In General, Why Do We Have To Study Accounting?

Whenever we hear the word "Accounting" we often associate it with figures and then relate it to
business. We failed to realize that accounting is not for business alone. Actually, nearly
everyone practices accounting in one form or another everyday. Whenever we go and in
everything we do which involves decision-making, accounting is present. Whether we are at
home, in school or anywhere else, accounting has always been a part of our daily struggle for
survival. This makes accounting to have a universal existence.

Even in professions which we may think their fields of studies are not related to business like
engineering, architecture, law, medicine, etc. - you name it- they too need a working knowledge
of accounting in pursuit to the practice of their professions.

Accounting is often called the "language of business"; the language we often hear in business
conversation. But how can we participate actively and communicate effectively in the
business community if we don't speak the same language. It's the way business people set
goals, measure results and evaluate performance.

In today's business world, learning and understanding the art of accounting is not just an
uphill climb but rather a survival skill.
CHAPTER 1

THE ACCOUNTANCY PROFESSION

AND ITS DEVELOPMENT

Learning Objectives:

After studying this chapter, we should be able to:

1. familiarize the background of the accountancy profession, the career opportunities

of a CPA and salient points of the Philippine Accountancy Act of 2004;
2. learn the various acronyms related to business, government agencies and
accountancy profession;
3. understand the reason why Philippine ASC has shifted to IAS; and
4. understand the effect of global accounting practice to our Filipino accountants.

THE ACCOUNTANCY PROFESSION

Accountancy is not only one of the modest, less expensive but also the most prestigious
profession in the land today. Since it existed way back in 1923, it hardly gained
recognition among the professions unlike medicine, engineering and law. Accountancy
is least known and unpopular because of the nature of services it accorded to its clients
which is handled with much needed "confidentiality". Aside from this, the profession
becomes the most feared of and dreaded of all, because it maintained the highest.
mortality rate among courses that require board examinations.

Despite the mortality rate problem, accountancy emerged as the most sought-after
profession with the tremendous growth and development of business in the country.
today. From a dismal 43 registered Certified Public Accountants in 1923 to
approximately 162,000 as of October 2015 with Mr. Armand Fabella of the Jose Rizal
College as holder of the first CPA Certificate or PRC-CPA Certificate No. 001.

3
Chupkead
The accountancy profession demands a quality of high standards performance at all
times to the public it served. Be it in government service, in commerce and industry or in
the academe which requires integrity, competence, due care and diligence in the
performance of duty which are embodied in the Code of Ethics for CPAs. Much more in
public practice where the CPA should maintain a high degree of independence in
mental attitude on matters concerning the impartiality of financial reports and maintain
secrecy of confidential information because credibility of the profession is at stake in
the performance of the "attest" function.
It is a welcome development to note that Accountancy is the first among the professions
here in the Philippines to be included under the World Trade Organization's (WTO)
policy of liberalization of services. This means that Filipino accountants will be freely
competing with other accountants from other parts of the world in the global field of
accounting practice.

WHAT IS AN ACCOUNTANT?

A Certified Public Accountant or a Professional Accountant is a holder of a

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

The course in BS Accountancy replaces all business courses majoring in the subjects
of accounting under the old curriculum. So, those who have taken and passed the said
examination are included in the above definition of the profession.

In the past, it has been the practice of private companies especially in areas where
there are only few CPAs to hire commerce-accounting graduates (under board) and
offered the position as accountant or bookkeeper/accountant although they are not, in
the real sense of the word. This created confusion and misled the public of what really is
the role of a bookkeeper and a professional accountant.

At this juncture, the work of a bookkeeper is clearly distinguished from the work of a
professional accountant in Chapter 4.

At present, the Board of Accountancy employs strictness in the implementation of the

standards and regulations of the practice wherein it requires the registration of staff and
partners of a CPA firm or we have to comply with the accreditation requirements with
both the Professional Regulation Commission and Board of Accountancy before we can
be allowed to practice public accountancy.
The Accountancy Profession and its Development
WHAT ARE THE CAREER OPPORTUNITIES OF AN ACCOUNTANT?
Once we become accountants, there we find several opportunities to grab with. We can
be employed and worked in various fields of endeavor such as the following:

Public Accounting under this field, we are in public practice. And as a public practitioner,
we have two options to choose from. It is either, we will become individual practitioners
and join partnership with other individual practitioners or getting employed with firms of
CPAS like, Punongbayan & Araullo, Sycip Gorres Velayo & Co. (SGV & Co.) Ampil
Elises Ciudadano & Co., Reyes Tacandong & Co. and many other auditing firms. In
which case, we are to render services to the public for a fee. We are not an employee of
the client company under audit but assume the role as "independent entity" vested
with freedom to exercise our own judgment in carrying out. the engagement requiring
our independence and impartiality of the report we prepared. Our work will include
auditing, the examination of financial statements and report our findings to the
management; taxation, the preparation of Income Tax Returns. and management
services, the design and installation of accounting systems. Once we choose this field,
we will become a member of the Association of CPAs (ACPAPP) sector.
in Public Practice

