WEEK 3 TO WEEK 4
II. Regulatory Framework for Auditing in the
Philippines
The regulatory framework for auditing in the
Philippines is primarily governed by the Securities and
Exchange Commission (SEC) and the Board of
Accountancy (BOA) under the Professional Regulation
Commission (PRC). Here's a sample outline of the
regulatory framework for auditing in the Philippines:
I. Securities and Exchange Commission (SEC)
A. Overview and Role of SEC in Auditing Regulation
The Securities and Exchange Commission (SEC) plays a
vital role in the regulation of auditing in the Philippines.
As the primary regulatory body overseeing capital markets
and corporate governance, the SEC ensures the credibility
and transparency of financial reporting through effective
auditing regulation.
The SEC's role in auditing regulation includes several key
aspects:
1. Supervision of Auditing Firms: The SEC is
responsible for the registration and supervision of
auditing firms operating in the Philippines. It
ensures that these firms comply with professional
standards and ethical guidelines while conducting
audits.
2. Financial Reporting Requirements: The SEC
establishes and enforces financial reporting
requirements for publicly listed companies and
other entities operating in the capital markets.
These reporting standards, such as the Philippine
Financial Reporting Standards (PFRS), guide
auditors in evaluating and ensuring compliance
with the relevant accounting principles.
3. Enforcement of Auditing Standards: The SEC
enforces auditing standards, such as the
Philippine Standards on Auditing (PSAs) and
International Standards on Auditing (ISAs), to
maintain consistency and quality in the audit
process. Auditors are expected to follow these
standards when conducting engagements.
4. Code of Ethics: The SEC upholds a Code of Ethics
for auditors and accountants to maintain the
highest level of professional conduct and integrity
in their engagements. This code emphasizes
principles such as independence, objectivity, and
confidentiality to preserve public trust in the
auditing profession.
5. Protection of Investor Interests: One of the SEC's
primary objectives is to protect investor interests
and promote investor confidence in the financial
markets. Effective auditing regulation ensures
that audited financial statements provide reliable
and accurate information to stakeholders.
6. Regulatory Enforcement: The SEC has the
authority to enforce auditing regulations and take
disciplinary actions against auditors or auditing
firms found in violation of professional standards
or ethical guidelines. This enforcement
mechanism acts as a deterrent against non-
compliance and strengthens the integrity of the
audit profession.
Overall, the SEC's oversight and regulation of auditing in
the Philippines contribute to the stability and efficiency of
the capital markets, safeguarding public interest, and
promoting confidence in financial reporting. Through its
proactive approach to auditing regulation, the SEC fosters
a climate of trust and transparency, essential for the
growth and development of the Philippine economy.
B. Registration and Supervision of Auditing Firms
The registration and supervision of auditing firms are
crucial components of the regulatory framework for
auditing in the Philippines. The process involves oversight
by regulatory bodies to ensure that auditing firms meet
specific criteria, adhere to professional standards, and
maintain ethical conduct in their operations.
Summary of Registration and Supervision of Auditing
Firms:
1. Registration Process: Auditing firms wishing to
operate in the Philippines must undergo a
registration process with the appropriate
regulatory authority, such as the Securities and
Exchange Commission (SEC). This process
involves submitting necessary documentation,
including details of the firm's structure,
ownership, qualifications of partners and
employees, and compliance with relevant auditing
standards.
2. Licensing Requirements: The registration process
includes obtaining the necessary licenses to
provide auditing services. The regulatory body,
such as the Board of Accountancy (BOA), ensures
that the firm's partners and employees are
licensed Certified Public Accountants (CPAs) with
valid and up-to-date credentials.
3. Professional Standards and Quality Control:
Auditing firms are required to demonstrate
adherence to professional standards, such as the
Philippine Standards on Auditing (PSAs) and
International Standards on Auditing (ISAs). These
standards ensure that the firm conducts audits in
a consistent, transparent, and reliable manner.
4. Independence and Objectivity: During the
registration process, auditing firms must declare
their independence and objectivity in performing
audit engagements. They are expected to maintain
impartiality and avoid any conflicts of interest that
could compromise the integrity of the audit
process.
5. Continuing Professional Development (CPD):
Auditing firms are encouraged to invest in the
professional development of their partners and
employees. Compliance with CPD requirements
set by the regulatory bodies ensures that auditors
stay updated with the latest developments in
auditing practices and standards.
6. Peer Review: As part of the supervision process,
auditing firms may undergo periodic peer reviews.
These reviews assess the quality of the firm's audit
engagements and internal control systems. The
objective is to identify areas for improvement and
maintain high-quality auditing services.
7. Regulatory Compliance and Enforcement: The
regulatory bodies regularly monitor auditing firms
to ensure compliance with the established
regulations and standards. Any violations or
discrepancies discovered during inspections may
lead to disciplinary actions, such as fines or
license revocation, to uphold the integrity of the
audit profession.
By implementing a robust registration and supervision
process, the regulatory bodies in the Philippines aim to
enhance the overall quality of auditing services, instill
public confidence in financial reporting, and safeguard the
interests of stakeholders in the country's capital markets.
C. Financial Reporting Requirements for Publicly Listed
Companies
Financial reporting requirements for publicly listed
companies in the Philippines are stringent and designed to
ensure transparency, accuracy, and comparability of
financial information. These requirements are governed by
the Securities and Exchange Commission (SEC) and aim
to provide investors and stakeholders with reliable
information for making informed decisions.
Summary of Financial Reporting Requirements for Publicly
Listed Companies:
1. Philippine Financial Reporting Standards (PFRS):
Publicly listed companies are required to prepare
their financial statements in accordance with the
Philippine Financial Reporting Standards (PFRS).
PFRS is based on the International Financial
Reporting Standards (IFRS) and ensures
consistency and comparability of financial
statements both nationally and internationally.
2. Annual and Interim Financial Statements: Publicly
listed companies must prepare and publish
annual financial statements, including the
balance sheet, income statement, statement of
changes in equity, and cash flow statement.
Additionally, they are required to disclose interim
financial statements on a quarterly basis.
3. Audited Financial Statements: The financial
statements of publicly listed companies must
 undergo an external audit by independent
external auditors. The auditors' report provides
assurance on the fairness and accuracy of the
financial statements, enhancing their reliability for
investors and stakeholders.
4. Timely Disclosure: Publicly listed companies must
adhere to strict timelines for submitting financial
reports to the SEC and other regulatory bodies.
Timely disclosure ensures that investors receive
updated information promptly, enabling them to
make well-informed investment decisions.
5. Segment Reporting: Publicly listed companies with
multiple business segments are required to
provide segment reporting, disclosing financial
information for each segment separately. This
facilitates a better understanding of the company's
diversified operations.
6. Related Party Transactions: Companies must
disclose related party transactions, including
those with directors, key management personnel,
and their relatives. This disclosure ensures
transparency and mitigates potential conflicts of
interest.
7. Management Discussion and Analysis (MD&A):
Publicly listed companies are encouraged to
include an MD&A section in their financial
reports. This narrative provides management's
insights into the financial performance, prospects,
and challenges faced by the company.
8. Corporate Governance Disclosures: Companies are
required to disclose information on their corporate
governance practices, including the composition of
the board of directors, executive compensation,
and risk management policies. Transparent
corporate governance practices promote
accountability and shareholder confidence.
9. Electronic Filing: The SEC mandates publicly
listed companies to file their financial reports
electronically, making them readily accessible to
the public through the SEC's online platform.
By adhering to these financial reporting requirements,
publicly listed companies in the Philippines uphold high
standards of financial transparency, accountability, and
credibility. These requirements foster investor confidence,
attract investments, and contribute to the overall growth
and stability of the capital markets in the country.
D. Enforcement of Auditing Standards and Code of Ethics
The enforcement of auditing standards and the code of
ethics is critical to maintain the integrity and credibility of
the audit profession in the Philippines. Regulatory bodies,
such as the Securities and Exchange Commission (SEC)
and the Board of Accountancy (BOA), play key roles in
ensuring compliance with these standards and ethical
guidelines. Here's a sample summary of the enforcement
process:
Summary of Enforcement of Auditing Standards and Code
of Ethics:
1. Regulatory Oversight: The SEC and BOA are
responsible for overseeing the auditing profession
in the Philippines. They set and promulgate
auditing standards, such as the Philippine
Standards on Auditing (PSAs), and the Code of
Ethics for Professional Accountants.
2. Mandatory Compliance: Auditing firms and
Certified Public Accountants (CPAs) are required
to adhere to the established auditing standards
and code of ethics during audit engagements and
other professional activities.
3. Quality Control Review: The regulatory bodies
conduct quality control reviews of auditing firms
to assess their compliance with auditing
standards and the code of ethics. These reviews
help identify areas for improvement and ensure
that audits are conducted in accordance with
professional standards.
4. Disciplinary Actions: In cases of non-compliance
or ethical violations, the regulatory bodies have
the authority to take disciplinary actions against
auditors or auditing firms. Disciplinary measures
may include warnings, fines, license suspension,
or revocation, depending on the severity of the
violation.
5. Investigative Process: The regulatory bodies may
initiate investigations based on complaints or
suspicious activities related to auditing
engagements. The investigative process aims to
uncover any violations of auditing standards or
ethical principles.
6. Reporting and Public Disclosure: The results of
quality control reviews, investigations, and
disciplinary actions are documented and, if
necessary, disclosed to the public. Public
disclosure reinforces transparency and
accountability within the auditing profession.
7. Continuing Professional Development (CPD): To
ensure ongoing compliance with standards and
ethical guidelines, CPAs are required to participate
in CPD programs. CPD helps auditors stay
updated with the latest developments in auditing
practices and regulations.
8. Collaboration with Professional Organizations: The
regulatory bodies collaborate with professional
organizations, such as the Philippine Institute of
Certified Public Accountants (PICPA), to promote
and enforce professional standards and ethical
conduct among auditors.
Through rigorous enforcement of auditing standards and
the code of ethics, the regulatory bodies protect the public
interest, maintain the credibility of financial reporting, and
uphold the reputation of the audit profession in the
Philippines. This commitment to enforcement fosters trust
between auditors, clients, and stakeholders and
contributes to the stability and efficiency of the country's
financial markets.
II. Board of Accountancy (BOA)
A. Role and Responsibilities of BOA in Auditing
Regulation
The Board of Accountancy (BOA) in the
Philippines plays a pivotal role in the regulation of
auditing and ensuring the competence and ethical
conduct of Certified Public Accountants (CPAs).
Here's a sample summary of the role and
responsibilities of BOA in auditing regulation:
Summary of Role and Responsibilities of BOA in
Auditing Regulation:
1. Licensing and Registration: BOA is
responsible for the licensing and
registration of CPAs in the Philippines. It
sets the qualifications and requirements
for individuals seeking to become CPAs,
including educational attainment,
practical experience, and passing the CPA
licensure examination.
2. Continuing Professional Development
(CPD): BOA oversees the CPD program for
CPAs, which requires them to undergo
continuous training and education to stay
updated with the latest developments in
auditing practices, accounting standards,
and regulatory requirements.
3. Development of Auditing Standards: BOA
is involved in the development and
adoption of auditing standards applicable
in the Philippines. These standards, such
as the Philippine Standards on Auditing
(PSAs), ensure consistency, quality, and
transparency in audit engagements.
4. Ethics and Professional Conduct: BOA
sets and enforces the Code of Ethics for
Professional Accountants, which outlines
the ethical principles and responsibilities
that CPAs must adhere to in their
professional practice. This code
emphasizes independence, integrity, and
objectivity in auditing engagements.
 5. Quality Control Review: BOA conducts
quality control reviews of auditing firms to
assess their compliance with professional
standards and ethics. The review process
helps identify areas for improvement and
ensures that audit engagements are
conducted with competence and diligence.
6. Regulatory Enforcement: BOA has the
authority to investigate complaints and
alleged violations of auditing standards or
ethical guidelines by CPAs. If violations
are found, BOA may take disciplinary
actions, including sanctions, fines,
suspension, or revocation of CPA licenses.
7. Collaboration with Professional
Organizations: BOA collaborates with
professional organizations, such as the
Philippine Institute of Certified Public
Accountants (PICPA), to promote the
interests of the accounting profession and
align regulatory efforts with industry
needs.
8. Public Interest Protection: BOA's primary
objective is to protect the public interest
by upholding high standards of
competence, integrity, and ethics in the
audit profession. This commitment
ensures that auditors serve as trusted
advisors in financial reporting and
corporate governance.
Through its proactive approach to auditing
regulation, BOA maintains the integrity and
credibility of the CPA profession in the Philippines.
By setting stringent licensing requirements,
enforcing ethical conduct, and fostering
continuous professional development, BOA
ensures that CPAs are well-equipped to meet the
challenges of auditing in a dynamic and evolving
business environment.
B. Licensing and Regulation of Certified Public
Accountants (CPAs)
The licensing and regulation of Certified Public
Accountants (CPAs) in the Philippines are
overseen by the Board of Accountancy (BOA). This
regulatory process ensures that CPAs meet
specific qualifications, demonstrate competence,
and adhere to ethical standards, thereby
upholding the integrity and credibility of the
accounting profession. Here's a sample summary
of the licensing and regulation of CPAs:
Summary of Licensing and Regulation of Certified
Public Accountants (CPAs):
1. Qualification Requirements: To become a
CPA in the Philippines, individuals must
meet specific qualification requirements
set by the Board of Accountancy. These
requirements typically include completing
a bachelor's degree in accounting or
related fields, passing the CPA licensure
examination, and fulfilling practical
experience hours.
2. CPA Licensure Examination: The CPA
licensure examination is conducted by the
Board of Accountancy. The exam assesses
candidates' knowledge and competency in
various areas of accounting, auditing,
taxation, and business law. Successful
candidates are granted their CPA licenses,
allowing them to practice as professional
accountants.
3. Continuing Professional Development
(CPD): After obtaining their CPA licenses,
CPAs are required to participate in
Continuing Professional Development
(CPD) programs. CPD ensures that CPAs
continually enhance their knowledge and
skills and stay up-to-date with the latest
developments in the accounting
profession.
4. Code of Ethics: CPAs are bound by a Code
of Ethics for Professional Accountants,
established by the Board of Accountancy.
The code outlines ethical principles and
responsibilities that CPAs must uphold in
their professional practice, including
independence, integrity, and
confidentiality.
5. Regulatory Compliance: The Board of
Accountancy ensures that CPAs comply
with the regulatory requirements
throughout their professional careers.
CPAs are expected to adhere to the
standards set by BOA and maintain their
licenses by fulfilling CPD obligations.
6. Disciplinary Actions: In cases of
professional misconduct or violations of
ethical guidelines, the Board of
Accountancy has the authority to take
disciplinary actions against CPAs. These
actions may include sanctions, fines,
suspension, or revocation of their CPA
licenses, depending on the severity of the
violation.
7. Collaboration with Professional
Organizations: The Board of Accountancy
collaborates with professional
organizations, such as the Philippine
Institute of Certified Public Accountants
(PICPA), to promote the interests of the
accounting profession and align
regulatory efforts with industry needs.
8. Public Interest Protection: The licensing
and regulation of CPAs are designed to
protect the public interest by ensuring
that individuals practicing as CPAs
possess the necessary qualifications,
skills, and ethical standards to provide
reliable and competent accounting
services.
By overseeing the licensing and regulation of
CPAs, the Board of Accountancy plays a crucial
role in maintaining the professional standards and
ethical conduct of accountants in the Philippines.
This regulatory oversight enhances the credibility
of the accounting profession and fosters public
trust in the financial reporting and assurance
services provided by CPAs.
C. Continuing Professional Development (CPD)
Requirements for CPAs
Continuing Professional Development (CPD) is a
vital aspect of the regulatory framework for
Certified Public Accountants (CPAs) in the
Philippines. The Board of Accountancy (BOA)
requires CPAs to undergo continuous learning and
professional development to enhance their
knowledge, skills, and competencies. Here's a
sample summary of the CPD requirements for
CPAs:
Summary of Continuing Professional Development
(CPD) Requirements for CPAs:
1. Mandatory CPD Program: The Board of
Accountancy has implemented a
mandatory CPD program for all CPAs in
the Philippines. This program is designed
to ensure that CPAs continually update
their knowledge and stay abreast of the
latest developments in accounting,
auditing, taxation, and other relevant
areas.

