus

which was first identified amid an outbreak of respiratory illness cases in Wuhan City, Hubei

Province, China. Most people infected with the virus will experience mild to moderate

respiratory illness and recover without requiring special treatment/medicine.

Financial Statements - are written records that convey the business activities and the financial

performance of a company. This includes Statement of Financial Position, Income Statement,

Cash Flows and Statement of Changes in Equity.

CHAPTER II

REVIEW OF RELATED LITERATURE AND STUDIES

This chapter presents an overview of the following articles and studies that relate to and

support the idea of this research.

RELATED LITERATURE

The International Federation of Accountants (IFAC), defined the accounting

profession as the one that performs accounting functions such as account analysis, auditing or

financial statement analysis. The importance of the role of professional accountants in business is

ensuring the quality of financial reporting cannot be overly emphasized. They often find

themselves being at the frontline of safeguarding the integrity of financial reporting. As such,

they have the task of defending the quality of financial reporting right at the source where the

numbers and figures are produced.

According to the CAPA (Confederation of Asian and Pacific Accountants) Survey

Report (2020), the coronavirus disease or COVID-19 pandemic took the world by surprise and

brought it to its knees. At the time of writing, there are over 8 million confirmed cases with

nearly 450,000 deaths. Its impact is felt not only on the health of people but also across all

economies and no sector is spared, including the accountancy profession.

The survey revealed that the challenges were presenting more severe hardships, and the struggle

to address immediate needs was more evident. This was usually reflective of the limited access

to resources, whether that be people, finance or technology.

According to CPA Journal (2021), between May 2020 and July 2020, the NYSSCPA

surveyed a random sample of NYSSCPA members and asked them about the impact of the

coronavirus (COVID-19) pandemic on their practice. Not surprisingly, for the vast majority of

NYSSCPA members, COVID-19 has severely impacted their practice. This survey discusses

their most significant changes.

Winiarski, M. (2020), noted in his article entitled 11 Accounting Challenges Arising

from COVID-19, accountants usually encountered challenges when it comes to Going Concern,

Accounting for impairment, Financial Statement disclosures, Vulnerability from concentrations,

SEC Considerations, Credit losses, Inventory, Income tax accounting, Accounting for

restructuring, Revenue recognition, and Accounting for PPP (Paycheck Protection Program).

Nagem, S. (2020), emphasized that when the coronavirus pandemic led to stay-at-home

orders that shuttered businesses, organizations across the country had to adapt quickly.

Employees began working from home and accelerated their use of videoconferencing.

Technology was upgraded, and leaders reassured clients, customers, and vendors without seeing

them face to face. Accounting firms, known for brick-and-mortar offices and in-person client

experiences, have encountered new challenges during the past several months. But experts say

those challenges — and the lessons learned from them — could lead to major long-term changes

in the accounting profession, from new office setups and remote audits to migration to

cloud-based technology systems.

 Cohn, M. (2020), expanded that public companies are dealing with a variety of financial

reporting difficulties in the face of the unpredictable COVID-19 pandemic and the impact it’s

having on businesses of all sizes. These include preparation of forward-looking cash-flow

estimates, recoverability and impairment of assets, accounting for financial assets, and going

concern analysis. The SEC has been granting companies and their accountants more time to deal

with all the problems, especially as many accountants are forced to work remotely and are away

from their colleagues.

Tas, L. (2020) also noted that companies affected by the COVID-19 outbreak may

experience cash flow challenges as a result of disrupted operations, higher operating costs or lost

revenues. They may need to obtain additional financing, amend the terms of debt agreements or

obtain waivers if they no longer satisfy debt covenants. In such cases, they will need to consider

whether any changes to existing contractual arrangements represent a substantial modification or

potentially a contract extinguishment.

Beltran B. M. (2021), emphasized that another change during the pandemic is the quick

adoption of new technology. Accountants generally go through voluminous paperwork, whether

electronic or hard copy, to get their work done. However, with the pandemic, the majority of the

paperwork and even the procedures that needed to be conducted by accounting firms had to be

done online and virtually. Several companies have incorporated virtual communication

applications and other digital tools into their operations to carry out essential procedures

involving their accountants, such as vouching, tracing, stocktaking, etc. Indeed, working from

home is a great challenge for accountants.

 Radigan, J. (2020), instructed that the coronavirus pandemic has the potential to create

significant changes for CPAs who prepare company financial statements — and for auditors as

well. Some in the accounting community say the March quarter’s financial statements will

provide evidence of the outbreak’s financial effects. These experts recommend that finance

personnel and practitioners take the following steps: (1) Consider the epidemic as part of audit

planning meetings, (2) Be alert to the effect on many financial statement accounts, (3) Be

prepared to write down assets and make detailed disclosures about the pandemic’s effects, (4)

Expect client estimates to be more of a challenge than usual, (5) Be alert to the effect on

employees and other stakeholders, (6) Carefully consider internal controls, (7) Pay attention to

loan covenants and lender requirements, and (8) Prepare for an increase in going concern

disclosures.

