Accounting and Auditing Standard

Setting Councils
FSRSC AASC
Board of Accountancy 1 Board of Accountancy 1
Securities and Exchange Commission 1 Securities and Exchange Commission 1
Bangko Sentral ng Pilipinas 1 Bangko Sentral ng Pilipinas 1
Commission on Audit 1 Commission on Audit 1
A major organization composed of 1 An association or organization of CPAs in 1
preparers and users of financial statements active public practice of accountancy
Bureau of Internal Revenue 1 Insurance Commission* 1
Insurance Commission* 1 Accredited Nat’l Prof. Org. of CPAs
Accredited Nat’l Prof. Org. of CPAs Public Practice 9
Public Practice 2 Commerce and Industry 1
Commerce and Industry 2 Academe / Education 1
Academe / Education 2 Government 0
Government 2 Total 17
Total 15 *PRBOA Res. No. 29 Series of 2022
Penal Provision
 Penal Provision

• Any person who shall violate any of the provisions of RA

9298 or the IRR shall upon conviction, be punished by a
fine of not less than P50,000 or by imprisonment for a
period not exceeding two (2) years or both.
 Fundamental
Principles of
Assurance Services
Outline

1. Introduction
2. Assurance engagements
Fundamentals:
• Nature, Demand, Types, Elements
3. Non-assurance engagements
Assurance Engagement - Defined

“Assurance engagement” means an engagement in which

a practitioner expresses a conclusion designed to enhance
the degree of confidence of the intended users other than
the responsible party about the outcome of the evaluation
or measurement of a subject matter against criteria.
 The Practitioner’s
Engagements
Attestation engagement is an
engagement in which the
practitioner is engaged to issue, or Assurance Non-assurance
does issue a written communication
that expresses a conclusion about
the reliability of a written assertion
that is the responsibility of another
party. Attestation Direct
(Assertion-based) Reporting
Tax Compilation
Audit Review
A Various
Advisory/
Others Consulting
Agreed-upon
• Examination of prospective Others
procedures
financial information
• CPA Performance Review
• CPA Risk Advisory
Question
Most of the large national CPA firms
a. Offer audit, tax, and management advisory services
b. Emphasize auditing to a lesser degree than do smaller
local and regional firms.
c. Are organized as corporations to obtain benefit of
limited liability.
d. Expect professional staff members to be accounting
generalists as opposed to the specialization of CPAs in
smaller firms.
Question
Which of the following best describes the logical
relationships among audits, attest engagements, and
assurance engagements?
a. All attest engagements are audits, but not all audits are
attest engagements.
b. All assurance engagements, including audits, involve
attestation.
c. An audit provides assurance but does not involve
attestation.
d. All audits are attest engagements, but not all attest
engagements are audits.
Assurance Engagements: Fundamentals
Nature
Nature of An Assurance Engagement
Enhanced Quality

Responsible Party Subject Matter Intended Users

?
Conclusion that
Evaluation and enhances
Criteria confidence
Measurement

Practitioner
 Question
Which of the following is correct regarding assurance engagements?
a. It is an engagement in which a practitioner expresses a conclusion
designed to enhance the degree of confidence of the intended
users other than the responsible party about the outcome of the
evaluation or measurement of a subject matter against criteria.
b. All engagements performed by professional accountants are
assurance engagements.
c. Whether a particular engagement is an assurance engagement
will depend upon whether it exhibits all of the following elements:
Incomplete
a three party relationship, a subject matter, and suitable criteria.
d. CPAs are the exclusive providers of assurance engagements as
the subject matter of assurance engagements is limited only to
financial information of a business entity.
Question
Assurance services least likely involve
a. Improving the quality of information for decision making
purposes.
b. Improving the quality of the decision model used.
c. Improving the relevance of information
d. Implementing a system that improves the processing of
information You will become the responsible party; therefore
no independence
Assurance Engagements: Fundamentals
Demand
Demand for Assurance Engagements

• Bias of responsible party

• Remoteness of users
• Complexity of subject matter
• Risk management – information risk reduction
• Cost of capital reduction
Question

The need for assurance services arises for all of the following
reasons except:
a. Expertise and independence of practitioners
b. Risk management
c. Enhancement in the reliability of information
d. Seeking recommendation
Consulting or Advisory
Question