Government Accounting under this field, we are to render services to the government.
We will gain employment in the National Government Agencies (NGA), such as
Department of Finance, Securities and Exchange Commission, Bangko Sentral ng
Pilipinas, National Bureau of Investigation, Bureau of Internal Revenue, Department of
Budget and Management, Department of Public Works and Highways, Department of
Trade and Industry, etc. or in the Government-Owned and Controlled Corporations
(GOCC), such as Government Service Insurance System, Social Security System,
Home Development and Mutual Fund, etc. At present all cities, provinces and
municipalities which are considered as Local Government Units (LGU) are already
employing accountants pursuant to Republic Act 7160 known as the "Local Government
Code of 1991". This widens the job opportunities of accountants. Once we choose this
field, we will become a member of the Government Association of CPAS (GACPA)
sector.

Private Accounting - under this field, we will gain employment in private firms and hold
positions as Chief Accountant, Accounting Manager, Internal Auditor, Finance Manager.
or the highest accounting officer of an enterprise which is known as the "Comptroller".
Once we choose this field, we will become a member of the Association of CPAs in
Commerce and Industry (ACPACI) sector.

Accounting Education - there are CPAs who join in the academe and sacrifice the
high income generating profession for the sake of love in accounting education. They
are our accounting professors, researchers, CPA Reviewers where only few become
authors in

5
Chapter L
accounting books; the unsung heroes who are committed to painstakingly prepare the
candidates to the difficult examinations for Certified Public Accountants. Once we
choose this field, we will become a member of the Association of CPAs in Education
(ACPAE) sector.
Other accountants become entrepreneurs in their own rights. They managed their own
businesses. With all these, can we imagine how versatile the accountants are?
All CPAs are members of the national professional organization known as "Philippine
Institute of Certified Public Accountants" (PICPA).
CODE OF PROFESSIONAL ETHICS FOR CPAS IN THE PHILIPPINES
The Code of Ethics for Professional Accountants in the Philippines was recently
adopted from the revised Code of Ethics for Professional Accountants developed by
International Federation of Accountants (IFAC) which took effect on June 30, 2008.
The use of this Code of Ethics has been approved by the Board of Directors of the
Philippine Institute of Certified Accountants (PICPA) and the same has been adopted by
the Board of Accountancy (BOA) and finally approved by the Professional Regulation
Commission (PRC) as part of the rules and regulations of the BOA for the practice of
accountancy profession. This is the start of the relationship among business,
government, the investing public and other users of financial information.
The Internal Federation of Accountants (IFAC) is an international body representing all
the major accounting bodies across the world. Its mission is to develop, adopt and
implement with high quality international standards and guidance; contributing to the
development of strong professional accounting organizations and accounting firms and
to high quality practice of by professional accountants worldwide.
Being a member of International Federation of Accountants (IFAC), it is committed to
observe the following fundamental principles, viz:

Integrity - A professional accountant should be straightforward and honest in all

professional and business relationships. Integrity also implies fair dealing and
truthfulness. A professional accountant should not be associated with reports,
returns, communications or other information where they believe that the information:
a) Contains a materially false or misleading statement;
b) Contains statements or information furnished recklessly
c) Omits or obscures information required to be included where such
omission or obscurity would be misleading.

Objectivity - A professional accountant should not allow bias, conflict of interest or

under influence of others to override professional or business judgments.

6
The Accountancy Profession and its Development

Professional Competence and Due Care - A professional accountant has a continuing

duty to maintain professional knowledge and skill at the level required to ensure that a
client or employer receives competent professional service based on current
developments in practice, legislation and techniques. A professional accountant should
act diligently and in accordance with applicable technical and professional standards
when providing professional services (i.e., services requiring accountancy or related
skills performed by a professional accountant including accounting, auditing, taxation,
management consulting and financial management services). In addition, they should
conform with the technical and professional standards of the following:
Board of Accountancy (BOA)/ Professional Regulation Commission (PRC)
• Securities and Exchange Commission (SEC)
Financial Reporting Standards Council (FRSC)
Auditing and Assurance Standards Council (AASC)
• Relevant legislation

Competent professional service requires the exercise of sound judgment in applying

professional knowledge and skill in the performance of such services. Professional
competence may be divided into two (2) separate phases:
1. Attainment of professional competence. The normal pattern of development. starts
initially with a high standard of general education followed by specific education, training
and examination in professionally relevant subjects, and whether prescribed or not, a
period of work experience.
2. Maintenance of professional competence. This requires a continuing awareness
and an understanding of relevant technical professional and business.
developments. Continuing professional development develops and maintains the
capabilities that enable a professional accountant to perform competently within the
professional environments.

Diligent encompasses the responsibility to act in accordance with the requirements of

an assignment, carefully, thoroughly and on a timely basis. A professional accountant
should take steps to ensure that those working under the professional accountant's
authority in a professional capacity have appropriate training and supervision.

Where appropriate, a professional accountant should make clients, employers or other

users of the professional services aware of limitations inherent in the services to avoid
the misinterpretation of an expression of opinion as an assertion of fact.

