FUNDAMENTALS OF ACCOUNTING 1

THE ACCOUNTANCY PROFESSION AND ITS DEVELOPMENT

WHAT IS AN ACCOUNTANT?

A Certified Public Accountant or a Professional Accountant is a holder of a baccalaureate degree in

Bachelor of Science in Accountancy (BSA), who has taken and passed the difficult and competitive
licensure examination for Certified Public Accountants and carries the title as “C.P.A.”, vested by the
laws of the Republic to practice Public Accounting in general under the supervision of the Professional
Regulation Commission.

WHAT ARE THE CAREER OPPORTUNITIES OF AN ACCOUNTANT?

• Public Accounting – under this field, we are in public practice. And as a public practitioner, we
have two options to choose from, it is either, we will become individual practitioner or getting
employed with firms of CPAs like (Punongbayan & Araullo, SGV & Co. and many other auditing
firms.) Once we choose this field, we will become a member of the Association of CPAs in Public
Practice (ACPAPP) sector.
• Government Accounting – under this field, we are to render services to the government. Once
we choose this field, we will become a member of Government Associations of CPAs (GACPA)
sector.
• Private Accounting – under this field, we will gain employment in private firms and hold
positions as Chief Accountant, Accounting Manager, Internal Auditor, Finance Manager or the
highest accounting officer of an enterprise which is known as the “Comptroller”. Once we
choose this field, we will become a member of the Association of CPAs in Commerce and
Industry (ACPACI) sector.
• Accounting Education – there are CPAs who join in the academe and sacrifice the high income
generating profession for the sake of love in accounting education. Once we choose this field,
we will become a member of the Association of CPAs in Education (ACPAE) sector.

CODE OF PROFESSIONAL ETHICS FOR CPAs IN THE PHILIPPINES

• Adopted from the revised Code of Ethics for Professional Accountants developed by the
International Federation of Accountants (IFAC), which took effect on June 30, 2008.
• Approved by the Board of Directors of the Philippine Institute of Certified Public Accountans
(PICPA)
• And the same has been adopted by Board of Accountancy (BOA)
 • And finally approved by the Professional Regulation Commission (PRC) as part of the rules and
regulations of the BOA for the practice of accountancy profession.

Being a member of International Federation of Accountants (IFAC), it is committed to observe the

following fundamental principles, viz:

❖ Integrity – A professional accountant should be straightforward and honest in all professional and
business relationships. A professional accountant should not be associated with reports, returns,
communications or other information where they believe that the information:
▪ Contains a materially false or misleading statement;
▪ Contains statements or information furnished recklessly
▪ Omits or obscures information required to be included where such omission or obscurity
would be misleading
❖ Objectivity – A professional accountant should not allow bias, conflict of interest or under influence
of others to override professional or business judgments.
❖ Professional Competence and Due Care – A professional accountant has a continuing duty to
maintain professional knowledge and skill at the level required to ensure that a client or employer
receives competent professional service based on current developments in practice, legislation and
techniques. Professional competence may be divided into two (2) separate phases:
▪ Attainment or professional competence.
▪ Maintenance of professional competence.
❖ Confidentiality – A professional accountant should respect the confidentiality of information
acquired as a result of professional and business relationships and should not disclose any such
information to third parties without proper and specific authority unless there is legal or
professional right or duty to disclose.
❖ Professional Behavior – A professional accountant should comply with relevant laws and regulations
and should avoid any action that discredits the profession.

CORE COMPETENCIES FRAMEWORK FOR ACCOUNTANTS

1) Knowledge – The CPAs knowledge must cover:

a) General Knowledge – Of emphasis here are gaining an understanding of the different cultures in
the world and developing an international perspective.
b) Organizational and Business Knowledge – In addition to the core knowledge in areas such as
economics, quantitative methods and business statistics, organization behavior, marketing and
operations management, the CPA must be conversant of international business and have an
understanding of how the global business system works.
c) Information Technology (IT) Knowledge – This includes not only being conversant with IT
concepts for business system but sound knowledge on internal control in computer-based
systems, development standards and practices for business systems, management of the
 adoption, implementation and use of IT, evaluation of computer business systems, and
managing the security of information.
d) Accounting Knowledge – This includes core knowledge related to accounting and related areas
and must include proficiency in the international accounting and auditing standards, cost
management and the latest concepts in management accounting, recent tax laws, business and
commercial laws.