2. CPD Credit Units: CPAs are required to
earn a specified number of CPD credit
units within a defined period to maintain
their professional licenses. These credit
units are earned through attending CPD
seminars, workshops, conferences,
training sessions, and other relevant
educational activities.
3. Different CPD Categories: The CPD
program offers various categories of
learning opportunities, allowing CPAs to
choose activities that align with their
professional interests and areas of
expertise. These categories may include
technical, ethical, managerial, and other
subjects relevant to the accounting
profession.
4. Accredited CPD Providers: The BOA
accredits organizations and institutions as
CPD providers to ensure the quality and
relevance of the CPD activities offered to
CPAs. Accredited providers offer courses
and programs that meet the standards set
by the BOA.
5. Compliance Reporting: CPAs are required
to document and keep records of their
CPD activities, including certificates of
attendance or completion. They must
submit reports of their completed CPD
credit units to the BOA during the license
renewal process.
6. Exemptions and Extensions: The BOA
may grant exemptions or extensions for
CPD requirements in certain cases, such
as medical reasons, military service, or
other valid reasons that hinder
compliance. However, CPAs must apply
for exemptions or extensions and provide
necessary documentation.
7. Enforcement and Sanctions: Non-
compliance with CPD requirements may
result in sanctions by the BOA, ranging
from warnings to the suspension or
revocation of the CPA license. Strict
enforcement of CPD ensures that CPAs
maintain their competence and uphold
professional standards.
8. Professional Growth and Development:
CPD serves as a platform for CPAs to
enhance their skills, broaden their
knowledge, and acquire new
competencies. It helps CPAs remain
relevant and competent in a dynamic and
rapidly changing business environment.
Continuing Professional Development (CPD) is an
integral part of a CPA's professional journey,
ensuring that they remain well-informed,
adaptable, and proficient in their roles. By
participating in CPD activities, CPAs continually
enhance their value as trusted financial
professionals, contributing to the overall growth
and credibility of the accounting profession in the
Philippines.
D. Enforcement of Professional Standards and Ethics for
CPAs
The enforcement of professional standards and ethics is a
crucial aspect of maintaining the integrity and credibility
of Certified Public Accountants (CPAs) in the Philippines.
Regulatory bodies, such as the Board of Accountancy
(BOA) and the Professional Regulation Commission (PRC),
are responsible for overseeing and enforcing these
standards to ensure CPAs' adherence to ethical principles
and professional conduct. Here's a sample summary of the
enforcement of professional standards and ethics for
CPAs:
Summary of Enforcement of Professional Standards and
Ethics for CPAs:
1. Code of Ethics for CPAs: The Board of
Accountancy (BOA) has established a
comprehensive Code of Ethics for Professional
Accountants that outlines the ethical principles
and responsibilities expected of CPAs. This code
emphasizes integrity, objectivity, confidentiality,
and professional behavior in all aspects of their
practice.
2. Regulatory Oversight: The BOA and the
Professional Regulation Commission (PRC) play a
key role in regulating and overseeing CPAs'
professional conduct. They are responsible for
enforcing the Code of Ethics and professional
standards established for the accounting
profession.
3. Quality Control Reviews: The regulatory bodies
conduct quality control reviews of auditing firms
and CPAs to assess their compliance with
professional standards and ethical guidelines.
These reviews help identify any deficiencies or
areas for improvement and ensure the delivery of
high-quality services.
4. Investigative Process: The BOA and the PRC have
the authority to investigate complaints and
reported violations of professional standards and
ethics by CPAs. The investigative process aims to
uncover any misconduct, breaches of ethics, or
non-compliance with standards.
5. Disciplinary Actions: In cases of proven violations,
the regulatory bodies may take disciplinary
actions against CPAs. These actions may include
warnings, fines, suspension, or revocation of the
CPA license, depending on the gravity of the
offense.
6. Public Disclosure: The results of quality control
reviews, investigations, and disciplinary actions
are documented and, if necessary, disclosed to the
public. Public disclosure reinforces transparency
and accountability within the accounting
profession.
7. Collaboration with Professional Organizations: The
BOA collaborates with professional organizations,
such as the Philippine Institute of Certified Public
Accountants (PICPA), to promote and enforce
professional standards and ethical conduct among
CPAs.
8. Continuing Professional Development (CPD): The
CPD program also serves as a platform for
reinforcing ethical principles and professional
standards. CPAs are encouraged to participate in
CPD activities that address ethical dilemmas and
challenges in their profession.
Enforcing professional standards and ethics for CPAs is
essential to safeguard the public interest, maintain trust
in the accounting profession, and uphold the credibility of
financial reporting. The regulatory bodies' commitment to
robust enforcement fosters accountability, transparency,
and ethical behavior among CPAs, ensuring that they
continue to serve as reliable and trusted financial
professionals in the Philippines.
III. Philippine Financial Reporting Standards (PFRS)
A. Adoption and Application of PFRS
The adoption and application of the Philippine
Financial Reporting Standards (PFRS) is a
significant milestone in the accounting and
financial reporting practices of companies in the
Philippines. PFRS aligns the country's accounting
standards with the International Financial
Reporting Standards (IFRS), promoting
consistency, comparability, and transparency in
financial reporting. Here's a sample summary of
the adoption and application of PFRS:
Summary of Adoption and Application of
Philippine Financial Reporting Standards (PFRS):
1. Convergence with IFRS: The Philippine Financial
Reporting Standards (PFRS) were introduced to
converge with the International Financial
Reporting Standards (IFRS). This convergence
aimed to enhance the credibility of financial
reporting in the Philippines and facilitate cross-
border investment and comparison of financial
information globally.
2. Adoption Timeline: The adoption of PFRS occurred
in several phases, with the full adoption completed
over a specific timeline. Companies were required
to transition from the previous accounting
standards (Philippine Generally Accepted
Accounting Principles or P-GAAP) to PFRS.
3. Financial Statement Presentation: PFRS outlines
the framework for the preparation and
presentation of financial statements. It provides
guidance on the format, content, and classification
of financial information to ensure consistency and
comparability across entities.
4. Accounting Policies: PFRS sets out the principles
and requirements for selecting and applying
accounting policies. Entities must use judgment
in applying these policies to present financial
information that faithfully represents their
financial position, performance, and cash flows.
5. Fair Value Measurement: PFRS introduces the
concept of fair value measurement for certain
assets, liabilities, and financial instruments. Fair
value measurement enhances the relevance of
financial information and reflects market-based
values.
6. Disclosure Requirements: PFRS includes
comprehensive disclosure requirements, ensuring
that entities provide sufficient and relevant
information to users of financial statements.
These disclosures help stakeholders understand
the company's financial position, performance,
and risks.
7. Impact on Businesses: The adoption of PFRS
required companies to undertake significant
changes in their accounting policies, systems, and
reporting processes. This transition involved
extensive training and adjustments to ensure
compliance with the new standards.
8. Continuing Updates and Amendments: PFRS is
subject to updates and amendments to keep pace
with changes in the global accounting landscape.
Companies are required to stay informed about
these updates and incorporate them into their
financial reporting.
The adoption and application of PFRS in the
Philippines have improved the quality and
reliability of financial reporting, providing
stakeholders with more meaningful and
comparable information. By aligning with
international accounting standards, PFRS has
enhanced the country's attractiveness to global
investors and strengthened its position in the
international business community.
B. Role of Auditors in Ensuring Compliance with
PFRS
The role of auditors in ensuring compliance with
the Philippine Financial Reporting Standards
(PFRS) is critical in maintaining the credibility and
reliability of financial statements. Auditors play a
fundamental role in assessing whether entities'
financial statements conform to the prescribed
accounting standards and provide assurance to
stakeholders on the accuracy and fairness of the
reported financial information. Here's a sample
summary of the role of auditors in ensuring
compliance with PFRS:
Summary of the Role of Auditors in Ensuring
Compliance with Philippine Financial Reporting
Standards (PFRS):
1. Conducting Audits: Auditors are engaged by
companies to perform financial statement audits.
During these audits, auditors review and examine
the financial records, transactions, and
accounting practices of the entity to ensure
compliance with PFRS.
2. Evaluating Accounting Policies: Auditors assess
whether the entity's accounting policies are in
accordance with the relevant PFRS requirements.
They verify that the selected accounting policies
are applied consistently and result in accurate
financial reporting.
3. Fair Value Assessments: When financial
instruments or assets are measured at fair value
under PFRS, auditors evaluate the entity's fair
value assessments to ensure they are based on
reliable and relevant information.
4. Disclosure Verification: Auditors verify the
adequacy and accuracy of the disclosures made by
the entity in its financial statements as required
by PFRS. They ensure that all material
information is properly disclosed for stakeholders'
understanding.
5. Assessment of Financial Statement Presentation:
Auditors evaluate the overall presentation of the
financial statements to confirm that they conform
to the prescribed formats and classifications
under PFRS.
6. Going Concern Assumption: Auditors assess
whether the entity's financial statements are
prepared on a going concern basis, as required by
PFRS. They evaluate the entity's ability to
continue its operations for the foreseeable future.
7. Auditor's Report: After completing the audit, the
auditor issues an audit report expressing their
professional opinion on the fairness of the
financial statements in accordance with PFRS.
The audit report provides stakeholders with
assurance on the reliability of the financial
information.
8. Communication with Management and Audit
Committee: Throughout the audit process,
auditors maintain communication with
management and the audit committee to address
any identified issues and provide
recommendations for improvement.
9. Ethical Considerations: Auditors adhere to a strict
code of ethics, including independence, objectivity,
and confidentiality, while performing their audit
engagements to maintain the integrity and
credibility of their work.
By diligently fulfilling their role, auditors
contribute to the trust and confidence that
stakeholders place in financial reporting. Their
independent and objective assessments help
ensure that entities comply with PFRS, enabling
stakeholders to make informed decisions based on
reliable financial information.
C. Reporting Requirements for Auditors under PFRS
Under the Philippine Financial Reporting
Standards (PFRS), auditors have specific reporting
requirements to communicate the results of their
audits and provide assurance on the fairness of
the financial statements. These reporting
requirements are designed to enhance
transparency and accountability in financial
 reporting. Here's a sample summary of the
reporting requirements for auditors under PFRS:
Summary of Reporting Requirements for Auditors
under Philippine Financial Reporting Standards
(PFRS):
1. Auditor's Report: The primary reporting
requirement for auditors under PFRS is the
issuance of the Auditor's Report. This report
provides an independent and professional opinion
on the fairness and reliability of the financial
statements prepared by the entity.
2. Expression of Opinion: In the Auditor's Report,
auditors express their opinion on whether the
financial statements present fairly, in all material
respects, the financial position, results of
operations, and cash flows in accordance with
PFRS. The opinion is either an unqualified opinion
(clean opinion), qualified opinion (with exceptions),
adverse opinion (materially misstated), or
disclaimer of opinion (unable to express an
opinion).
3. Key Audit Matters (KAMs): For audits of listed
entities or other entities required by law or
regulation, the Auditor's Report may include Key
Audit Matters (KAMs). KAMs are significant
matters that the auditor considers most critical
during the audit and require additional
communication to stakeholders.
4. Basis for Opinion: The Auditor's Report explains
the basis for the auditor's opinion, including the
audit procedures performed, the assessment of
accounting policies and estimates, and any
limitations encountered during the audit.
5. Emphasis of Matter: If auditors believe that
certain matters warrant emphasis, but do not
affect the opinion, they may include an Emphasis
of Matter paragraph in the report. This draws
stakeholders' attention to specific items in the
financial statements.
6. Other Reporting Obligations: In certain
circumstances, auditors may be required to issue
special reports on other financial information,
such as reports on condensed financial
statements or reports on specific engagements, as
per applicable laws or regulations.
7. Compliance with International Standards on
Auditing (ISAs): Auditors are required to comply
with the International Standards on Auditing
(ISAs) when conducting their audit engagements.
Compliance with ISAs ensures consistency and
quality in audit procedures and reporting.
8. Timeliness and Format: The Auditor's Report is
typically included in the entity's annual financial
statements. It must be issued within a reasonable
timeframe after the completion of the audit. The
report follows a standardized format as prescribed
by auditing standards.
The Auditor's Report serves as a crucial
communication tool between auditors and
stakeholders, providing assurance of the reliability
of financial statements and enhancing confidence
in the entity's financial reporting. Through their
comprehensive and transparent reporting,
auditors play a vital role in upholding the
credibility and integrity of financial information
prepared under PFRS.
IV. Auditing Standards and Practices
A. Philippine Standards on Auditing (PSAs)
The Philippine Standards on Auditing (PSAs) are a
set of guidelines and principles that govern the
conduct of audits in the Philippines. Issued by the
Auditing Standards and Practices Council (ASPC),
these standards ensure consistency, quality, and
uniformity in the audit process, and they are
closely aligned with the International Standards
on Auditing (ISAs). Here's a sample summary of
the Philippine Standards on Auditing (PSAs):
Summary of Philippine Standards on Auditing
(PSAs):
1. Purpose and Scope: The PSAs provide
comprehensive guidance to auditors on the
principles, procedures, and responsibilities
involved in conducting audits of financial
statements. The standards outline the auditor's
responsibilities, objectives, and procedures to
obtain reasonable assurance about the financial
statements' reliability.
2. Alignment with International Standards: The PSAs
are closely aligned with the International
Standards on Auditing (ISAs), issued by the
International Auditing and Assurance Standards
Board (IAASB). This alignment ensures
consistency in auditing practices globally and
enhances the credibility of Philippine audits on
the international stage.
3. Structure and Format: The PSAs are organized in
a logical sequence, addressing various aspects of
the audit process, from planning to reporting.
Each standard has a specific number and title,
making it easy to reference and apply in practice.
4. Fundamental Principles: The PSAs are
underpinned by fundamental principles, including
integrity, objectivity, professional competence and
due care, confidentiality, and professional
behavior. These principles guide auditors in
maintaining ethical conduct and providing reliable
audit services.
5. Risk Assessment: The PSAs emphasize the
importance of risk assessment in audit planning.
Auditors are required to understand the entity's
business and environment, identify and assess
risks, and design appropriate audit procedures to
address those risks effectively.
6. Audit Evidence: The PSAs provide guidance on
obtaining sufficient and appropriate audit
evidence to support the auditor's conclusions and
opinions. Auditors use various audit procedures,
such as inspection, observation, inquiry, and
confirmation, to gather evidence.
7. Documentation: The PSAs require auditors to
maintain detailed and organized audit
documentation, providing a record of the audit
work performed and the evidence obtained. This
documentation supports the auditor's conclusions
and serves as a reference for future audits.
8. Reporting: The PSAs set out the requirements for
the auditor's report, including the format, content,
and expression of opinion. The report
communicates the auditor's findings and opinion
on the fairness of the financial statements.
By adhering to the Philippine Standards on
Auditing (PSAs), auditors in the Philippines
uphold a consistent and robust approach to
conducting audits. The standards promote
transparency, accountability, and reliability in the
audit process, ensuring that financial statement
users can have confidence in the information
presented in audited financial statements.
B. Generally Accepted Auditing Standards (GAAS) in
the Philippines