Confidentiality
-
A professional accountant should respect the confidentiality of information acquired
as a result of professional and business relationships and should not disclose any such
information to third parties without proper and specific authority unless there is a legal
or professional right or duty to disclose. Confidential information acquired as a result of
professional and business relationships should not be used for the personal advantage
of the professional accountant or third parties.

7
Chapter 1
Professional Behavior - A professional accountant should comply with relevant laws
and regulations and should avoid any action that discredits the profession.
In marketing and promoting themselves and their work, professional accountants
should not bring the profession into disrepute. Professional accountants should be
honest and truthful and should not: make exaggerated claims for the services they are
able to offer, the qualifications they posses, or experience they have gained; or make
disparaging reference or unsubstantiated comparisons to the work of others.
CORE COMPETENCIES FRAMEWORK FOR ACCOUNTANTS
It has been a problem in the past on how to bridge the gap between clientele.
companies' needs and what our graduates from the academe can offer. A competency-
based approach to the preparation of professionals offers a systematic and effective
way of bridging this gap.
A competency-based approach to education is one where the competencies, and skill
sets required of a newly admitted professional are identified through a formal process
and are later validated by business and industry and subject matter experts. Such
identified competencies (or learner outcomes) have predetermined performance.
measures for assessing skill acquisition.
The government has undertaken efforts to improve the entry-level qualification
requirements for the Filipino CPAs by releasing the well-defined set of competencies,
Core Competency Framework for Entry to the Philippine Accountancy Profession.
The core competencies for accountants identify the knowledge, skill, and professional
values that new CPAs need to have in order to successfully face the challenges of
today's changing environment and the future.
The strategic goal is to produce technically competent and ethical professional
accountants ready to compete internationally. Hence, the higher education structure
(which includes the curriculum and course syllabi) should develop the following
minimum core competencies:

Knowledge - The CPAs knowledge must cover:

General Knowledge Of emphasis here are gaining an understanding of the different

cultures in the world and developing an international perspective. It is generally
believed that the traits that will make our Filipino CPAs prominent in the global
marketplace are:
• competency in the English language (the lingua franca of business),
• adaptability to Western business practices,
⚫ level of training and
good capabilities in dealing with foreign partners
The Accountancy Profession and its Development

Organizational and Business Knowledge - In addition to the core knowledge in areas

such as economics, quantitative methods and business statistics, organization behavior,
marketing and operations management, the CPA must be conversant of international
business and have an understanding of how the global business system works. He
should also have an appreciation of the importance of ethics and corporate governance
in business. The CPA must demonstrate competence in the following:
⚫ administrative capability and efficiency
⚫ decision modelling
• risk analysis and management
• measurement
⚫ industry and sector perspective

Information Technology (IT) Knowledge - This includes not only being conversant
with. IT concepts for business system but sound knowledge on internal control in
computer- based systems, development standards and practices for business systems,
management of the adoption, implementation and use of IT, evaluation of computer
business systems, and managing the security of information.

Accounting Knowledge - This includes core knowledge related to accounting and

related areas and must include proficiency in the international accounting and auditing
standards, cost management and the latest concepts in management accounting,
recent tax laws, business and commercial laws. It also includes knowledge of corporate
finance and the Philippine capital markets, professional ethics and environmental
accounting and reporting. The CPA should demonstrate competence in the following:
Basic Accounting and Preparation of Financial Statements, the Accounting
Profession and International Accounting Standards
• Advanced Financial Accounting Practices
• Advanced Financial Reporting Principles
• Management Accounting - Basic Concepts
• Management Accounting-Information for Planning, Decision-Making and Control
• Taxation

Business and Commercial Laws

• Auditing Fundamentals
• Auditing Advanced Concepts
• Business Finance and Financial Management

Skills

The skills to be developed include:

Chapter 1
Intellectual This set of skills includes the ability to carry out abstract logical thinking and
understand critical thinking. It also includes creative thinking or the generation of new
ideas; visualization or "seeing things in the mind's eye"; and reasoning skills or the
discovery of a rule or principle underlying the relationship between two or more objects
and applying it when solving a problem. The CPA must demonstrate the following skills:

⚫ analysis
• problem solving
⚫strategic/critical thinking
Interpersonal - This involves developing the ability of CPAs to work in groups and
being a team player. It includes the skills to participate as member of a team and
contributing to group effort; teaching others new skills; working to satisfy clients'
expectations; negotiation skills and working with diversity or working well with men and
women from diverse backgrounds. The CPA must demonstrate attributes, such as:
⚫ being a team player
• persuasion, confidence and diplomacy
• discreetness, open mind and patience
• capability for work and ability to respond well to pressure
Communication - This refers to active listening skills and the ability to communicate
effectively one's points of view, both orally and in writing, at all organization levels; being
able to justify one's position, deliver powerful presentations and to persuade and
convince others. The CPA must demonstrate skills such as the ability to:
• verbally and/or in writing explain financial/statistical/administrative.
matters/policies/procedures/regulatory matters/audit results at a level
appropriate to the audience.
⚫ ask clear, concise and relevant questions to obtain desired information to perform
a task.
• Negotiate effectively.