The need for assurance services arises for all of the following
reasons except:
a. Potential bias in providing information
b. Closeness
Remoteness between user and the organization
c. Complexity of the processing systems
d. Remoteness between a user and the organization
Assurance Engagements: Fundamentals
Types
Types of Assurance Engagements

1. Level of Assurance
a. Reasonable
b. Limited

2. Structure
a. Attestation
b. Direct reporting
Question
Which of the following refers to an attestation type of assurance engagement?
a. The objective is a reduction in assurance engagement risk to an acceptably
RAE for a positive form of expression of the practitioner’s
low level as the basis
conclusion.
b. The objective is a reduction in assurance engagement risk to a level that is
acceptable in the circumstances of the engagement, but where that risk is
greater than for a reasonable
LAE assurance engagement, as the basis for a
negative form of expression of the practitioner’s conclusion.
c. The evaluation or measurement of the subject matter is performed by the
responsible party and the subject matter information is in the form of assertion
by the responsible party that is made available to the intended users.
d. The practitioner either directly performs the evaluation or measurement of the
subject matter, or obtains a representation from the responsible party that has
Direct Reporting
performed the evaluation Assurance Engagement
or measurement that is not available to the intended
users. The subject matter information is provided to the intended users in the
assurance report.
Levels of Assurance and Engagement
Risk
Absolute Not attainable

Reasonable
Assurance
Level
Limited

None Non-assurance

Engagement Risk
Level of Assurance Engagements

Assurance Level of Form of Conclusion

Engagement Engagement Risk
Reasonable Low Positive
(High)
Limited Greater than for Negative
(Low or Moderate) RAE
(High or moderate)
Limitations of Assurance Engagements

• Selective testing
• Judgement
• Inherent limitations of internal control
• Persuasive evidence rather than conclusive
• Characteristics of subject matter
Question

When the professional accountant has obtained sufficient

appropriate evidence to conclude that the subject matter
conforms in all material respects with identified suitable Positive
criteria, he or she can provide what level of assurance?
a. None
b. High
c. Moderate
d. Absolute
Question
It is the risk that the practitioner expresses an inappropriate
conclusion when the subject matter information is
materially misstated.
a. Business risk
b. Assurance engagement risk
c. Detection risk
d. Audit risk
In accordance with the Philippine Framework for Assurance
Engagements, obtaining absolute assurance is generally
not attainable as a result of such factors as:

a. b. c. d.
The use of selective testing Yes Yes Yes No
The inherent limitations of Yes Yes Yes Yes
internal control
The use of judgment Yes No Yes No
Most audit evidence are No Yes Yes Yes
persuasive rather than
conclusive
Characteristics of subject matter No No Yes Yes
Structure of Assurance Engagements

Engagement Is subject matter Who primarily

responsible party’s evaluates the
representation subject matter?
Attestation Yes Responsible party
(Assertion-based)
Direct reporting No Practitioner
Question
There are two types of assurance engagements according
to structure: attestation engagements and direct
engagements. The main difference between the two lies in
who is measuring, or evaluating, the underlying subject
matter against the criteria. In an attestation engagement,
who primarily performs the evaluation and measurement of
subject matter?
a. Responsible party
b. Practitioner
c. Third party
d. The public
Question

Attestation is any service that requires a CPA firm to issues a

report about the reliability of an assertion that is made by
another party. Which of the following elements is the
critical component that distinguishes an attest
engagement from other forms of assurance engagements?
a. An accountable party
b. A written assertion
c. A subject matter
d. An accountability relationship
Question
Which of the following is the most likely example of a direct
reporting assurance engagement?
a. A review of a sustainability report, which has been
prepared by management.
b. A review of the effectiveness of a company’s system of
internal controls. The practitioner would evaluate the
internal controls, and then issue an assurance report
explaining the outcome of the review.
c. An audit of annual financial statements.
d. A review of interim financial statements.
Elements of Assurance Engagements

1. Three party relationship

2. Subject matter (appropriate)
3. Criteria (suitable)
4. Evidence (sufficient appropriate)
5. Report (written assurance)
Three Party Relationship

Intended Users Cannot be RP alone

Accountability Assurance

Responsible Party Practitioner

Subject Matter

1. Financial
2. Non-financial
3. Physical characteristics
4. Systems / Processes
5. Behavior
Criteria

Benchmark against the subject matter. (Formal, Less Formal,

Established, Specifically Developed)