In the Philippines, Generally Accepted Auditing
Standards (GAAS) are a set of principles and
guidelines that auditors follow when conducting
audits of financial statements. These standards
are issued by the Auditing Standards and
Practices Council (ASPC) and serve as the
foundation for the audit process, ensuring
consistency, quality, and professionalism in audit
engagements. Here's a sample summary of the
Generally Accepted Auditing Standards (GAAS) in
the Philippines:
Summary of Generally Accepted Auditing
Standards (GAAS) in the Philippines:
1. Purpose and Scope: Generally Accepted Auditing
Standards (GAAS) provide a framework for
auditors to plan, perform, and report on financial
statement audits. These standards define the
objectives of the audit and the auditor's
responsibilities in obtaining reasonable assurance
about the financial statements' reliability.
2. Professional Competence: GAAS requires auditors
to possess the necessary professional competence,
knowledge, and skills to perform audits effectively.
Auditors are expected to have a thorough
understanding of accounting principles, auditing
standards, and relevant laws and regulations.
3. Independence and Objectivity: GAAS emphasizes
the importance of auditor independence and
objectivity. Auditors must maintain an
independent attitude and avoid any conflicts of
interest that could compromise their impartiality
in conducting the audit.
4. Planning and Supervision: GAAS requires auditors
to plan the audit engagement carefully, including
assessing risks, establishing audit objectives, and
determining the audit approach. Adequate
supervision ensures that audit procedures are
performed with due care and consistency.
5. Audit Evidence: GAAS emphasizes the need for
auditors to obtain sufficient and appropriate audit
evidence to support their conclusions and
opinions on the financial statements. Auditors use
a combination of tests and procedures to gather
relevant evidence.
6. Documentation: GAAS mandates auditors to
maintain comprehensive audit documentation,
recording the audit work performed, the evidence
obtained, and the conclusions reached. These
audit files serve as a record of the audit and
facilitate review by supervisors or other auditors.
7. Reporting: GAAS sets out the requirements for the
auditor's report, which includes the expression of
the auditor's opinion on the fairness of the
financial statements. The report communicates
the auditor's findings and conclusions to the users
of the financial statements.
8. Quality Control: GAAS stresses the importance of
maintaining an effective system of quality control
within the audit firm. Quality control procedures
ensure that audits are conducted in accordance
with professional standards and that audit
engagements meet the required level of quality
and competence.
By adhering to the Generally Accepted Auditing
Standards (GAAS), auditors in the Philippines
uphold the integrity and credibility of the audit
profession. These standards provide a systematic
and reliable approach to auditing, ensuring that
financial statement users can have confidence in
the accuracy and reliability of the information
presented in audited financial statements.
C. International Standards on Auditing (ISAs) and
Their Application in the Country
The International Standards on Auditing (ISAs) are
a set of globally recognized auditing standards
issued by the International Auditing and
Assurance Standards Board (IAASB). These
standards serve as a foundation for high-quality
and consistent audit practices worldwide. In the
Philippines, the application of ISAs is essential in
ensuring that audits meet international
benchmarks and align with best practices. Here's
a sample summary of the International Standards
on Auditing (ISAs) and their application in the
country:
Summary of International Standards on Auditing
(ISAs) and Their Application in the Philippines:
1. Global Recognition: The International Standards
on Auditing (ISAs) are widely accepted and
recognized as the benchmark for auditing
practices worldwide. The adoption of ISAs
enhances the credibility and quality of audit
engagements in the Philippines by aligning them
with global standards.
2. Issuance and Updates: The International Auditing
and Assurance Standards Board (IAASB) issues
and updates the ISAs regularly to address
emerging challenges and changes in the business
environment. These updates ensure that auditors
in the Philippines are equipped to deal with
contemporary audit issues.
3. Adoption in the Philippines: The Philippine
Institute of Certified Public Accountants (PICPA)
has adopted the ISAs as the basis for auditing
practices in the country. This adoption reflects the
commitment of the accounting profession in the
Philippines to adhere to internationally recognized
audit standards.
4. Application to All Audit Engagements: The ISAs
apply to all types of audit engagements, including
financial statement audits, internal audits, and
other assurance engagements. By applying the
ISAs, auditors ensure a systematic and consistent
approach to their work.
5. Enhancing Audit Quality: The application of ISAs
in the Philippines helps enhance the quality of
audit engagements. Auditors follow the prescribed
methodologies and procedures, ensuring a
comprehensive and robust examination of
financial statements and relevant information.
6. Focus on Risk Assessment: ISAs place significant
emphasis on risk assessment in the audit process.
Auditors in the Philippines are required to
understand the entity's operations, identify and
assess risks, and design audit procedures to
address these risks effectively.
7. Communication of Findings: ISAs emphasize clear
and transparent communication of audit findings.
The auditor's report provides stakeholders with
meaningful insights into the financial statements,
highlighting key audit matters and any material
uncertainties.
8. Continuous Professional Development: The
application of ISAs requires auditors to stay
informed about updates and developments in the
standards. Continuous professional development
ensures that auditors in the Philippines are well-
equipped to apply the latest standards in their
engagements.
The application of the International Standards on
Auditing (ISAs) in the Philippines underscores the
country's commitment to maintaining high-quality
and internationally recognized audit practices. By
 adhering to these standards, auditors uphold the
credibility and reliability of financial reporting,
thereby fostering trust among stakeholders and
contributing to the overall growth and stability of
the business environment.
V. Code of Ethics for Professional Accountants
A. Overview of the Code of Ethics for CPAs
The Code of Ethics for Certified Public Accountants (CPAs)
is a fundamental set of ethical guidelines that govern the
professional conduct of CPAs in their practice. Issued by
the Professional Regulatory Board of Accountancy and the
Professional Regulation Commission in the Philippines,
the Code of Ethics sets out the principles and
responsibilities that CPAs must adhere to in their
professional roles. Here's a sample summary of the
overview of the Code of Ethics for CPAs:
1. Fundamental Principles: The Code of Ethics for
CPAs is underpinned by fundamental principles
that guide their behavior and decision-making.
These principles include integrity, objectivity,
professional competence and due care,
confidentiality, and professional behavior.
2. Integrity: CPAs are expected to be honest and
straightforward in all professional and business
relationships. They must maintain their integrity
and avoid any act or omission that could discredit
the profession.
3. Objectivity: CPAs must remain impartial and
unbiased in their judgments, ensuring that their
professional decisions are not influenced by
personal interests or external pressures.
4. Professional Competence and Due Care: CPAs are
required to maintain professional competence and
continually develop their knowledge and skills.
They must perform their duties with due care,
diligence, and thoroughness.
5. Confidentiality: CPAs must respect the
confidentiality of information acquired during the
course of their work. They are obligated to disclose
such information only when required by law or
with proper authority.
6. Professional Behavior: CPAs are expected to act in
a manner consistent with the reputation of the
accounting profession. They must uphold the
highest standards of professional behavior and
promote trust and confidence in their services.
7. Independence: Independence is a critical aspect of
the Code of Ethics. CPAs must avoid any financial
or other relationship that could compromise their
independence in performing audit and assurance
engagements.
8. Application to Different Services: The Code of
Ethics applies to CPAs across various services,
including audit, assurance, taxation, advisory,
and consultancy. It ensures a consistent ethical
framework for all professional activities.
9. Continuing Professional Development: CPAs are
encouraged to pursue continuous professional
development to stay updated with changes in
accounting standards, laws, and regulations,
ensuring that they remain competent and capable
of upholding the Code of Ethics.
The Code of Ethics for CPAs serves as a guiding framework
for professional conduct, reinforcing the profession's
commitment to ethical behavior, transparency, and
accountability. By adhering to the principles outlined in
the Code, CPAs in the Philippines maintain public trust
and confidence, contributing to the reputation and
integrity of the accounting profession as a whole.
B. Ethical Principles and Responsibilities of Auditors
The ethical principles and responsibilities of auditors form
the foundation of their professional conduct and guide
their behavior throughout the audit process. Upholding
these principles is essential in ensuring the integrity,
objectivity, and reliability of audit engagements. Here's a
sample summary of the ethical principles and
responsibilities of auditors:
Summary of Ethical Principles and Responsibilities of
Auditors:
1. Integrity: Auditors must demonstrate honesty,
truthfulness, and ethical behavior in all aspects of
their work. They should be fair and
straightforward, avoiding any actions that could
compromise their professional integrity.
2. Objectivity: Auditors must maintain an impartial
and unbiased mindset when conducting audits.
They should not allow personal or financial
interests, relationships, or external pressures to
influence their professional judgments.
3. Professional Competence and Due Care: Auditors
are responsible for possessing the necessary
knowledge, skills, and expertise to perform audits
effectively. They must continuously update their
professional knowledge and exercise due care in
executing their audit procedures.
4. Confidentiality: Auditors are entrusted with
sensitive financial information during the course
of their work. They must respect the
confidentiality of this information and refrain from
disclosing it to unauthorized individuals or
organizations, except where required by law or
with proper authority.
5. Independence: Auditors must maintain
independence in appearance and fact when
conducting audit engagements. They should avoid
any financial, personal, or other relationships that
could compromise their objectivity.
6. Professional Behavior: Auditors are
representatives of the accounting profession and
must conduct themselves in a manner that
upholds the reputation and credibility of the
profession. They should comply with applicable
laws, regulations, and professional standards.
7. Responsibility to the Public Interest: Auditors have
a responsibility to act in the public interest by
ensuring the accuracy and reliability of financial
information. Their work directly impacts the
stakeholders' confidence in financial reporting.
8. Communication and Transparency: Auditors
should communicate with stakeholders clearly
and transparently, providing meaningful insights
into the audit process, findings, and any material
issues identified during the audit.
9. Ethical Dilemmas: Auditors may encounter ethical
dilemmas in their work. When faced with such
situations, they should carefully assess the ethical
implications and make decisions that prioritize the
public interest and their professional
responsibilities.
10. Continuing Professional Development: Auditors
are encouraged to pursue continuous professional
development to enhance their knowledge and
skills, ensuring that they remain competent and
informed about evolving auditing standards and
ethical considerations.
By adhering to these ethical principles and
responsibilities, auditors demonstrate their commitment to
upholding the highest standards of professional conduct
and promoting trust and confidence in the financial
reporting process. The ethical conduct of auditors is vital
in safeguarding the interests of stakeholders and
maintaining the credibility of the accounting profession.
D. Independence and Objectivity in Auditing
Independence and objectivity are two fundamental
principles that lie at the core of auditing. These
principles ensure that auditors maintain an
unbiased and impartial mindset throughout the
audit process, thereby enhancing the credibility
and reliability of audit engagements. Here's a
sample summary of the importance of
independence and objectivity in auditing:
Summary of Independence and Objectivity in
Auditing:
 1. Independence: Independence is a critical ethical
principle that requires auditors to maintain an
impartial and unbiased attitude when conducting
audit engagements. Auditors should be free from
any financial or non-financial relationships that
could compromise their ability to exercise
professional judgment objectively.
2. Importance of Independence: Independence is vital
in auditing because it provides stakeholders,
including investors, creditors, and the public, with
confidence in the reliability of the audited
financial statements. It ensures that auditors'
opinions are not influenced by personal or
financial interests, safeguarding the integrity of
the audit process.
3. External and Internal Independence: Auditors
need to maintain both external independence (in
appearance and fact) and internal independence
(mental attitude). External independence assures
stakeholders that auditors are free from any
relationships that could impair their objectivity.
Internal independence ensures that auditors
remain impartial and make unbiased judgments
during the audit.
4. Threats to Independence: There are various
threats to auditor independence, such as self-
interest threats (financial interests), self-review
threats (auditing one's own work), advocacy
threats (promoting a client's position), familiarity
threats (close relationships with clients), and
intimidation threats (coercive influence). Auditors
must identify and address these threats to
maintain their independence effectively.
5. Objectivity: Objectivity is closely linked to
independence and requires auditors to approach
their work with an unbiased and neutral mindset.
Auditors should base their professional judgments
solely on the audit evidence and avoid being
influenced by personal or external factors.
6. Enhancing Objectivity: Objectivity is strengthened
through robust audit planning, conducting
thorough and independent assessments, and
considering alternative explanations when
evaluating audit evidence. Documentation of the
audit process and findings also reinforces the
objectivity of the auditor's conclusions.
7. Impact on Audit Quality: Independence and
objectivity significantly impact the quality and
reliability of audit engagements. When auditors
are independent and objective, they are more
likely to detect material misstatements and
provide accurate assessments of the financial
statements' fairness.
8. Regulatory Oversight: Professional standards,
such as the Philippine Standards on Auditing
(PSAs) and the International Standards on
Auditing (ISAs), emphasize the importance of
independence and objectivity. Regulatory bodies
closely monitor compliance with these principles
to maintain the integrity of the auditing
profession.
By upholding the principles of independence and
objectivity, auditors play a crucial role in
enhancing trust and credibility in the financial
reporting process. These principles safeguard
stakeholders' interests, promote transparency,
and ensure that financial information is presented
accurately and fairly.
VI. Audit Quality and Peer Review
A. Importance of Audit Quality in Ensuring Financial
Reporting Credibility
Audit quality is a crucial aspect of ensuring the
credibility and reliability of financial reporting. It
plays a fundamental role in safeguarding the
interests of stakeholders and promoting
transparency and accountability in financial
statements. Here's a sample summary of the
importance of audit quality in ensuring financial
reporting credibility:
Summary of the Importance of Audit Quality in
Ensuring Financial Reporting Credibility:
1. Stakeholder Confidence: High-quality audits
enhance stakeholders' confidence in the accuracy
and fairness of financial statements. When
financial reporting is supported by a rigorous and
thorough audit, stakeholders can rely on the
information to make informed decisions.
2. Independent Verification: Audits provide
independent and objective verification of the
financial information presented in the financial
statements. This independent scrutiny ensures
that the financial reporting is free from material
misstatements or inaccuracies.
3. Detection of Misstatements: High-quality audits
are designed to detect material misstatements,
whether due to error or fraud. The auditor's
examination of the underlying records,
transactions, and internal controls helps uncover
any discrepancies and ensures that they are
appropriately addressed.
4. Compliance with Standards: Quality audits adhere
to professional standards, such as the Philippine
Standards on Auditing (PSAs) or the International
Standards on Auditing (ISAs). Compliance with
these standards ensures consistency and
uniformity in the audit process.
5. Assurance to Investors and Creditors: Investors
and creditors rely on audited financial statements
to assess the financial health and performance of
a company. A high-quality audit provides
assurance that the financial information is
accurate and trustworthy.
6. Protection of Public Interest: The credibility of
financial reporting is essential to protect the
public interest. Reliable financial information
enables regulators, policymakers, and the public
to monitor businesses, make informed decisions,
and maintain market integrity.
7. Confidence in Capital Markets: High-quality
audits contribute to confidence in capital markets.
When investors have faith in the accuracy of
financial reporting, they are more willing to invest,
fostering a healthy and thriving investment
climate.
8. Reduction of Information Asymmetry: Audit
quality helps reduce information asymmetry
between company management and external
stakeholders. By providing an independent
assessment of financial information, audits level
the playing field and ensure that stakeholders
have access to reliable information.
9. Enhancing Corporate Governance: Quality audits
play a significant role in strengthening corporate
governance practices. A robust audit process
ensures that management is accountable for the
financial information they present to stakeholders.
10. Mitigating Fraud and Mismanagement: Through
thorough examination and scrutiny, high-quality
audits act as a deterrent against fraudulent
activities and mismanagement. Audits hold
management accountable and foster an
environment of integrity and ethical behavior.
 Overall, audit quality is paramount in ensuring
the credibility and integrity of financial reporting.
It instills confidence in stakeholders, supports
market efficiency, and fosters a business
environment built on transparency and trust. By
upholding audit quality, auditors contribute to the
overall health and stability of the financial
ecosystem.
B. Role of Peer Review in Assessing Audit Quality
Peer review plays a crucial role in assessing audit
quality and ensuring that auditing firms adhere to
the highest professional standards. It involves the
evaluation of an audit firm's policies, procedures,
and practices by independent peers to identify
areas of improvement and ensure compliance with
auditing standards. Here's a sample summary of
the role of peer review in assessing audit quality:
Summary of the Role of Peer Review in Assessing
Audit Quality:
1. Evaluation of Compliance: Peer review assesses
whether an audit firm complies with relevant
professional standards, such as the Philippine
Standards on Auditing (PSAs) or the International
Standards on Auditing (ISAs). The review
evaluates the firm's practices to ensure they align
with the prescribed auditing procedures.
2. Independent Assessment: Peer review involves a
comprehensive and objective evaluation conducted