Values

Values must concentrate on:

Professional Ethics - Since the objectives of the accountancy profession are to work in
accordance with the highest standards of professionalism, to attain the higher level of
performance and generally to meet the public interest, the need for CPAs to conform to
the ethical standards of the profession become vital. These include integrity, objectivity
and independence, professional competence and due care, confidentiality, and
professional behavior.

Moral Values - Beyond ethical rules, there is a need for CPAs to be able to discern
between what is morally right or wrong.

10
The Accountancy Profession and its Development THE ACCOUNTANCY LAW OF 2004
One of the remarkable developments in the accountancy profession is the signing into
law on May 13, 2004 by her Excellency, Madam President Gloria Macapagal-Arroyo,
Presidential Decree No. 692 formerly known as the "Revised Accountancy Law" that
was R.A. No. 9298 known as "Philippine Accountancy Act of 2004" which
repealed
enacted on May 5, 1975 by his Excellency, the late President Ferdinand E. Marcos.
The law mentions the revival of the Continuing Professional Development (CPD) for
CPAs which originally took effect in 1987. It states that, "All Certified Public Accountants
shall abide by the requirements, rules and regulations on continuing professional
education to be promulgated by the Board, subject to the approval of the
Commission, in coordination with the accredited national professional organizations of
certified public accountants or any duly accredited educational institutions. For
this purpose, a CPD Council is hereby created to implement the CPD program".

Other salient points of the law are as follows:

• The Board of Accountancy and its Composition (Sec. 5)- The Board of
Accountancy (BOA), under the supervision and administrative control of the
Professional Regulation Commission (PRC) shall be composed of a chairman and six
(6)' members to be appointed by the President of the Philippines from a list of three
(3) recommendees for each position and ranked by the Commission, from a list of five
(5) nominees for each position submitted by the accredited national professional
organization of Certified Public Accountants. The Board shall elect a vice-chairman.
from among its members for the term of one (1) year. The chairman shall preside in all
meetings of the Board and in the event of a vacancy in the office of the chairman, the
vice-chairman shall assume such duties and responsibilities until such time that a
chairman is appointed.
• Admission Requirements to the CPA Board Examinations (Sec. 14) - Any
person applying for examination shall establish the following requisites to the
satisfaction of the Board that he/she:

1. is a Filipino Citizen
2. has a good moral character
3. is a holder of the degree of Bachelor of Science in Accountancy conferred by a
school, college, academy or institute, duly recognized and/or accredited by the
Commission on Higher Education (CHED) or other authorized government offices; and
4. has not been convicted of any criminal offense involving moral turpitude
• Scope of the CPA Board Examination (Sec. 15) - The licensure examination for
CPA shall cover the following subjects with the corresponding weights in units of two
(2) and maximum number of hours of three (3), viz: Theory of Accounts, Business Law
and Taxation, Management Services, Auditing Theory, Auditing Problems, Practical

11
Chapter 1
Accounting Problems I, Practical Accounting Problems II.
The purpose of this CPA Examination is to test the overall knowledge and
competence of the candidates. The contents and coverage of these subjects shall be in
accordance with the outline or syllabus prepared and issued by Board of
Accountancy upon approval by the Professional Regulation Commission. The Board
however, subject to the approval of the Commission, may revise or exclude any of the
subjects and their syllabi, and add new ones as the need arises.
However, after having series of consultations with the members of the academe and
other stakeholders, the Board Licensure Examination for Certified Public Accountants.
(BLECPA) through the Professional Regulatory Board of Accountancy has resolved
and approved on Dec. 15, 2015, Resolution No. 275 series of 2015 that the
following changes be made to the existing subjects, thereby, reducing the number of the
CPA Examination subjects from seven (7) to six (6) starting May 2016 examinations
and onwards, viz:

From
1. Theory of Accounts
2. Practical Accounting Problems I 3. Practical Accounting Problems II

4. Management Services

5. Auditing Theory
6. Auditing Problems

7. Business Law and Taxation

2.
To
1. Financial Accounting and Reporting Advanced Financial Accounting and
Reporting

3. Management Advisory Services

.4. Auditing

5. Taxation

6.
Regulatory Framework for Business
Transactions

The approved resolution does not depart radically from the prescribed content of the
BLECPA subjects but serve merely to rationalize and integrate related subjects for
better comprehension and more effective application of the theory into practice.
• Rating in the Licensure Examination (Sec. 16)- To be qualified as having passed
the licensure examination for accountants, a candidate must obtain a general average
of seventy-five (75%), with no grades lower than sixty-five (65%) in any given
subject. In the event a candidate obtains the. rating of seventy-five (75%) and above in
at last a majority of subjects as, provided for in this Act, he / she shall receive a
 conditional credit for the subjects passed: Provided, That a candidate shall take an
examination in the remaining subjects within two years from the preceding
examination: Provided further, That if the candidate fails to obtain at least a general
average of seventy-five (75%) and a rating of at least sixty-five percent (65%) in each of
the subjects re-examined, he/she shall be considered as failed in the entire
examination.