Wolfe J. et. al (2021), added that the world has changed dramatically in recent months.

Firms should consider the impact of COVID-19 on a client’s business, especially the impact on

financial statement amounts that require judgment or estimation, such as asset valuations or

revenue recognition. Additional disclosures, such as going concern and/or risks and

uncertainties, or modifications to the CPA firm’s report may be necessary. If a client’s business

fails at a later date, lenders and investors may be quick to blame the CPA firm for their lost

investment, especially if, in hindsight, disclosure was inadequate or the firm failed to detect a

misstatement in the financial statements. This is an extraordinary time for the world, our country,

and the profession. While the full impact of COVID-19 is unknown and uncertain, what is

certain is the need for CPAs to be vigilant and informed and to be flexible and adaptable in their
response to these changing times. Taking necessary precautionary steps now is important and

will help to protect from potential losses that may arise as the public health and economies

recover.

RELATED STUDIES

According to Papadopoulou (2020), the COVID- 19 pandemics influenced the operation

of accountants pushed into shifts in their working pattern. In general, it was impossible to

accommodate the newly emerging demands for the workplace. Finally, research has shown that

when the world's economy is in danger during emergencies, the relevance of an accounting

career is much more pronounced, as analyzed.

According to the study conducted by Hossain, D. A. (2021) regarding the Impact of

Covid-19 on the Accounting Profession, the accounting profession is facing the following

challenges as a result of the Covid-19 pandemic: (1) Time-constrained decision making, (2)

Working remotely, (3) Reduction of employee number, (4) Audit and Assurance Services, (5)

Increase in fraud, and (6) Consideration for accounting standards.

According to Bjorn Biel Beltran (2021), few things in history have caused a titanic

upheaval to modern society like the coronavirus disease 2019 (COVID 19). Aside from plunging

the world economy into the worst global recession since the Second World War, according to the

World Bank, the pandemic has also exacerbated the risks associated with a decade-long wave of

global debt accumulation, as well as steepening the long-expected slowdown in potential growth

over the next decade.

 Heltzer W.et.al. (2021), concluded that COVID-19 limits accountants’ ability to meet

face-to-face with coworkers and clients, and unprecedented, unpredictable economic hardships

have fallen upon accounting firms and clients alike. Concurrent research predicts that

“COVID-19 presents a veritable “perfect storm” for fraud risk, and auditors should be on high

alert. This extended finding suggests that not only it is believed clients’ internal controls will be

less effective due to COVID-19, but also auditors’ ability to determine the effectiveness of

internal controls will be thwarted by COVID-19. Internal controls serve to reduce accounting

errors and misstatements. If these controls are less effective due to COVID-19, and auditors are

not able to determine the deceased effectiveness, COVID-19 may lead to financial statements

unintentionally littered with errors and misstatements.

Moses, M.A (2021), based on research, each phase of the audit has been impacted one way

or another but has varied insignificance. Recruiting of clients has had to change to fit the needs

of both the auditor and the clients. In addition, the auditor’s understanding of the client's business

and its environment has also changed from previous periods due to the implications of the

pandemic. Increased risk assessments have occurred for both the preliminary engagement

activities and the planning phase.

STATE-OF-THE-ART

Accordingly, the COVID-19 pandemics led to a new work age. When the coronavirus

pandemic led to stay-at-home orders that shuttered businesses, organizations adapt rapidly to a

remote work environment using the cloud, zoom, and other technologies (not as usual) and

accounting practitioners worldwide welcomed the modern concept of "workplace" in this

enormous home experiment.

With this situation, accounting firms have encountered new challenges during the past

several months. The physical and financial constraints of Covid-19 have hindered the

productivity of accountants, their ability to execute their job, maintain relations with

co-employees, and their capacity to offer future services to potential clients. Since the companies

have to report on their operations, financial condition, and cash flows during this crisis, and those

reports will have to be audited, the burden for the accounting profession has also increased as

organizations do not have the total capacity to disclose information as per rules and because of

decline and the failure to get clear and accurate data. The pandemic has also brought on massive

increases in fraudulent behavior. The shift to remote work has created a new risk landscape due

to the inefficiency of internal control as a result of work-from-home and virtual communication.

Furthermore, with regards to issuing annual and quarterly reports during a period of massive

uncertainty, accountants have found themselves with confusing adjustments and a list of factors

to consider. Overall, these difficulties may have an impact on the financial report's quality.
 CHAPTER III

RESEARCH METHODOLOGY

This chapter introduces the methodology that was adapted and used in the collection of

data and analysis of researchers. It consists of research design, research participants, research

instruments, data gathering procedures and statistical treatment.

RESEARCH DESIGN

This research is a quantitative research that will use descriptive-correlational as research

design. This type of research corresponds to identifying the characteristics of an observed

phenomenon or exploring the correlation between two or more variables. This research design

was suitable for this study for the reason, it describes the level of impact of the Covid-19

pandemic on the accounting profession in terms of preparation of financial statements and

auditing as well as its relationship to the challenges that the accountants have encountered during

the pandemic in Naga City. The method was relevant and appropriate for the study as the

researchers determined the extent of the relationship between two or more paired variables or

two or more sets of data.