by auditors external to the reviewed firm. This
independent assessment ensures a fair and
impartial evaluation of the audit quality.
3. Continuous Improvement: Peer review serves as a
mechanism for continuous improvement in audit
quality. The feedback and recommendations
provided by peer reviewers enable the audit firm to
enhance its procedures and address any identified
weaknesses.
4. Identification of Best Practices: Peer review offers
an opportunity for audit firms to learn from each
other. Best practices observed during the review
can be shared and adopted, leading to overall
improvements in the quality of audits.
5. Enhancing Public Confidence: The peer review
process enhances public confidence in the
auditing profession. It demonstrates that audit
firms are committed to upholding high-quality
standards and are accountable for the quality of
their work.
6. Risk-Based Approach: Peer review is typically risk-
based, focusing on areas that are more likely to
impact audit quality. This approach allows for a
targeted evaluation of critical aspects of the firm's
auditing practices.
7. Feedback and Recommendations: Following the
review, the firm receives constructive feedback
and recommendations to strengthen their audit
processes. This feedback helps identify areas for
improvement and provides guidance on enhancing
audit quality.
8. Compliance with Regulatory Requirements: In
some jurisdictions, peer review is mandatory for
audit firms to maintain their licensure or
registration. Compliance with peer review
requirements demonstrates the firm's commitment
to meeting regulatory expectations and ensuring
audit quality.
9. Strengthening Professional Standards: The peer
review process can help identify potential gaps or
challenges in auditing standards. Such insights
can contribute to the continuous development and
improvement of auditing standards and
guidelines.
In conclusion, peer review plays a vital role in
assessing and enhancing audit quality. Through
independent evaluation and feedback, it
contributes to the overall improvement of auditing
practices, instills confidence in the profession, and
reinforces the commitment of audit firms to
maintaining the highest standards of quality and
professionalism.
C. Compliance Requirements for Peer Review of
Auditing Firms
Compliance requirements for peer review of
auditing firms are essential to ensure that audit
practices meet high-quality standards and adhere
to the prescribed auditing procedures. The peer
review process involves a comprehensive
evaluation of an audit firm's policies, procedures,
and practices by independent peers. Here's a
sample summary of the compliance requirements
for peer review of auditing firms:
Summary of Compliance Requirements for Peer
Review of Auditing Firms:
1. Mandatory Peer Review: In many jurisdictions,
peer review is a mandatory requirement for audit
firms that perform attest and assurance
engagements. Regulators and professional bodies
impose this requirement to enhance audit quality
and maintain the credibility of the profession.
2. Frequency of Reviews: The frequency of peer
reviews varies depending on the jurisdiction and
the size of the audit firm. Large firms typically
undergo peer reviews more frequently than
smaller firms. Common review cycles include
triennial, biennial, or annual intervals.
3. Qualified Reviewers: Peer reviewers must be
qualified and experienced auditors external to the
firm being reviewed. They should possess the
necessary expertise to conduct a thorough and
unbiased evaluation of the audit firm's practices.
4. Scope of Review: The scope of the peer review
encompasses various aspects of the audit firm's
operations, including audit engagements, quality
control processes, compliance with professional
standards, and adherence to ethical principles.
5. Risk-Based Approach: Peer reviews are often risk-
based, focusing on areas that have a higher
impact on audit quality and risk mitigation. The
review assesses the firm's ability to identify and
address risks effectively.
6. Confidentiality and Independence: Peer review
procedures must maintain strict confidentiality to
protect sensitive information about the audit
firm's clients. Reviewers must also maintain their
independence to ensure an objective evaluation.
7. Documentation: Both the reviewed firm and the
peer reviewers must maintain detailed
documentation of the peer review process. This
includes the review plan, workpapers, findings,
and recommendations.
8. Remediation and Follow-up: If any deficiencies or
areas for improvement are identified during the
peer review, the audit firm is expected to take
corrective actions. The firm may also be subject to
follow-up procedures to ensure compliance with
the recommendations.
9. Reporting: Following the completion of the peer
review, a report is issued, summarizing the
findings and conclusions. The report may include
 recommendations for improvement and highlight
areas of strength in the firm's audit practices.
10. Regulatory Compliance: Compliance with peer
review requirements is often a condition for
maintaining the audit firm's licensure or
registration with regulatory bodies or professional
associations.
By complying with the peer review requirements,
auditing firms demonstrate their commitment to
upholding high-quality standards, continuously
improving their audit practices, and enhancing
public confidence in the reliability of their audit
engagements. Peer review is an integral part of the
quality assurance process, supporting the
integrity and professionalism of the auditing
profession.
VII. Regulatory Enforcement and Disciplinary Actions
A. Role of SEC and BOA in Regulatory Enforcement
The Securities and Exchange Commission (SEC)
and the Board of Accountancy (BOA) play critical
roles in regulatory enforcement to maintain
integrity, transparency, and compliance within the
financial and accounting sectors in the
Philippines. Both regulatory bodies have distinct
responsibilities that contributethe to effective
enforcement of rules and regulations. Here's a
sample summary of the role of SEC and BOA in
regulatory enforcement:
Summary of the Role of SEC and BOA in
Regulatory Enforcement:
1. Securities and Exchange Commission (SEC):
 Oversight of Capital Markets: The SEC is primarily
responsible for regulating and supervising the
Philippine capital markets. It ensures that entities
involved in securities transactions, including
listed companies, investment banks, and
brokerage firms, comply with securities laws and
protect investors' interests.
 Registration and Approval: The SEC reviews and
approves the registration of securities, such as
stocks and bonds, to ensure that issuers provide
accurate and complete information to potential
investors.
 Enforcement of Securities Laws: The SEC enforces
the Securities Regulation Code (SRC) and other
related laws. It investigates and takes legal actions
against individuals or entities engaged in
fraudulent practices, insider trading, or market
manipulation.
 Corporate Governance: The SEC promotes good
corporate governance practices and requires
companies to disclose relevant information to
shareholders and the public. It sets standards for
financial reporting and disclosure, contributing to
transparency and accountability.
 Investor Protection: The SEC safeguards the rights
of investors by ensuring that companies adhere to
fair and ethical business practices. It provides
information and assistance to investors and takes
action against entities engaged in activities that
harm investor interests.
2. Board of Accountancy (BOA):
 Regulation of the Accounting Profession: The BOA
is responsible for regulating the practice of
accountancy in the Philippines. It sets the
standards for the licensure and registration of
Certified Public Accountants (CPAs) and oversees
their professional conduct.
 Licensure and Registration of CPAs: The BOA
conducts the licensure examinations for aspiring
CPAs and issues certificates to those who meet the
qualification requirements. It also registers
accountancy firms in compliance with relevant
laws and regulations.
 Adoption of Standards: The BOA adopts and
implements accounting and auditing standards,
including the Philippine Standards on Auditing
(PSAs) and Philippine Financial Reporting
Standards (PFRS), to ensure uniformity and
consistency in financial reporting and auditing
practices.
 Ethical Oversight: The BOA enforces the Code of
Ethics for CPAs, ensuring that all practitioners
adhere to the highest ethical principles and
professional conduct in their work.
 Investigation and Disciplinary Actions: The BOA
investigates complaints against CPAs or
accountancy firms and, when necessary, takes
disciplinary actions against those found to be in
violation of professional standards or ethical
principles.
By fulfilling their respective roles, the SEC and
BOA contribute to the stability and credibility of
the financial and accounting sectors in the
Philippines. Their regulatory enforcement efforts
foster public trust, protect investor interests, and
uphold the integrity of financial reporting and
auditing practices.
B. Disciplinary Actions and Sanctions for Non-
compliance with Auditing Standards and Ethics
Disciplinary actions and sanctions for non-
compliance with auditing standards and ethics are
essential mechanisms to uphold the integrity and
credibility of the auditing profession. Both
regulatory bodies and professional associations
have the authority to take disciplinary actions
against auditors or audit firms that fail to adhere
to the prescribed standards and ethical principles.
Here's a sample summary of disciplinary actions
and sanctions for non-compliance with auditing
standards and ethics:
Summary of Disciplinary Actions and Sanctions
for Non-compliance with Auditing Standards and
Ethics:
1. Regulatory Enforcement by SEC and BOA:
 Warning Letters: In cases of minor violations,
regulatory bodies like the Securities and Exchange
Commission (SEC) and the Board of Accountancy
(BOA) may issue warning letters to auditors or
audit firms. These letters serve as a notice to
rectify the non-compliance and act as a first step
toward corrective action.
 Fines and Penalties: For more severe non-
compliance, regulatory bodies have the authority
to impose fines and penalties on auditors or audit
firms. These financial sanctions serve as a
deterrent and discourage future violations.
 License Suspension or Revocation: Regulatory
bodies may suspend or revoke the licenses of
auditors or audit firms found to be consistently
non-compliant with auditing standards and
ethics. This action prevents them from conducting
audit engagements until they demonstrate
adherence to the required standards.
 Criminal Charges: In cases involving fraud,
misrepresentation, or severe ethical breaches,
regulatory bodies may refer the matter to law
enforcement agencies for possible criminal
 charges. This can result in legal proceedings and
potential imprisonment or fines.
2. Professional Association Actions:
 Reprimands: Professional associations, such as
the Philippine Institute of Certified Public
Accountants (PICPA), may issue reprimands to
members who violate ethical principles or auditing
standards. A reprimand formally expresses
disapproval of the member's conduct.
 Continuing Professional Education (CPE)
Requirements: Non-compliant auditors may be
required to complete additional CPE courses to
enhance their knowledge and understanding of
relevant standards and ethics.
 Ethics Education and Training: Professional
associations may provide ethics education and
training programs to members to reinforce the
importance of ethical behavior and professional
conduct.
 Suspension or Expulsion: Professional
associations have the authority to suspend or
expel members who repeatedly violate auditing
standards or ethical principles. Suspension or
expulsion indicates a serious breach of
professional conduct and may lead to the loss of
membership privileges.
Disciplinary actions and sanctions serve as crucial
deterrents against non-compliance with auditing
standards and ethics. They reinforce the
importance of upholding professional standards
and ethical behavior in the auditing profession,
protecting the interests of stakeholders and
promoting public trust in financial reporting and
auditing practices.
C. Protection of Public Interest in the Audit
Profession
Protection of the public interest is a fundamental
principle in the audit profession, aiming to ensure
the credibility and reliability of financial reporting
and maintain public trust in the financial
markets. Auditors play a vital role in safeguarding
the interests of various stakeholders, including
investors, creditors, regulators, and the general
public. Here's a sample summary of the protection
of public interest in the audit profession:
Summary of Protection of Public Interest in the
Audit Profession:
1. Independent Assurance: Auditors provide an
independent and objective assessment of a
company's financial statements. Their unbiased
evaluation offers stakeholders confidence that the
financial information presented is accurate and
reliable.
2. Detecting Fraud and Mismanagement: By
conducting thorough examinations and
implementing risk-based audit procedures,
auditors play a significant role in detecting fraud,
mismanagement, and material misstatements in
financial statements. This helps protect
stakeholders from potential financial losses due to
deceptive practices.
3. Enhancing Market Confidence: Reliable financial
reporting, verified through audits, enhances
market confidence and encourages investment.
Investors and creditors are more likely to engage
with companies that undergo external audits,
knowing that their financial information is
independently validated.
4. Corporate Governance and Accountability: Audits
promote good corporate governance by holding
company management accountable for the
accuracy and completeness of financial reporting.
Audited financial statements provide stakeholders
with insights into a company's financial health
and performance.
5. Compliance with Standards: Auditors adhere to
professional standards and ethical principles,
ensuring that auditing practices consistently meet
high-quality benchmarks. Compliance with these
standards enhances the credibility and integrity of
the audit process.
6. Transparency and Accountability: Public interest
is served when auditors provide transparent and
accountable audit reports. Clear communication
of audit findings and opinions allows stakeholders
to make informed decisions based on reliable
financial information.
7. Regulatory Oversight: Regulatory bodies, such as
the Securities and Exchange Commission (SEC)
and the Board of Accountancy (BOA), monitor
auditors' compliance with standards and ethical
conduct. The oversight ensures that auditors act
in the best interest of the public.
8. Investor Protection: Auditors protect investors'
interests by independently assessing the financial
health of companies. This information aids
investors in making informed choices about
allocating their resources and mitigating potential
risks.
9. Contributing to Economic Stability: By fostering
confidence in financial reporting and financial
markets, auditors contribute to economic stability.
Investors and businesses can make informed
decisions based on accurate financial information,
promoting healthy economic growth.
10. Upholding Professionalism: The audit profession's
commitment to the protection of public interest
reinforces its professionalism and ethical
responsibility. Auditors act as watchdogs,
ensuring that companies adhere to accounting
standards and regulatory requirements.
Overall, the protection of public interest is at the
core of the audit profession. Auditors' independent
assessments and objective evaluations instill
confidence in financial reporting, promote
accountability, and contribute to the overall
stability and trustworthiness of the financial
ecosystem.
VIII. Future Developments and Challenges in Auditing
Regulation
A. Emerging Issues and Trends in Auditing
and Assurance
Emerging issues and trends in auditing
and assurance reflect the dynamic nature
of the business environment,
technological advancements, and
changing stakeholder expectations.
Auditors must adapt to these
developments to maintain the relevance
and effectiveness of their audit practices.
Here's a sample summary of some
emerging issues and trends in auditing
and assurance:
Summary of Emerging Issues and Trends
in Auditing and Assurance:
1. Technology Integration: Technology is reshaping
the audit landscape, with auditors increasingly
leveraging data analytics, artificial intelligence,
and automation tools. These technologies enable
auditors to analyze large datasets efficiently and
 identify patterns or anomalies, enhancing the
audit's effectiveness and accuracy.
2. Cybersecurity and Data Privacy: With the rising
prevalence of cyber threats and data breaches,
auditors are focusing more on evaluating a
company's cybersecurity measures and data
privacy controls. Assurance services related to
data protection and cybersecurity risk
management are becoming more prevalent.
3. Sustainability and ESG Reporting: Stakeholders
are increasingly interested in a company's
environmental, social, and governance (ESG)
performance. Auditors are exploring ways to
provide assurance on ESG disclosures to enhance
transparency and address investor demands for
sustainable practices.
4. Integrated Reporting: Auditors are adapting to the
trend of integrated reporting, where companies
present financial and non-financial information in
a cohesive report. Integrated reporting provides a
comprehensive view of a company's performance
and impacts, requiring auditors to consider a
broader range of information in their assessments.
5. Remote Auditing: The COVID-19 pandemic
accelerated the adoption of remote auditing
practices. Auditors are leveraging technology to
conduct virtual audits, reducing travel costs and
increasing audit efficiency while addressing health
and safety concerns.
6. Assurance on Non-Financial Information: Beyond
financial statements, auditors are being engaged
to provide assurance on non-financial information,
such as sustainability reports, social impact
metrics, and other key performance indicators.
7. Focus on Internal Controls: With heightened
emphasis on corporate governance and risk
management, auditors are placing more emphasis
on evaluating the effectiveness of a company's
internal controls.
8. Professional Skepticism: As audit complexity
increases, auditors are enhancing their
professional skepticism and critical thinking skills
to identify potential risks and inconsistencies in
financial reporting.
9. Continuous Monitoring and Reporting: Some
auditors are exploring the concept of continuous
monitoring and reporting, where real-time data
analysis and reporting allow for ongoing
assessment of a company's financial health.
10. Stakeholder Engagement: Auditors are engaging
with a broader range of stakeholders to
understand their expectations and needs better.
Effective stakeholder engagement helps auditors
provide more relevant and valuable assurance
services.
To navigate these emerging issues and
trends, auditors must continuously
update their skills, embrace technology,
and maintain a forward-thinking
approach. By staying ahead of these
developments, auditors can enhance the
value they provide to clients and
stakeholders and ensure the relevance
and effectiveness of audit and assurance
services in a rapidly changing business
landscape.
B. Challenges in Maintaining Auditing
Quality and Independence
Maintaining auditing quality and
independence is crucial for the credibility
and reliability of audit engagements.
However, several challenges exist that can
potentially impact the effectiveness of
audits and compromise auditors'
independence. Addressing these
challenges is essential to upholding the
integrity of the audit profession. Here's a
sample summary of the challenges in
maintaining auditing quality and
independence:
Summary of Challenges in Maintaining
Auditing Quality and Independence:
1. Time and Resource Constraints: Auditors often
face time and resource constraints, particularly
when conducting complex audits for large or
multinational clients. Insufficient time may hinder
the thoroughness of audit procedures and limit
the ability to identify material misstatements.
2. Increasing Complexity of Financial Reporting: As
financial reporting standards evolve and become
more intricate, auditors must continuously
enhance their technical expertise to keep up with
the complexity. Navigating intricate accounting
treatments and estimates requires advanced skills
and knowledge.
3. Pressure from Clients: Auditors may face pressure
from clients to overlook or downplay certain
accounting issues that could affect financial
reporting. Client pressure can compromise
independence and objectivity if not appropriately
managed.