12
The Accountancy Profession and its Development

That this approved resolution shall not be deemed to affect those who are eligible to
take the conditional or removal examinations pursuant to Section 16 of R.A. No. 9298,
and who, as such, shall be allowed within a period of two (2) years from the
effectivity of this Resolution to take and pass the particular subject/s in which they have
failed under the old scheme, i.e. original six (6) subjects. Provided, that if an
examinee fails to pass the conditional or removal examination after the lapse of the
two (2) year period, he/she shall considered as having failed in the entire examination,
and henceforth, has to take all the new subjects for the BLECPA as prescribed under
this resolution.

• Reports of Rating (Sec. 17) - The Board shall submit to the commission the ratings
obtained by each candidate within ten (10) calendar days after the examination,

⚫
unless extended for just cause
Upon the release of the results of the examination, the Commission shall send by
mailing the rating received by each examinee at his/her given address using the
mailing envelope submitted during the examination. Failing Candidates to Take
Refresher Course (Sec. 18) - Any candidate who fails in two (2) complete Certified
Public Accountant Board Examinations shall be disqualified from taking another set
of examinations unless he/she submits. evidence to the satisfaction of the Board that
he/she enrolled in and completed at least twenty-four (24) units of subject given in the
licensure examination. For purposes of this Act, the examination in which the candidate
was conditioned together with the removal examination on the subject in which he/she
failed shall be counted as one complete examination.

The Accountancy Law of 2004's declaration of policy provided that "the state
recognizes the importance of accountants in nation building and development.
Hence, it shall develop and nurture competent, virtuous, productive and well-
rounded professional accountant whose standards of practice and service shall be
excellent, qualitative, word class and globally competitive through regulatory
measures, programs and activities. that fasten their professional growth and
development."

THE BIRTH OF THE PHILIPPINE ACCOUNTING STANDARDS (PAS)

Accounting Standards are authoritative statements of how particular types of
transactions and other events should be reflected in the financial statements.
The Accounting Standards Council (ASC) was created by Philippine Institute of
Certified Public Accountants (PICPA) on November 18, 1981. It is a standard-setting
body which is tasked to establish and improve the "Generally Accepted
Accounting Principles" (GAAP) in the Philippines. The approved statements and the
relative interpretations of the ASC are known as "Statement of Financial Accounting
Standards" or SFAS which will be effective only upon approval by the Professional
Regulation Commission (PRC) and unless indicated to the contrary, shall not be
retroactive.

13
Chapter 1

ng
The ASC is composed of eight (8) members with four (4) members nominated by
PICPA and one (1) each from Securities and Exchange Commission (SEC), Bangko
Sentral Pilipinas (BSP), Professional Regulation Commission (PRC) specifically the
Board of Accountancy (BOA) and the Financial Executive Institute of the Philippines
(FINEX). The term of office of the members is two (2) years which can be renewed.
At present, however, Section 9 (A) of the Rules and Regulations Implementing R.A.
9298 otherwise known as the Philippine Accountancy Act of 2004, created the new
accounting standard-setting body known as the Philippine Financial Reporting
Standards Council (PFRSC) to replace the Accounting Standards Council.
Consequently, the Statement of Financial Accounting Standards (SFAS) are now known
as the Philippine Accounting Standards (PAS).

The PFRSC is created by the Professional Regulation Commission (PRC) upon

recommendation of the Board of Accountancy (BOA) to assist the Board of
Accountancy in carrying out its powers and functions.

The PFRSC is composed fifteen (15) members with a Chairman who has been or is
presently a senior accounting practitioner and fourteen (14) representatives from the
following:

Board of Accountancy
Securities and Exchange Commission.
Bangko Sentral ng Pilipinas
Bureau of Internal Revenue
Commission on Audit
Major organization of preparers and users of financial Statements. Accredited National
Professional Organization of CPAs:
Public Practice
Commerce and Industry
Academe or Education
1

2
2
2
2

14
Government Total

The Chairman and members of the Council shall have a term of three (3) years
renewable for another term. Any member of the ASC shall qualify for appointment to the
PFRSC. However, the ASC shall continue to function until the full creation of PFRSC.

STANDARDS
(IASB) REPLACES THE
INTERNATIONAL ACCOUNTING
BOARD BOARD (IASB) INTERNATIONAL ACCOUNTING STANDARDS COUNCIL
(IASC)

With the growing and seemingly unstoppable internationalization of business and

trade, the IASC, a private independent standard-setting body was created with the
objective of achieving uniformity in accounting principles which are used by business
and other organizations for financial reporting around the world by formulating and
publishing for the public interest, the accounting standards to be observed in the
14
The Accountancy Profession and its Development
presentation of financial statements, to promote their worldwide acceptance and to work
for the improvement and harmonious application of accounting standards and
procedures.
The approved statements of the IASC are known as International Accounting Standards
(IAS)
The IAS was founded in 1973 through an agreement made by the professional
accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, the
Netherlands, the United Kingdom, Ireland and the United States of America.
In 1997, after nearly 25 years of achievements, the IASC concluded that if it were to
effectively continue to perform its task, it must find a way to bring about convergence
between national accounting standards and practices and high quality global accounting
standards. And as a result, not too long after, on July 1, 2000, the IASC was replaced
by International Accounting Standards Board (IASB). The IASB has come out with
new reporting standards that are called International Financial Reporting Standards
(IFRS). Although the IASB has no legal authority to impose the standards that it
promulgates, many countries support them. For the meantime, the pronouncements of
the IASC will continue to be designated as International Accounting Standards (IAS).