POPULATION/ SAMPLE

The participants in the study were 20 Certified Public Accountants from businesses, the

commerce industry, and the public practice sectors. The respondents are determined by the use of

stratified random sampling. The researchers carried out the online survey on an anonymous basis

that allowed accountants to speak themselves openly without any prejudice and discrimination.
DATA GATHERING PROCEDURE

As the coronavirus pandemic has engulfed the nation for almost two years and brought

changes in the operation of businesses, this study aims to determine the different dilemmas and

challenges encountered by accountants during the pandemic in Naga City. To gather significant

data for the study, the researchers will use survey questionnaires through the use of Google forms

as a research instrument.

Before the conduct of the study, the researchers will obtain permission from the

respondents to conduct the survey. The researchers will explain the purpose of the study and

assure each respondent that their information would be kept secure, private, and anonymous.

After getting the approval, the instruments will be distributed to the respondents through an

online platform and will be given enough time to answer all the questions. Moreover, the

researchers will also conduct interviews with some of the respondents for additional inquiries

that are relevant to the study. Data gathered from the interviews and questionnaires will be

collected by the researchers and will be organized and analyzed using appropriate statistical

tools.

STATISTICAL TOOL

The data is subject to the following statistical treatment:

1. Weighted Mean Average and Ranked- was used to determine the impact of the

Covid-19 pandemic on the accounting profession in Naga City in terms of

preparation of financial statements and auditing.

2. Weighted Mean and Ranked - was used to determine the challenges that the

accountants have encountered during the pandemic in Naga City.

3. Pearson Correlation Coefficient Test - was used to determine the significant

relationship between the impact of the Covid-19 pandemic on the accounting

profession and the accountants’ challenges during the year 2020-2021.

BIBLIOGRAPHY

LITERATURE

Beltran B. M. (2021). Accounting in a World Reshaped by Covid-19.

Retrieved from https://www.bworldonline.com/accounting- -in-a-world-reshaped-by-covid-19/

CAPA (Confederation of Asian and Pacific Accountants) (2020). COVID-19 Impacts Challenges
Facing the Profession and Professional Accountancy Organisations. Retrieved from
http://www.capa.com.my/covid-19-impacts-challenges-facing-the-profession-and-professional-a
ccountancy-organisations/

Cohn, M. (2020). Companies Face Financial Reporting Challenges During Coronavirus

Pandemic. Retrieved from
https://www.accountingtoday.com/news/companies-face-financial-reporting-challenges-during-c
oronavirus-pandemic

CPA Journal (2021). The Impact of COVID-19 on the Profession. Retrieved from
https://www.cpajournal.com/2021/02/01/the-impact-of-covid-19-on-the-profession/

International Federation of Accountants (IFAC). Roles and Importance of Professional

Accountants in Business. Retrieved from
https://www.ifac.org/about-ifac/professional-accountants
-business/news-events/2013-10/roles-and-importance-professional-accountants-business

Nagem, S. (2020). How COVID-19 taught new ways to work. Retrieved from
https://www.journalofaccountancy.com/news/2020/jul/remote-work-after-coronavirus-pandemic.
html

Radigan, J. (2020). How the Coronavirus may affect Financial Reporting and Auditing.
Retrieved from
https://www.journalofaccountancy.com/news/2020/mar/how-coronavirus-may-affect-financial-re
porting-auditing-23087.html

Tas, L. (2020). Five financial reporting issues to consider as a consequence of COVID-19.

Retrieved from
https://www.ey.com/en_gl/assurance/five-financial-reporting-issues-to-consider-as-a-consequenc
e-of-covid-19
Winiarski, M. (2020). 11 Accounting Challenges Arising from COVID-19. Retrieved from
https://info.cbiztofias.com/the-new-
england-accounting-advisor-0/11-accounting-challenges-arising-from-covid-19

Wolfe J. et. al (2020). The indirect impacts of COVID-19 on CPA firms. Retrieved from
https://www.journalofaccountancy.com/news/2020/apr/indirect-impacts-of-coronavirus-on-cpa-fi
rms.html

STUDIES

Heltzer W.et.al. (2020). COVID-19 and the Accounting Profession. Retrieved from
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3839771

Hossain, D. A (2021). The Impact of Covid-19 on the Accounting Profession. Retrieved from
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3923710

Jabin, S. (2021). The Impact of COVID- 19 on the Accounting Profession in Bangladesh.

Retrieved from https://www.koreascience.or.kr/article/JAKO202119453005142.pdf

Moses, M.A (2021). The impacts of COVID-19 on Audit Practices. Retrieved from
https://commons.emich.edu/cgi/viewcontent.cgi?article=1702&context=honors

Bjorn Biel M. Beltran (2021). Accounting in a world reshaped by COVID-19

https://www.bworldonline.com/accounting-in-a-world-reshaped-by-covid-19/