4. Familiarity Threats: Long-term client relationships
can lead to familiarity threats, where auditors
develop close ties with management. This
familiarity may affect auditors' objectivity and
willingness to challenge management's assertions.
5. Non-Audit Services: Providing non-audit services
to audit clients can create self-interest or advocacy
threats to independence. Accepting substantial
fees for non-audit services may impact the
auditor's ability to remain unbiased during the
audit.
6. Auditor Rotation Challenges: Mandatory auditor
rotation, while intended to promote independence,
can create challenges when new auditors lack a
deep understanding of the client's business and
operations.
7. Technological Disruptions: The rapid advancement
of technology presents challenges and
opportunities for auditors. While technology can
enhance audit efficiency, auditors must also
ensure that reliance on automated tools does not
compromise the quality of audit procedures.
8. Globalization and Cross-Border Audits: Auditing
international companies with diverse operations
and regulatory environments can pose challenges
for auditors in obtaining consistent and reliable
audit evidence.
9. Talent Shortage: The demand for skilled auditors
is growing, but there is a shortage of talent in the
profession. Attracting and retaining qualified
auditors remains a challenge for audit firms.
10. Public Perception and Reputation: Negative
incidents involving audit failures or ethical lapses
can erode public trust in the audit profession.
Ensuring the integrity and credibility of audits is
crucial for rebuilding and maintaining public
confidence.
To address these challenges, audit firms
and regulatory bodies must work
collaboratively to implement effective
safeguards, promote continuous
professional development, and reinforce
 ethical conduct. By actively addressing auditors and promotes the adoption of global best
these challenges, auditors can uphold the practices.
highest standards of quality and 8. Regulatory Influence and Advocacy: Working with
independence, contributing to the international regulatory bodies strengthens the
profession's trustworthiness and collective voice of national regulators. Together,
relevance in today's complex business they can advocate for regulatory reforms and
environment. policy changes that benefit the auditing profession
and public interest.
C. Collaboration with International Audit 9. Regional and Global Forums: Participating in
Regulatory Bodies regional and global forums allows audit regulators
to engage in dialogue, share insights, and develop
Collaboration with international audit
coordinated approaches to address emerging
regulatory bodies is essential for
issues in auditing and assurance.
promoting consistent global auditing
10. Reputation and Credibility: Active collaboration
standards, enhancing audit quality, and
with reputable international audit regulatory
fostering cross-border cooperation.
bodies enhances the reputation and credibility of
Auditing is increasingly influenced by
national regulators and the auditing profession in
global business practices, and
the global arena.
international collaboration enables
By fostering collaboration with
regulators and professional bodies to
international audit regulatory bodies,
address common challenges and align
national regulators and professional
their efforts effectively. Here's a sample
organizations demonstrate their
summary of the importance of
commitment to maintaining high-quality
collaboration with international audit
audit practices, safeguarding public
regulatory bodies:
interest, and contributing to a globally
Summary of Collaboration with
cohesive and robust audit profession. The
International Audit Regulatory Bodies:
collective efforts of global audit regulators
1. Global Harmonization of Standards: Collaboration
strengthen the profession's ability to
with international audit regulatory bodies
adapt to evolving challenges and ensure
facilitates the harmonization of auditing standards
the integrity and credibility of financial
and guidelines. Consistent global standards
reporting worldwide.
enhance the comparability of financial information
and bolster investor confidence in cross-border
investments. Note: The sample outline above provides an overview of the
2. Sharing Best Practices: International collaboration regulatory framework for auditing in the Philippines. The
enables the sharing of best practices and actual regulations and standards may be more detailed
successful initiatives in auditing and assurance. and subject to updates over time. Auditors, accounting
Regulators and professional bodies can learn from firms, and other stakeholders in the Philippines must
comply with the specific rules and guidelines set forth by
each other's experiences and adopt effective
the Securities and Exchange Commission, Board of
strategies to improve audit quality and Accountancy, and other relevant regulatory bodies.
effectiveness.
3. Cross-Border Audit Oversight: Many companies II. Regulatory Framework for Auditing in the Philippines
operate in multiple jurisdictions, making cross- A. The Philippine Accountancy Act and Professional
border audit oversight challenging. Collaboration Regulations Commission (PRC)
with international regulatory bodies allows for the B. Code of Ethics for Professional Accountants in the
Philippines
coordination of audit inspections and the
C. The role of the Board of Accountancy (BOA) in setting
exchange of information, ensuring effective auditing standards
oversight of multinational audit firms. Case study and Practical Application with answers please
4. Mutual Recognition Agreements: Collaborating
with international audit regulatory bodies can lead Case Study: Auditing Standards and Ethics Compliance
to the establishment of mutual recognition Company XYZ is a medium-sized manufacturing company
agreements, recognizing the equivalence of audit in the Philippines. They have engaged ABC Auditing Firm,
a reputable auditing firm registered with the Board of
qualifications across countries. This facilitates
Accountancy (BOA), to conduct their annual financial
auditor mobility and supports global talent statement audit. The audit partner assigned to the
development. engagement is Sarah, a Certified Public Accountant (CPA)
5. Crisis Management and Risk Mitigation: In times with extensive experience in auditing.
of financial crises or market disruptions, During the audit process, Sarah and her team identified
international collaboration helps regulators and several material misstatements in the company's financial
auditors work together to identify emerging risks statements. Some of these misstatements appeared to be
intentional attempts to inflate revenue and understate
and implement coordinated responses to protect
expenses to present a better financial performance. Sarah
the public interest. discussed these findings with the company's management,
6. Joint Research and Development: Collaborative who strongly requested her to overlook the misstatements,
efforts can lead to joint research and development stating that their competitors were doing the same, and it
initiatives in auditing practices and was necessary for the company's survival.
methodologies. Research partnerships contribute Practical Application Questions:
to the continuous improvement and innovation in 1. According to the Philippine Accountancy Act and
the Professional Regulations Commission (PRC),
the auditing profession.
what are the fundamental responsibilities of
7. Cross-Border Training and Professional auditors in conducting financial statement audits?
Development: Collaboration with international Answer: According to the Philippine Accountancy Act and
bodies facilitates the exchange of knowledge and the Professional Regulations Commission (PRC), the
expertise through training programs, workshops, fundamental responsibilities of auditors in conducting
and conferences. This enriches the skills of financial statement audits include exercising due
professional care, performing the audit with independence
and objectivity, and adhering to the ethical principles and
standards set by the Board of Accountancy (BOA).
2. In this case, what specific ethical principles and
standards from the Code of Ethics for Professional
Accountants in the Philippines should Sarah
consider when dealing with the identified
misstatements?
Answer: In this case, Sarah should consider the following
specific ethical principles and standards from the Code of
Ethics for Professional Accountants in the Philippines:
a. Integrity: Sarah should act with integrity and avoid any
involvement in misrepresentations or fraudulent activities.
b. Objectivity: Sarah must maintain objectivity throughout
the audit process and not allow personal biases or
external pressures to influence her professional judgment.
c. Professional Competence and Due Care: Sarah should
demonstrate professional competence and exercise due
care in the performance of her audit procedures to identify
and address material misstatements adequately.
d. Professional Behavior: Sarah should comply with all
relevant laws, regulations, and auditing standards while
conducting the audit.
3. What is the role of the Board of Accountancy
(BOA) in setting auditing standards in the
Philippines, and how does it contribute to
ensuring audit quality?
Answer: The Board of Accountancy (BOA) is responsible
for setting auditing standards in the Philippines, which are
collectively known as the Philippine Standards on Auditing
(PSAs). These standards provide comprehensive guidelines
and procedures that auditors must follow while
conducting audits. By setting these standards, the BOA
ensures uniformity, consistency, and high-quality audit
practices in the country. Compliance with PSAs enhances
the credibility and reliability of financial reporting,
protects the interests of stakeholders, and upholds the
integrity of the auditing profession.
4. How should Sarah and her team respond to the
company's management's request to overlook the
misstatements?
Answer: Sarah and her team must respond to the
company's management firmly and professionally. They
should explain that as auditors, they are bound by
professional ethical standards and cannot overlook
material misstatements or engage in any unethical
conduct. They should reiterate their commitment to
conducting the audit with independence, objectivity, and
adherence to auditing standards. Sarah should also
inform the management that she is required to report any
identified misstatements to the appropriate parties, as
necessary, to uphold the integrity of the audit process and
protect the public interest.
5. What potential consequences might Sarah and
ABC Auditing Firm face if they fail to address the
misstatements properly?
Answer: If Sarah and ABC Auditing Firm fail to address
the misstatements properly and compromise their
independence and objectivity, they may face severe
consequences, including:
a. Regulatory Sanctions: The Board of Accountancy (BOA)
could initiate disciplinary actions against Sarah and the
auditing firm for non-compliance with auditing standards
and ethical principles. This could result in fines, penalties,
or even the suspension or revocation of their audit
licenses.
b. Legal Liabilities: The company's stakeholders, such as
investors and creditors, may take legal action against
Sarah and the auditing firm for any damages caused due
to misstatements that were not appropriately addressed.
c. Reputational Damage: Failure to uphold professional
ethics and audit standards could lead to significant
reputational damage for both Sarah and ABC Auditing
Firm, affecting their future business opportunities and
client trust.
d. Loss of Client Trust: The company, and potentially other
clients, may lose trust in Sarah and the auditing firm's
ability to conduct unbiased and reliable audits, leading to
the loss of future engagements.
In conclusion, adherence to auditing standards and
ethical principles is crucial for auditors to maintain their
independence, objectivity, and professionalism. By
upholding these principles, auditors protect the integrity
of the audit process and ensure the reliability of financial
reporting, ultimately serving the public interest.
Role Playing Scenario: Discussing Ethical Dilemmas in
Auditing
Participants:
Auditor - Alex (You)
Audit Manager - Andrea
Scenario:
Alex is a staff auditor working at ABC Auditing Firm.
Andrea, the audit manager, calls Alex into her office to
discuss an ethical dilemma that arose during a recent
audit engagement.
Andrea: Alex, thank you for coming in. I wanted to discuss
an ethical situation that we encountered during the audit
at Company XYZ. We found several material
misstatements in their financial statements that appear to
be intentional attempts to manipulate the numbers.
Alex: Yes, I noticed those misstatements during my audit
procedures. It's concerning and could have a significant
impact on the financial statements.
Andrea: Absolutely, it's crucial to address this issue
appropriately. However, the company's management has
requested us not to report these misstatements and to
adjust the figures to make them look more favorable. They
argue that their competitors are doing the same, and it's
necessary for the company's survival.
Alex: That puts us in a difficult position. As auditors, we
have a duty to report any material misstatements and act
in the public interest. Overlooking these misstatements
would compromise our independence and objectivity.
Andrea: I completely agree. Upholding the Code of Ethics
for Professional Accountants is essential for our integrity
and credibility. We must consider the ethical principles of
integrity, objectivity, professional competence, and due
care in handling this situation.
Alex: Yes, and we must also comply with the Philippine
Accountancy Act and the guidelines set by the Board of
Accountancy (BOA) in setting auditing standards.
Andrea: Precisely. The BOA's standards, such as the
Philippine Standards on Auditing (PSAs), provide the
framework for conducting our audits and ensure
consistent and high-quality practices.
Alex: So, what should we do in this situation? How do we
balance the company's request with our ethical
responsibilities?
Andrea: Our duty is to act in the public interest and
maintain our independence and objectivity. We cannot
compromise the integrity of the audit process. We need to
discuss this matter with our engagement partner and
inform them about the misstatements. If the company
refuses to make the necessary adjustments, we might have
to consider withdrawing from the engagement and, if
necessary, report our findings to the appropriate
authorities.
Alex: I understand the importance of acting ethically and
professionally. I will support your decision, and we should
document all our discussions and the steps we take to
address this issue.
Andrea: That's the right approach, Alex. Always remember
that our reputation and the credibility of our profession
are built on our commitment to upholding ethical
standards and ensuring the accuracy and reliability of
financial reporting.
Role Playing Summary:
In this role-playing scenario, the auditor (Alex) and the
audit manager (Andrea) engage in a discussion about an
ethical dilemma encountered during an audit engagement.
They emphasize the importance of adhering to the Code of
Ethics for Professional Accountants, the Philippine
Accountancy Act, and the auditing standards set by the
Board of Accountancy. Both participants agree that their
primary responsibility is to act in the public interest,
maintain their independence and objectivity, and uphold
the integrity of the audit process. They conclude that
reporting the misstatements to the appropriate authorities
and potentially withdrawing from the engagement are
necessary steps to ensure ethical conduct and protect the
credibility of the audit profession.
MULTIPLE CHOICE QUESTIONS
Which regulatory body is responsible for overseeing the
practice of accountancy in the Philippines?
a. Philippine Securities and Exchange Commission (SEC)
b. Professional Regulations Commission (PRC)
c. Board of Accountancy (BOA)
d. Philippine Institute of Certified Public Accountants
(PICPA)
1. What is the primary objective of the Philippine
Accountancy Act?
a. To promote fair competition among accounting firms
b. To protect the interests of accounting professionals
c. To regulate the practice of accountancy in the
Philippines
d. To ensure consistent financial reporting by all
companies
2. The Code of Ethics for Professional Accountants in the
Philippines is based on which international ethics
framework?
a. International Code of Ethics for Accountants (ICAEW)
b. International Financial Reporting Standards (IFRS)
c. International Ethics Standards Board for Accountants
(IESBA)
d. International Standards on Auditing (ISA)
3. The Code of Ethics for Professional Accountants in the
Philippines applies to which of the following professionals?
a. Lawyers and attorneys
b. Certified Public Accountants (CPAs)
c. Doctors and medical practitioners
d. Engineers and architects
4. The Board of Accountancy (BOA) is a regulatory body
under the supervision of the:
a. Department of Trade and Industry (DTI)
b. Securities and Exchange Commission (SEC)
c. Professional Regulations Commission (PRC)
d. Department of Finance (DOF)
5. What is the role of the Board of Accountancy (BOA) in
the regulatory framework for auditing?
a. Setting financial reporting standards for companies
b. Overseeing the Philippine Stock Exchange (PSE)
c. Conducting inspections of audit firms
d. Setting auditing standards in the Philippines
6. Which of the following is responsible for adopting and
implementing the Philippine Standards on Auditing
(PSAs)?
a. Philippine Institute of Certified Public Accountants
(PICPA)
b. Securities and Exchange Commission (SEC)
c. Professional Regulations Commission (PRC)
d. Board of Accountancy (BOA)
7. The Philippine Standards on Auditing (PSAs) provide
guidance on which of the following?
a. Financial reporting for non-profit organizations
b. Conducting audits of financial statements
c. Setting ethical standards for auditors
d. Implementing tax regulations for businesses
8. Which ethical principle requires accountants to be
straightforward and honest in all professional and
business relationships?
a. Professional Competence and Due Care
b. Objectivity
c. Confidentiality
d. Integrity
9. When faced with a conflict of interest, what ethical
principle requires accountants to maintain their
independence of mind and not allow bias, conflict of
interest, or undue influence to override their professional
judgment?
a. Integrity
b. Objectivity
c. Professional Behavior
d. Professional Competence and Due Care
10. The Code of Ethics for Professional Accountants in the
Philippines is primarily based on the ethical framework
provided by:
a. International Financial Reporting Standards (IFRS)
b. International Ethics Standards Board for Accountants
(IESBA)
c. International Accounting Standards Board (IASB)
d. Philippine Financial Reporting Standards (PFRS)
11. A professional accountant who has a significant
financial interest in a client entity may face a threat to
their independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
12. Which regulatory body has the authority to suspend or
revoke the license of a Certified Public Accountant (CPA)
found guilty of misconduct?
a. Securities and Exchange Commission (SEC)
b. Philippine Institute of Certified Public Accountants
(PICPA)
c. Professional Regulations Commission (PRC)
d. Board of Accountancy (BOA)
13. The Philippine Accountancy Act requires auditors to
conduct their engagements with due professional care.
What does "due professional care" mean in this context?
a. Exercising professional skepticism in all audit
procedures
b. Performing the audit in compliance with international
standards
c. Conducting the audit with the highest level of
professional judgment and diligence
d. Conducting the audit in a timely manner and within
budget constraints
14. A professional accountant who is aware of illegal acts
committed by their client but fails to report the matter to
the appropriate authorities may face a threat to their
compliance with which ethical principle?
a. Professional Competence and Due Care
b. Integrity
c. Objectivity
d. Professional Behavior
15. What is the primary purpose of the Code of Ethics for
Professional Accountants in the Philippines?
a. To ensure accountants comply with tax regulations
b. To set guidelines for financial reporting
c. To provide principles and ethical standards for
accountants to follow
d. To regulate the registration of Certified Public
Accountants (CPAs)
16. In the Philippines, who has the authority to investigate
and discipline professional accountants for violations of
the Code of Ethics?
a. Securities and Exchange Commission (SEC)
b. Professional Regulations Commission (PRC)
c. Philippine Institute of Certified Public Accountants