PHILIPPINE ASC HAS SHIFTED TO IAS

In an effort to improve and harmonize the accounting standards relative to the
preparation and presentation of financial statements, the Philippine Accounting
Standards Council which in many decades mostly based its Accounting Standards from
the United States or American Accounting Standards has shifted to International
Accounting Standards (IAS) in 1997 but it was only in the year 2000 wherein the
Philippine ASC made a sweeping revision of its old "Statement of Financial Accounting
Standards" (SFAS) to conform with its counterpart, the IAS.
Currently, the IASB has revised its IASS which the ASC adopted and are called
Philippine Accounting Standards (PASS). The IASB has also formulated new standards
and are called International Financial Reporting Standards (IFRS) which the ASC
adopted and are called Philippine Financial Reporting Standards (PFRS). In short,
Philippine Accounting Standards (PASS) corresponds to the adopted International
Accounting Standards (IASs) and Philippine Financial Reporting Standards (PFRSS)
corresponds to the adopted International Financial Reporting Standards (IFRSS).
The move of Philippine ASC to shift to IAS could be attributed to the following factors:
1. The Philippine organizations, such as the Securities and Exchange
Commission, Board of Accountancy and Philippine Institution of Certified Public
Accountants (PICPA) support the IASB standard;
2. The removal of free choice of accounting alternative treatment under the IASB
15
Chapter 1

standards which will redound to having a uniform financial reporting around the world
and;
3. The IASB standard was recognized by Asian Development Bank (ADB), World Bank
and World Trade Organization (WTO).

GOVERNMENT SECTOR ADOPTS INTERNATIONAL ACCOUNTING STANDARDS

Meanwhile, in the government sector, the Commission on Audit (COA) adopted the
International Accounting Standards on January 1, 2014 and they call it, Philippine Public
Sector Accounting Standards (PPSAS) and was fully implemented on January 1, 2015
after the creation of the Philippine Public Sector Accounting Standards Board
(PPSASB) on October 10, 2008. The role of the PPSASB is to assist the omission in
formulating and implementing the public sector accounting standards which will
redound to establishing and maintaining linkages with international bodies,
professional organizations and academe on accounting related fields on financial
management.

The PPSAS will align with prevailing international standards, provide quality accounting
standards thereby enhancing the quality and uniformity in financial reporting by the
Philippine public sector entities, and ensuring accountability, transparency and
comparability of financial information with other public sector entities around the world. It
sets out the recognition, measurement, presentation and disclosure requirements for
financial reporting in the Philippine Government. PPSAS shall apply to all National
Government Agencies (NGAs) which refer to departments, agencies, bureaus, state
universities and colleges, government instrumentalities and commissions including
judiciary and constitutional commission, Local Government Units. Government-Owned
and/or Controlled Corporation.

AIMING TOWARDS GLOBALIZATION

and

Globalization has resulted in business enterprises entering into transactions that extend
beyond the borders of their home country as evidence by multinational corporations
which have grown widely with their subsidiaries and affiliates located in other parts of
the world. It has also awakened the need for accounting principles and standards to
have international acceptability. It is toward this trend of accounting practice where we
are in now. This gives opportunity to Filipino accountants to be able to practice
accounting freely in other parts of the world. Just imagine, we will be competing with
other accountants from other parts of the world! The worst scenario is, what if these.
foreign investors bring along with them their own accountants for reason that we are not
so familiar with their nature of business? It is like the "rules" in playing basketball. We do
not know when is a shot to be counted as "two or three points", how many dribbles that
a player should make before he "takes off for a twinner" or when is a "technical foul" or
flagrant foul" be called, etc. There are rules of the game which are obsolete and new
rules emerged are adopted.

16
"Let us keep abreast with the changing rules of the game and continue playing with
them in the global arena of
accounting practice".
PHILCPA
7

FOREIGN ACCOUNT

Chapter

Review Questions-
1-1. Why is accountancy profession considered as less expensive and what made
it

1-2.

1-3.
unpopular as compared to medicine, law, engineering, etc.?
How does the World Trade Organization's policy on liberation of services affect the
practice of accountancy profession?
What are the career opportunities of a CPA? Differentiate and explain.
1-4. Con a CPA in the government service be allowed to practice public accounting?
1-5. Can a CPA in the government service be allowed to teach accounting and the
related subjects in colleges and universities?

1-6.
What is a CPA?
1-7.

1-8.
Why is continuing professional development for CPA's important?

is attending a formal CPA review a must requirement in taking the CPA Board
Examination? Explain?