2) Skills – The Skills to be developed include:

a) Intellectual – This set of skills includes the ability to carry out abstract logical thinking and
understand criticial thinking.
b) Interpersonal – This involves developing the ability of CPAs to work in groups and being a team
player.
c) Communication – This refers to active listening skills and the ability to communicate effectively
one’s points of view, both orally and in writing, at all organization levels; being able to justify
one’s position, deliver powerful presentations and to persuade and convice others.

3) Values – Values must concentrate on:

a) Professional Ethics – Since the objectives of the accountancy profession are to work in
accordance with the highest standards of professionalism, to attain the higher level of
performance and generally to meet the public interest, the need for CPAs to conform to the
ethical standards of the profession become vital.
b) Moral Values – Beyond ethical rules, there is a need for CPAs to be able to discern between
what is morally right or wrong.

THE ACCOUNTANCY LAW OF 2004

One of the remarkable developments in the accountancy profession is the signing into law on May 13,
2004 by her Excellency, Madam President Gloria Macapagal-Arroyo, R.A. No. 9298 known as “Philippine
Accountancy Act of 2004” which repealed Presidential Decree No. 692 formerly known as the “Revised
Accountancy Law” that was enacted on May 5, 1975 by his Excellency, the late President Ferdinand E.
Marcos.

Other salient points of the law are as follows:

• The Board of Accountancy and its Composition (Sec. 5) – The Board of Accountancy (BOA),
under the supervision and administrative control of the Professional Regulation Commission
(PRC) shall be composed of a chairman and six (6)’ members.
• Admission Requirements to the CPA Board Examinations (Sec. 14) – Any person applying for
examination shall establish the following requisites to the satisfaction of the Board that he/she:
o is a Filipino Citizen
o has a good moral character
o is a holder of the degree of Bachelor of Science in Accountancy
o has not been convicted of any criminal offense involving moral turpitude
 • Scope of the Board Examination – The revised six subjects in the CPA licensure examinations
are now:
o Financial Accounting and Reporting
o Advanced Financial Accounting and Reporting
o Management Accounting Services
o Auditing
o Taxation
o Regulatory Framework for Business Transactions
• Rating in the Licensure Examination (Sec. 16) – To be qualified as having passed the licensure
examination for accountants, a candidate must obtain a general average of seventy-five (75%),
with no grades lower that sixty-five (65%) in any given subject.
• Reports of Rating (Sec. 17) – The Board shall submit to the commission the ratings obtained by
each candidates within ten (10) calendar days after the examination, unless extended for just
cause.
• Failing Candidates to Take Refresher Course (Sec. 18) – Any candidate who fails in two (2)
complete Certified Public Accountant 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 twenty-four (24) units of subject given in the
licensure examincation. For purposes of this Act, the examination in which the candidate was
conditioned together with the removal examination on the subject in which he/she failed shall
be counted as one complete examination.

THE BIRTH OF THE PHILIPPINE ACCOUNTING STANDARDS (PAS)

The Accounting Standards Council (ASC) was created by Philippine Institute of Certified Public
Accountants (PICPA) on November 18, 1981. It is standard-setting body which is tasked to establish and
improve the “Generally Accepted Accounting Principles” (GAAP) in the Philippines. The approved
statements and the relative interpretations of the ASC are known as “Statement of Financial Accounting
Standards” of SFAS which will be effective only upon approval by the Professional Regulation
Commission (PRC) and unless indicated to the contrary, shall be retroactive.

The ASC is composed of eight (8) members with four (4) members nominated by PICPA and one (1) each
from (SEC),(BSP),(PRC specifically the BOA), Final Executive Institute of the Philippines (FINEX). The term
of office of the members is two (2) years which can be renewed.

At present, however, Section 9 (A) of the Rules and Regulations Implementing R.A 9298 … created the
new accounting standard-setting body known as the Philippine Financial Reporting Standards Council
(PFRSC) to replace the Accounting Standards Council. Consequently, the Statement of Financial
Accounting Standards (SFAS) are now known as the Philippine Accounting Standards (PAS).

The PFRSC is composed fifteen (15) members with a Chairman who has been or is presently a senior
accounting practitioner.
INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB) REPLACES THE INTERNATIONAL ACCOUNTING
STANDARDS COUNCIL (IASC)

- To achieve uniformity in accounting principles which are used by business and other
organizations for financial reporting around the world.
- The approved statements of the IASC are known as International Accounting Standards (IAS).

PHILIPPINE ASC HAS SHIFTED TO IAS

GOVERNMENT SECTOR ADOPTS INTERNATIONAL ACCOUNTING STANDARDS