(PICPA)
d. Board of Accountancy (BOA)
17. A professional accountant who is offered gifts or
excessive hospitality from a client may face a threat to
their compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
18. What is the primary objective of the Philippine
Standards on Auditing (PSAs)?
a. To regulate the licensing of accountants in the
Philippines
b. To provide guidance on financial reporting for public
companies
c. To promote consistent and high-quality audit practices
in the country
d. To enforce compliance with international auditing
standards
19. A professional accountant who has a close family
member employed by a client may face a threat to their
independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
20. The Philippine Accountancy Act is a legislative act that
falls under which branch of the Philippine government?
a. Legislative Branch
b. Executive Branch
c. Judicial Branch
d. Regulatory Branch
21. The Board of Accountancy (BOA) is composed of how
many members?
a. Three members
b. Five members
c. Seven members
d. Nine members
22. Which regulatory body in the Philippines is responsible
for regulating and supervising auditing firms?
a. Professional Regulations Commission (PRC)
b. Securities and Exchange Commission (SEC)
c. Philippine Institute of Certified Public Accountants
(PICPA)
d. Board of Accountancy (BOA)
23. The primary purpose of the Code of Ethics for
Professional Accountants in the Philippines is to:
a. Provide guidelines for financial reporting of publicly
listed companies
b. Establish ethical standards for accountants to follow in
their professional practice
c. Regulate the licensing and registration of accountants in
the country
d. Set guidelines for the taxation of businesses and
individuals
24. Which ethical principle requires professional
accountants to refrain from disclosing confidential
information obtained during the course of their
professional duties?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
25. The Code of Ethics for Professional Accountants in the
Philippines is primarily based on the principles of:
a. Competence, Confidentiality, and Objectivity
b. Integrity, Objectivity, and Professional Behavior
c. Integrity, Objectivity, Professional Competence, and Due
Care
d. Integrity, Objectivity, and Confidentiality
26. The primary role of the Board of Accountancy (BOA) is
to:
a. Set and implement financial reporting standards for
companies in the Philippines
b. Oversee the financial operations of publicly listed
companies
c. Set and implement auditing standards for professional
accountants in the Philippines
d. Regulate the licensing and registration of accountants
in the country
27. In the Philippines, auditors are required to conduct
their engagements in compliance with which set of
auditing standards?
a. Philippine Financial Reporting Standards (PFRS)
b. Philippine Standards on Auditing (PSAs)
c. International Financial Reporting Standards (IFRS)
d. International Standards on Auditing (ISAs)
28. Which of the following best describes the role of the
Board of Accountancy (BOA) in the regulatory framework
for auditing?
a. Setting auditing standards and providing guidance for
audit engagements
b. Overseeing the financial operations of publicly listed
companies
c. Regulating the licensing and registration of professional
accountants in the Philippines
d. Enforcing compliance with international accounting
standards
29. A professional accountant who performs an audit for
an entity where they have a financial interest may face a
threat to their independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
30. The Code of Ethics for Professional Accountants in the
Philippines applies to which of the following individuals?
a. All employees of a company, regardless of their role
b. All professional accountants, whether in public practice,
business, the public sector, or academia
c. Only Certified Public Accountants (CPAs) who are in
public practice
d. Only accountants working for publicly listed companies
31. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to comply with all
relevant laws and regulations. Which ethical principle does
this requirement align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
32. The primary objective of the Philippine Accountancy
Act is to:
a. Regulate the financial reporting of publicly listed
companies
b. Establish the qualifications and standards for the
practice of accountancy in the Philippines
c. Set the tax rates for businesses and individuals in the
country
d. Oversee the operations of the Philippine Stock Exchange
(PSE)
33. A professional accountant who performs an audit for a
close friend may face a threat to their independence
known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
34. The Board of Accountancy (BOA) is responsible for
issuing which of the following licenses to qualified
individuals?
a. Certified Public Accountant (CPA) license
b. Business Permit license
c. Securities and Exchange Commission (SEC) license
d. International Standards on Auditing (ISA) license
35. A professional accountant who is under significant
pressure to agree to the conclusions of a client's
management may face a threat to their compliance with
which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
36. The Philippine Accountancy Act and the Code of Ethics
for Professional Accountants in the Philippines are both
aimed at:
a. Promoting fair competition among accounting firms
b. Protecting the interests of investors in publicly listed
companies
c. Ensuring compliance with tax regulations for
businesses
d. Regulating the practice of accountancy and maintaining
high ethical standards for accountants
37. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to exercise due
professional care in their professional activities. What does
"due professional care" mean in this context?
a. Exercising the highest level of professional judgment
and diligence
b. Avoiding conflicts of interest in all professional and
business relationships
c. Complying with all relevant laws and regulations
d. Providing services with competence, diligence, and
objectivity
38. A professional accountant who has a close family
member serving as a key management personnel in a
client entity may face a threat to their independence
known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
39. The Board of Accountancy (BOA) is responsible for the
setting, implementation, and enforcement of which of the
following standards?
a. International Financial Reporting Standards (IFRS)
b. Philippine Financial Reporting Standards (PFRS)
c. International Standards on Auditing (ISAs)
d. Philippine Standards on Auditing (PSAs)
40. A professional accountant who is offered a job at a
client entity may face a threat to their independence
known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
41. The Code of Ethics for Professional Accountants in the
Philippines applies to professional accountants in all
sectors, including those working in:
a. Public practice, business, and the public sector
b. The public sector and academia, but not public practice
or business
c. Public practice and academia, but not the public sector
or business
d. The public sector and business, but not public practice
or academia
42. The Philippine Accountancy Act empowers the
Professional Regulations Commission (PRC) to perform
which of the following tasks?
a. Issuing licenses for publicly listed companies
b. Regulating the stock market operations
c. Regulating the practice of accountancy and issuing
licenses to qualified accountants
d. Setting financial reporting standards for businesses.
43. Which ethical principle requires professional
accountants to provide services with competence,
diligence, and objectivity to clients?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
44. The Philippine Standards on Auditing (PSAs) are
primarily aimed at providing guidance to auditors on:
a. Taxation regulations for businesses
b. Conducting audits of financial statements
c. Setting financial reporting standards for companies
d. Performing risk assessments for publicly listed
companies
45. A professional accountant who is pressured to change
the conclusions of an audit report may face a threat to
their compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
46. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to avoid being associated
with information that they believe contains a materially
false or misleading statement. Which ethical principle does
this requirement align with?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
47. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to be straightforward and
honest in all professional and business relationships.
Which ethical principle does this requirement align with?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
48. A professional accountant who is under pressure to
compromise their independence to maintain a long-
standing client relationship may face a threat to their
compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
49. The Philippine Accountancy Act empowers the
Professional Regulations Commission (PRC) to investigate
and discipline Certified Public Accountants (CPAs) for
violations of the Act and the Code of Ethics. What
disciplinary actions can the PRC take in such cases?
a. Impose fines and penalties
b. Suspend or revoke the CPA's license
c. Issue a warning letter to the CPA
d. Require the CPA to undergo additional training
50. The Professional Regulations Commission (PRC) is
responsible for regulating the practice of which of the
following professions in the Philippines?
a. Medicine
b. Engineering
c. Law
d. All of the above
51. The Philippine Accountancy Act is embodied in which
Republic Act?
a. Republic Act No. 9298
b. Republic Act No. 7942
c. Republic Act No. 9165
d. Republic Act No. 11223
52. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to maintain which of the
following principles while discharging their professional
responsibilities?
a. Professional Independence
b. Professional Skepticism
c. Professional Integrity
d. Professional Competence
53. The primary function of the Securities and Exchange
Commission (SEC) in the regulatory framework for
auditing is to:
a. Set the Philippine Financial Reporting Standards (PFRS)
b. Regulate the financial reporting of publicly listed
companies
c. Enforce the Code of Ethics for Professional Accountants
d. Regulate the practice of accountancy in the Philippines
54. A professional accountant who has a close
relationship with a director of a client entity may face a
threat to their independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
55. The Code of Ethics for Professional Accountants in the
Philippines is issued by which of the following bodies?
a. Philippine Institute of Certified Public Accountants
(PICPA)
b. Professional Regulations Commission (PRC)
c. Securities and Exchange Commission (SEC)
d. Board of Accountancy (BOA)
56. The Philippine Standards on Auditing (PSAs) are
based on which international auditing standards?
a. International Standards on Auditing (ISAs)
b. International Financial Reporting Standards (IFRS)
c. International Ethics Standards Board for Accountants
(IESBA)
d. International Accounting Standards (IAS)
57. A professional accountant who is offered an expensive
gift from a client may face a threat to their independence
known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
58. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to have which of the
following skills and knowledge to perform their
professional duties competently?
a. Technical knowledge of taxation laws
b. Ability to prepare complex financial reports
c. Knowledge of relevant auditing standards
d. Familiarity with legal and regulatory requirements
59. Which regulatory body has the authority to inspect
and assess the quality of audit services provided by
auditing firms in the Philippines?
a. Professional Regulations Commission (PRC)
b. Securities and Exchange Commission (SEC)
c. Board of Accountancy (BOA)
d. Philippine Institute of Certified Public Accountants
(PICPA)
60. The Philippine Accountancy Act grants the
Professional Regulations Commission (PRC) the power to
suspend the license of a Certified Public Accountant (CPA)
for a period not exceeding:
a. Two years
b. Three years
c. Five years
d. Ten years
61. Which ethical principle requires accountants to treat
all information acquired during the course of their work as
confidential and not disclose it to a third party without
proper and specific authority unless there is a legal or
professional right or duty to disclose?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Confidentiality
62. The Board of Accountancy (BOA) is responsible for
establishing which of the following accounting standards
in the Philippines?
a. International Financial Reporting Standards (IFRS)
b. Philippine Financial Reporting Standards (PFRS)
c. Philippine Standards on Auditing (PSAs)
d. Generally Accepted Accounting Principles (GAAP)
63. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to avoid any
subordination of their judgment to others. Which ethical
principle does this requirement align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
64. A professional accountant who is threatened with
dismissal for disagreeing with a client's management may
face a threat to their compliance with which ethical
principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
65. The Securities and Exchange Commission (SEC) in
the Philippines is responsible for regulating and
supervising which of the following entities?
a. Banks and financial institutions
b. Publicly listed companies
c. Non-profit organizations
d. Private educational institutions
66. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to avoid conflicts of
interest. Which ethical principle does this requirement
align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
67. A professional accountant who is offered an
opportunity to invest in a client's business may face a
threat to their independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
68. The Professional Regulations Commission (PRC) is
responsible for the issuance and renewal of licenses for
Certified Public Accountants (CPAs). How often must CPAs
renew their license in the Philippines?
a. Every two years
b. Every three years
c. Every five years
d. Every ten years
69. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to comply with relevant
laws and regulations and avoid any conduct that might
discredit the profession. Which ethical principle does this
requirement align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
70. Which ethical principle requires accountants to be
objective and not allow bias, conflict of interest, or undue
influence to override their professional judgment?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
71. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to maintain their
professional knowledge and skill at a level required to
ensure competent professional service. Which ethical
principle does this requirement align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
72. A professional accountant who is pressured to
manipulate financial statements may face a threat to their
compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
73. The Securities and Exchange Commission (SEC) in
the Philippines has the authority to investigate and
discipline:
a. All accountants practicing in the country
b. Only Certified Public Accountants (CPAs) who work for
publicly listed companies
c. Only Certified Public Accountants (CPAs) who are in
public practice
d. Only Certified Public Accountants (CPAs) who are
members of PICPA
74. The Professional Regulations Commission (PRC) is
composed of how many commissioners?
a. Three commissioners
b. Five commissioners
c. Seven commissioners
d. Nine commissioners
75. A professional accountant who has a close personal
relationship with a director of a client entity may face a
threat to their independence known as:
a. Advocacy threat
b. Self-interest threat
c. Familiarity threat
d. Intimidation threat
76. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to refrain from disclosing
any confidential information obtained during the course of
their work. Which ethical principle does this requirement
align with?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
77. A professional accountant who is threatened with
legal action for disagreeing with a client's management
may face a threat to their compliance with which ethical
principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
78. The Philippine Standards on Auditing (PSAs) are
formulated to ensure that auditors conduct their audits
with:
a. Due professional care
b. Highest level of skepticism
c. Independence and objectivity
d. Professional skepticism
79. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to avoid conflicts of
interest, which means they should not:
a. Have any financial interest in a client entity
b. Be associated with information they believe contains a
false statement
c. Perform audit engagements for friends or close family
members
d. Accept gifts or hospitality that might impair their
independence
80. The Philippine Accountancy Act grants the
Professional Regulations Commission (PRC) the authority
to suspend the license of a Certified Public Accountant
(CPA) in case of:
a. Negligence in the practice of accountancy
b. Violation of the Code of Ethics for Professional
Accountants
c. Failure to submit annual audit reports to the SEC
d. Non-compliance with tax regulations
81. Which ethical principle requires accountants to be
honest and straightforward in their professional and
business relationships?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
82. The Securities and Exchange Commission (SEC) in
the Philippines is responsible for enforcing compliance
with financial reporting standards for which type of
companies?
a. Sole proprietorships
b. Private limited companies
c. Publicly listed companies
d. Non-profit organizations
83. A professional accountant who is under pressure to
disclose confidential client information to the public may
face a threat to their compliance with which ethical
principle?
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional Behavior
84. The Board of Accountancy (BOA) in the Philippines is
composed of members who are appointed by the:
a. Securities and Exchange Commission (SEC)
b. Professional Regulations Commission (PRC)
c. Philippine Institute of Certified Public Accountants
(PICPA)
d. Department of Finance (DOF)
85. The Philippine Standards on Auditing (PSAs) are
designed to ensure that auditors comply with which of the
following principles while conducting an audit
engagement?
a. Professional Independence
b. Professional Skepticism
c. Professional Integrity
d. Professional Competence
86. A professional accountant who is pressured to
misrepresent financial information may face a threat to
their compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
87. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to provide professional
services diligently and in accordance with:
a. The International Ethics Standards Board for
Accountants (IESBA) Code of Ethics
b. The Philippine Financial Reporting Standards (PFRS)
c. The International Standards on Auditing (ISAs)
d. The Philippine Standards on Auditing (PSAs)
88. A professional accountant who is under pressure to
issue an unqualified audit opinion when the financial
statements contain material misstatements may face a
threat to their compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
89. The Securities and Exchange Commission (SEC) in the
Philippines is responsible for promoting:
a. Competition among accounting firms
b. Fair competition among publicly listed companies
c. Transparency and accountability in financial reporting
d. The use of international accounting standards in the
country
90. A professional accountant who is pressured to change
audit procedures to reduce the extent of testing may face a
threat to their compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
91. The Philippine Standards on Auditing (PSAs) are
developed by the Board of Accountancy (BOA) in
collaboration with which of the following organizations?
a. Philippine Institute of Certified Public Accountants
(PICPA)
b. Professional Regulations Commission (PRC)
c. Securities and Exchange Commission (SEC)
d. Philippine Financial Reporting Standards Council
(FRSC)
statements are fairly presented may face a threat to their
compliance with which ethical principle?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
99. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to avoid any action that
may discredit the profession. Which ethical principle does
this requirement align with?
a. Integrity
b. Objectivity
c. Professional Competence and Due Care
d. Professional Behavior
TRUE OR FALSE
1. True or False: The Philippine Accountancy
Act is a law that regulates the practice of
accountancy in the Philippines.