1-9. Does the accreditation requirements of staff and partners of a CPA firm aimed
to
limit the number of CPA practitioners? Explain.

1-10. What is the main purpose of the CPA Examination?

1-11. What are the admission requirements to the CPA Exam?

1-12 What is the required passing grade of CPA candidate?

1-13. When is a CPA candidate considered "conditioned"?

1-14. How many times a CPA candidate should foil before he/she be allowed to take
refresher course? Explain.

1-15. is it necessary for a CPA candidate to pass all the six (6) subjects given by the
Board of Accountancy? Explain.

1-16. Why was the Accounting Standards Council (ASC) of the Philippines created?
18
The Accountancy Profession and its Development

1-17. What is ASC? What attributed Accounting Standards Council to totally shift to
International Accounting Standards?

1-18. What do you call the government's version of International Accounting

1-19.
Standards that was adopted by COA?

What was the effectivity of the full implementation of the International Accounting
Standards by the government sector?

1-20. What replaces the Accounting Standards Council?

Quizzers----
------

1-1
Identification of Acronyms

Instructions: Give the full text of the following acronyms which are related to business,
government offices and accountancy profession.

1. PRC

2. WTO

3. ACPAPP

4. GACPA

5. ACPAE

6. ACPACI

7. PICPA
8. BSA

9. CPD

10. SEC

11. BSP

12. NBI

13. BIR

14. DBM

19
Chapter 1

15. DTI

16. LGU

17. DPWH

18. CHED

19. ASC

20. SFAS

21. GAAP

22. BOA

23. FINEX

24. COA
25. FASB

26. GOCC

27. PFRS

28. PAS

29. IAS

30. IASC

31. IASB

32. IFRS

33. CPA

34. SSS

35. GS1S

36. HDMF

37. FRSC

38. ADB

39. PPSAS

40. IFAC

20
The Accountancy Profession and its Development
True or False

Instruction: Write letter T if the statements are correct and F if the statement is wrong.
1. Accountancy is not only one of the modest, less expensive but also the
most prestigious profession in the country today.
2. It was in 1923 that accountancy profession was first recognized through
the passing of the accountancy law.

3. Until today, the accountancy profession maintains the highest mortality

rate among courses that require board examinations.

4. Accountancy is the first among the professions here in the Philippines to be

included under the World Trade Organization's policy liberalization of services.

5. Accountancy is considered a profession because it has a body of

principles, assumptions and a set of ethical standards.

6. Republic Act 7160 which is known as the "Local Government Code of 1991"
created cities, provinces and municipalities as Local Government Units.

7. The Board of Accountancy employs strictness, whereby before a CPA can engage
into public practice, he has to obtain accreditation with Professional Regulatory
Commission and Board of Accountancy.

8. All CPAs employed in the government agencies are considered as public

practitioners.

9. The knowledge of accounting is important and beneficial to those who are

engaged in business only.

10 A CPA who is teaching in the subjects of taxation in a college or university

is not considered to be in the exercise of profession.

11. A CPA is not allowed by law to engage in any lawful business activity if he
is a public practitioner.

12. R. A. 9298 known as "Philippine Accountancy Act of 2004" repealed P.D.

692 formerly known as the "Revised Accountancy Law".

13. The Board of Accountancy shall be composed of a chairman and 6

members to be appointed by the President of the Philippines.

14. The purpose of the CPA Board Examination is to test the overall

21
Chapter 1

14. The purpose of the CPA Board Examination is to test the overall
knowledge and competence of the candidates.

15. Under the new accountancy law, the Professional Regulatory Commission, subject
to the approval of the Board of Accountancy may revise or exclude any of the subjects
in their syllabi and add new ones as the need arises.
16. To be qualified as having passed the CPA Board Exam, the candidate must obtain
a general average of 75% and above with no grades lower than
65% in any given subject.

17. A conditional candidate shall automatically become a CPA two years after without
taking examinations on the remaining subjects that he/she failed. 18. Any candidate
who failed in 2 complete CPA Board shall be disqualified from taking another set of
examination unless he/she has enrolled and completed at least 24 units of subject given
in the licensure examination.
19. The Philippine Financial Reporting Standards Council is the new standard setting-
body which is tasked to establish and improve the Generally Accepted Accounting
Principles in the Philippines.
20. The objective of International Accounting Standard is to achieve uniformity in the
accounting principles which are used by business and other organizations for financial
reporting around the world.