92. A professional accountant who is under pressure to 2. True or False: The Professional
issue a qualified audit opinion when the financial Regulations Commission (PRC) is
statements contain no material misstatements may face a responsible for regulating various
threat to their compliance with which ethical principle? professions in the Philippines, including
a. Integrity accountancy.
b. Objectivity
c. Professional Competence and Due Care 3. True or False: The PRC is composed of five
d. Professional Behavior commissioners who are appointed by the
President of the Philippines.
93. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to act diligently in 4. True or False: The Code of Ethics for
accordance with applicable technical and professional Professional Accountants in the
standards. Which ethical principle does this requirement Philippines is issued by the Securities and
align with? Exchange Commission (SEC).
a. Integrity
b. Objectivity 5. True or False: The Code of Ethics for
c. Professional Competence and Due Care Professional Accountants in the
d. Professional Behavior Philippines applies only to Certified Public
Accountants (CPAs) in public practice.
94. The Securities and Exchange Commission (SEC) in
the Philippines is responsible for ensuring the accuracy 6. True or False: The Code of Ethics for
and completeness of financial statements of which type of Professional Accountants in the
companies? Philippines requires accountants to
a. Sole proprietorships comply with all relevant laws and
b. Partnership firms regulations.
c. Corporations and publicly listed companies
d. Non-governmental organizations (NGOs) 7. True or False: The Code of Ethics for
Professional Accountants in the
95. A professional accountant who is threatened with Philippines requires accountants to
legal action for refusing to violate professional standards exercise due professional care in their
may face a threat to their compliance with which ethical professional activities.
principle?
a. Integrity 8. True or False: The Code of Ethics for
b. Objectivity Professional Accountants in the
c. Professional Competence and Due Care Philippines requires accountants to avoid
d. Professional Behavior conflicts of interest in all professional and
business relationships.
96. The Code of Ethics for Professional Accountants in the
Philippines requires accountants to comply with the 9. True or False: The Code of Ethics for
fundamental principles of: Professional Accountants in the
a. Integrity, Objectivity, and Independence Philippines requires accountants to
b. Integrity, Objectivity, Professional Competence, and Due refrain from disclosing any confidential
Care information obtained during the course of
c. Integrity, Objectivity, Professional Competence, and their work.
Confidentiality
d. Integrity, Objectivity, Independence, and Professional 10. True or False: The Board of Accountancy
Behavior (BOA) is responsible for issuing licenses to
qualified Certified Public Accountants
97. The Securities and Exchange Commission (SEC) in (CPAs) in the Philippines.
the Philippines has the authority to impose sanctions and
penalties on publicly listed companies that fail to comply 11. True or False: The BOA is composed of
with financial reporting requirements. What type of seven commissioners who are appointed
sanctions can the SEC impose? by the Professional Regulations
a. Imprisonment for company directors Commission (PRC).
b. Fines and penalties
c. Suspension of company operations 12. True or False: The BOA is responsible for
d. Revocation of the company's business license setting and implementing auditing
standards in the Philippines.
98. A professional accountant who is under pressure to
issue an adverse audit opinion when the financial 13. True or False: The BOA works closely with
the Philippine Institute of Certified Public
 Accountants (PICPA) to develop
accounting and auditing standards.
14. True or False: The BOA has the authority
to inspect and assess the quality of audit
services provided by auditing firms in the
Philippines.
15. True or False: The BOA is responsible for
enforcing compliance with financial
reporting standards for publicly listed
companies in the Philippines.
16. True or False: The Philippine Standards
on Auditing (PSAs) are based on the
International Standards on Auditing (ISAs)
issued by the International Auditing and
Assurance Standards Board (IAASB).
17. True or False: The PSAs provide guidance
to auditors on how to conduct an audit
engagement and issue an audit report.
18. True or False: The PSAs are primarily
aimed at providing guidance to companies
on how to prepare their financial
statements.
19. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to
maintain their professional knowledge and
skill at a level required to ensure
competent professional service.
20. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to be
honest and straightforward in all
professional and business relationships.
21. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to avoid
being associated with information they
believe contains a materially false or
misleading statement.
22. True or False: The Philippine Accountancy
Act grants the Professional Regulations
Commission (PRC) the authority to
suspend or revoke the license of a
Certified Public Accountant (CPA) for a
specified period.
23. True or False: The Philippine Accountancy
Act requires all accountants, regardless of
their role, to be licensed by the PRC to
practice accountancy in the Philippines.
24. True or False: The Philippine Accountancy
Act empowers the PRC to investigate and
discipline CPAs for violations of the Act
and the Code of Ethics.
25. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to
disclose confidential information if it is in
the public interest to do so.
26. True or False: The PRC is responsible for
regulating the financial reporting of
publicly listed companies in the
Philippines.
27. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to avoid
any action that may discredit the
profession.
28. True or False: The BOA has the authority
to issue the Philippine Financial Reporting
Standards (PFRS).
29. True or False: The PSAs are formulated to
ensure that auditors conduct their audits
with professional skepticism.
30. True or False: The PSAs apply only to
auditors in public practice and do not
cover auditors working in the public
sector or business.
31. True or False: The Philippine Accountancy
Act grants the BOA the authority to issue
licenses to individuals who have met the
qualification requirements for Certified
Public Accountants (CPAs).
32. True or False: The BOA is composed of
nine commissioners who are appointed by
the President of the Philippines.
33. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to
disclose any confidential information
obtained during the course of their work if
required by law or authorized by the
client.
34. True or False: The BOA is responsible for
regulating the financial reporting of
publicly listed companies in the
Philippines.
35. True or False: The PSAs are based on the
Philippine Financial Reporting Standards
(PFRS) issued by the Philippine Financial
Reporting Standards Council (FRSC).
36. True or False: The PSAs are designed to
ensure that auditors comply with the
fundamental principles of integrity,
objectivity, professional competence, and
confidentiality.
37. True or False: The PSAs provide guidance
to auditors on how to prepare financial
statements and disclosures for various
types of entities.
38. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to be
independent and avoid any relationship
that may compromise their objectivity.
39. True or False: The BOA has the authority
to suspend or revoke the license of a
Certified Public Accountant (CPA)
permanently for violations of the
Philippine Accountancy Act.
40. True or False: The Philippine Accountancy
Act empowers the BOA to inspect and
assess the quality of audit services
provided by auditing firms in the
Philippines.
41. True or False: The Philippine Accountancy
Act grants the BOA the authority to
investigate and discipline CPAs for
violations of the Act and the Code of
Ethics.
42. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to
provide services with professional
competence and due care.
 43. True or False: The BOA has the authority
to impose sanctions and penalties on
publicly listed companies that fail to
comply with financial reporting
requirements.
44. True or False: The PSAs are developed by
the BOA in collaboration with the
Philippine Institute of Certified Public
Accountants (PICPA).
45. True or False: The Philippine Accountancy
Act empowers the PRC to suspend or
revoke the license of a Certified Public
Accountant (CPA) permanently for
violations of the Act.
46. True or False: The Code of Ethics for
Professional Accountants in the
Philippines requires accountants to avoid
any relationship that may compromise
their independence.
47. True or False: The BOA has the authority
to issue licenses to qualified Certified
Public Accountants (CPAs) and oversee
the accountancy profession in the
Philippines.
48. True or False: The BOA is responsible for
setting financial reporting standards for
publicly listed companies in the
Philippines.
49. True or False: The Philippine Accountancy
Act empowers the PRC to investigate and
discipline accountants for violations of the
Act, but it does not have the authority to
revoke their licenses permanently.
50. True or False: The PSAs are designed to
ensure that auditors conduct their audits
with due professional care and objectivity.
Answer: True
FILL IN THE BLANK
1. The ___________ is a law that regulates the practice
of accountancy in the Philippines.
2. The ___________ is responsible for regulating
various professions in the Philippines, including
accountancy.
3. The PRC is composed of _________ commissioners
who are appointed by the President of the
Philippines.
4. The ___________ is issued by the Professional
Regulations Commission (PRC) and provides
guidance to professional accountants in the
Philippines.
5. The Code of Ethics for Professional Accountants in
the Philippines applies to all Certified Public
Accountants (CPAs) in __________.
6. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to comply
with all relevant __________ and __________.
7. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to exercise
due __________ in their professional activities.
8. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to avoid
conflicts of __________ in all professional and
business relationships.
9. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to refrain
from disclosing any __________ information
obtained during the course of their work.
10. The ___________ is responsible for issuing licenses
to qualified Certified Public Accountants (CPAs) in
the Philippines.
11. The BOA is composed of ___________
commissioners who are appointed by the
___________.
12. The BOA is responsible for setting and
implementing ___________ standards in the
Philippines.
13. The BOA works closely with the ___________ to
develop accounting and auditing standards.
14. The BOA has the authority to inspect and assess
the quality of ___________ provided by auditing
firms in the Philippines.
15. The ___________ are formulated to ensure that
auditors conduct their audits with professional
skepticism.
16. The PSAs provide guidance to auditors on how to
conduct an ___________ engagement and issue an
audit report.
17. The PSAs are based on the ___________ issued by
the ___________.
18. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to maintain
their professional ___________ and ___________ at a
level required to ensure competent professional
service.
19. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to be honest
and ___________ in all professional and business
relationships.
20. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to avoid
being associated with information they believe
contains a materially ___________ statement.
21. The Philippine Accountancy Act grants the PRC
the authority to ___________ the license of a
Certified Public Accountant (CPA) for a specified
period.
22. The Philippine Accountancy Act requires all
accountants, regardless of their role, to be
___________ by the PRC to practice accountancy in
the Philippines.
23. The Philippine Accountancy Act empowers the
PRC to ___________ and ___________ CPAs for
violations of the Act and the Code of Ethics.
24. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to disclose
___________ information if it is in the ___________
interest to do so.
25. The PRC is responsible for regulating the financial
___________ of ___________ in the Philippines.
26. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to avoid any
___________ that may compromise their
___________.
27. The BOA has the authority to ___________ or
___________ the license of a Certified Public
Accountant (CPA) permanently for violations of the
Philippine Accountancy Act.
28. The Code of Ethics for Professional Accountants in
the Philippines requires accountants to avoid any
action that may ___________ the profession.
29. The PSAs are designed to ensure that auditors 47. The PSAs are designed to ensure that auditors
conduct their audits with due professional conduct their audits with due professional
___________ and ___________. ___________ and ___________.

30. The PSAs apply to auditors in ___________ practice, 48. The PSAs apply to auditors in ___________ practice,
as well as auditors working in the public as well as auditors working in the public
___________ or business. ___________ or business.

31. The PSAs provide guidance to auditors on how to 49. The PSAs provide guidance to auditors on how to
prepare financial statements and ___________ for prepare financial statements and ___________ for
various types of ___________. various types of ___________.

32. The Philippine Accountancy Act grants the BOA 50. The Philippine Accountancy Act grants the BOA
the authority to issue ___________ to individuals the authority to issue ___________ to individuals
who have met the qualification requirements for who have met the qualification requirements for
Certified Public Accountants (CPAs). Certified Public Accountants (CPAs).

33. The BOA is composed of ___________

commissioners who are appointed by the
___________.

34. The Code of Ethics for Professional Accountants in

the Philippines requires accountants to disclose
any confidential information obtained during the
course of their work if required by ___________ or
authorized by the ___________.

35. The BOA is responsible for regulating the financial

reporting of ___________ in the Philippines.

36. The PSAs are based on the Philippine Financial

Reporting ___________ (PFRS) issued by the
Philippine Financial Reporting Standards
___________ (FRSC).

37. The PSAs are designed to ensure that auditors

conduct their audits with fundamental ___________
of integrity, objectivity, professional competence,
and confidentiality.

38. The PSAs provide guidance to auditors on how to

conduct an audit engagement and issue an
___________ report.

39. The Code of Ethics for Professional Accountants in

the Philippines requires accountants to be
___________ and avoid any relationship that may
compromise their ___________.

40. The BOA has the authority to ___________

sanctions and penalties on publicly listed
companies that fail to comply with financial
reporting requirements.

41. The PSAs are developed by the BOA in

collaboration with the ___________.

42. The Philippine Accountancy Act empowers the

PRC to ___________ or ___________ the license of a
Certified Public Accountant (CPA) permanently for
violations of the Act.

43. The Code of Ethics for Professional Accountants in

the Philippines requires accountants to avoid any
___________ that may compromise their
___________.

44. The BOA has the authority to issue licenses to

qualified Certified Public Accountants (CPAs) and
oversee the accountancy ___________ in the
Philippines.

45. The BOA is responsible for setting financial

reporting standards for ___________ in the
Philippines.

46. The Philippine Accountancy Act empowers the

PRC to ___________ and ___________ accountants
for violations of the Act, but it does not have the
authority to revoke their licenses permanently.