1-3

Multiple Choice
Instructions: Encircle the letter of the corresponding correct answer.
1. When was the year that accountancy profession was first recognized through
the passing of accountancy law?

a. 1910
b. 1923
c. 1945 1975
2. It is in this field of professional practice where CPAs are considered as
"independent entity" vested with freedom to exercise his own judgment and
impartiality of the reports he prepared -
a. Government Accounting b. Management Accounting
c. Private Accounting
Public Accounting

22
The Accountancy Profession and its Development

3.
A CPA who chooses to join in the academe as a university professor, CPA Reviewer,
Researcher, etc. is a member of what sector-
a. Association of CPAs in Commerce and Industry
b. Government Association of CPAs
c. Association of CPAs in Public Practice d. Association of CPAs in Education

4. Many accountants are employed in business enterprise as chief accountant or

comptroller. Said accountants are engaged in-

a. General Accounting
b. Government Accounting
c. Private Accounting
d. Public Accounting

5. The accredited national professional organization of CPAs is-

a. Association of CPAs in Commerce and Industry

b. Association of CPAs in Education
c. Government Association of CPAs
d. Philippine Institute of CPAs
6. A CPA in public practice who is engaged in the design and installation of general
accounting system is said to be performing a/an-

a. management services work b. auditing work

c. tax servicing work
d. none of the above

7. A CPA in public practice who carefully examines, tests and checks accuracy of
accounting data -

a. Auditor

b. Bookkeeper
c.
accountant
d. budget officer

8. A CPA in public practice who examines financial statements and renders opinion.
that is free from bias is said to be engaged in-

a. management accounting b. auditing

c.
bookkeeping
d. none of the above

9. Presidential Decree 692 which was previously known as the "Revised

Accountancy Law" which was re-enacted May 5, 1975 was repealed by the Republic
Act No. 9298 is known as-

23
Chapter 1
a. Philippine Accountancy Act of 2004
b. Revised Accountancy Law of 2004
C.
PICPA Law of 2004
d. Professional Accountancy Act of 2004
10. The CPA Board Examination covers how many subjects?

a. 6 subjects
c.
8 subjects
d.
9 subjects

b. 7 subjects
11. The Board of Accountancy shall be composed of a chairman and how many
24
members?

a. 3 members
b. 5 members
C.
6 members d. 7 members

12. The Board of Accountancy shall elect a Vice-Chairman from among its members
for the term of-

a. 1 year

b. 2 years
C.
3 years d. 4 years

13. Any person applying for examination shall establish the following requisites to
the satisfaction of the Board that he/she

a. is a Filipino citizen
b. has good moral character
—

c. has not been convicted of any criminal offense involving moral

tur.tude
d. all of the above

14. How many calendar days that the Board of Accountancy shall submit to the
Professional Regulatory Commission the ratings that the candidate obtained
during the board exam?
a. 8 calendar days
b. 9 calendar days
c. 10 calendar days d. 11 calendar days
15. A conditioned candidate, shall take an examination in the remaining subjects-
a. within 2 years from the preceding examination
b. 2 years from the last day of release
c. 2 years after date the review course started
d. no need to take the exam as already considered "passed"

The Accountancy Profession and its Development

16. The new standard-setting body created in 2005 to replace the Accounting
Standards Council (ASC)-

a. International Standards Committee b. Financial Reporting Standards Council c.

Financial Accounting Standards Board
d. Statement of Financial Accounting Standards.

17. Due to the creation of FRSC, the Accounting Standards Council's Statement of
Financial Accounting Standards (SFAS) are now being renamed as-

a. Philippine Accounting Standards

b. International Accounting Standard c. PICPA Standard
d. Standards of Reporting

18. The chairman of the Philippine Financial Reporting Standards Council (PFRSC)
must have been or presently a-

a. a senior accounting practitioner

b. a member of PICPA

c. a member of the Board of Accountancy

d. a chairman of the Professional Regulation Commission

19. What do you call the approved statements of the International Accounting
Standards Board (IASB)?

a. International Accounting Standards

b. International Financial Reporting Standards
c. International Financial Statements
d. none of the above

20. The members of the Professional Regulatory Board of Accountancy shall be

appointed by the-

a. Association of CPAs in Public Practice

b. Professional Regulation Commission
c. Philippine Institute of CPAs
d. President of the Philippines

21. Which of the following is not a qualification of an applicant for the CPA licensure
examination?

a. He/she is of good moral character b. He/she is at least 21 years of age

25
Chapter 1
He/she is a Filipino citizen
d. He/she is a holder of the degree of Bachelor of Science in Accountancy
c.

22. Which of the following statements is correct?

a. The examination in which the candidate was conditioned and the removal
examination on the subject in which he/she failed shall be counted as two (2) complete
examination
5. Any candidate who fails in two (2) complete CPA board examinations will
no longer be allowed to take another set of examinations.
c. Any candidate who fails in two (2) complete CPA board examinations shall be
disqualified from taking another set of examinations unless he/she submits evidence to
the satisfaction of the Board that he/she enrolled in and completed at least twenty-four
(24) units of subjects given in the licensure examination.
d. None of the above

23. Which among the following is the work of a public practitioner which has a
purpose of expressing an opinion on financial statements?

a. taxation
b. management advisory services
c. external auditor
d. internal auditor

24. A professional accountant in public practice is prohibited from divulging any

confidential information as a result of professional and business relationship to third
parties without specific authority from the management.

a. objectivity
b. confidentiality c. due care
d. none of these

25. A professional accountant should not allow bias, conflict of interest or under
influence of others to override professional or business judgments.
a. objectivity
b. integrity
c. professional competence
d. none of these

26