To be suitable:
❑Relevant
❑Complete
❑Reliable
❑Neutral
❑Understandable
Evidence

Basis of opinion/conclusion

Sufficiency vs. Appropriateness

Sufficiency is the measure of the quantity of evidence.
Appropriateness is the measure of the quality of evidence,
that is, its relevance and its reliability.
Evidence

Materiality is relevant when the practitioner determines the

nature, timing and extent of evidence-gathering
procedures, and when assessing whether the subject
matter information is free of misstatement.
Assurance Engagement Risk
It is the risk that the practitioner expresses an inappropriate
conclusion when the subject matter information is
materially misstated.
Evidence

Other items for evidence gathering

1. Cost-benefit consideration
2. Professional skepticism
Written Assurance Report

Conveys assurance
Which of the following refers to “criteria” element of
assurance engagement?
a. Benchmarks used to evaluate or measure the subject
matter.
b. Information obtained by the practitioner in arriving at
the conclusions on which the opinion is based. Evidence

c. Contains a conclusion that conveys the assurance

obtained about the subject matter information. Report

d. The subject matter, and subject matter information

(assertion), of an assurance engagement. Subject
Which of the following statements is incorrect regarding the
three party relationship element of assurance
engagement?
a. The intended user is generally, but may not be, the
addressee of the professional accountant’s report.
b. The responsible party and the intended user will often be
from separate organizations.
c. The responsible party may also be one of the intended
users.
d. The intended user(s) is(are) always limited to the
addressee of the professional accountant’s report.
The subject matter of an assurance engagement may take
many forms, including:

a. b. c. d.
Nonfinancial performance of Yes Yes Yes No
condition
Behavior Yes Yes Yes Yes
Financial performance or behavior Yes Yes No Yes
Physical characteristics Yes No No No
Systems and processes Yes No Yes Yes
The subject matter of an assurance engagement may take
many forms, including:

a. b. c. d.
Key performance indicators Yes Yes Yes No
Compliance with laws and Yes Yes Yes Yes
regulations
Compliance with contracts Yes Yes No Yes
Internal control Yes No No No
Size of lease property Yes No Yes Yes
Greenhouse gas statement Yes Yes No No
Corporate social responsibility Yes Yes No No
reporting
The characteristics for determining whether criteria are
suitable include:

a. b. c. d.
Relevance Yes Yes Yes Yes
Reliability Yes Yes Yes Yes
Completeness Yes Yes No Yes
Neutrality Yes No No Yes
Comparability Yes No No No
Feedback value Yes Yes No No
Understandability Yes Yes Yes Yes
Non-Assurance Engagements

• Agreed-upon procedures
• Compilation of financial and other information
• Some tax services where no conclusion is expressed, and
tax consulting
• Management consulting and other advisory services
Agree-Upon Procedures

• Auditor is engaged to carry out those procedures of an

audit nature to which the auditor and the entity and any
appropriate third parties have agreed and to report the
factual findings.
Compilation

• Accountant is engaged to use accounting expertise as

opposed to auditing expertise to collect, classify and
summarize financial information
Tax Services

• Practitioner provides advice on income tax and business

strategies
Management Consulting

• Practitioner provides advice or recommendation for the

improvement of client’s use of its capabilities and
resources to achieve the objective the client’s
organization
Standards Governing Professional
Services by CPAs in the Philippines
Standards Related Practice Statements Application of Standards
Phil Standards on Auditing Phil Auditing Practice Audit of historical financial
Statements information
Phil Stds on Review Phil Review Engagement Review of historical financial
Engagements Practice Statements information
Phil Stds on Assurance Phil Assurance Engagement Assurance engagements
Engagements Practice Statements dealing with subject matter
other than historical financial
information
Phil Stds on Related Services Phil Related Services Practice Agreed-upon procedures
Statements information and other related
services engagements as
specified by AASC
Phil Stds. on Quality Management All services falling under
(formerly PSQC) AASCs Engagement Std
Standards

• Philippine Standards on Auditing (PSAs) are to be applied, as appropriate, in the

audit of historical financial information.
• Philippine Standards on Review Engagements (PSREs) are to be applied in the
review of historical financial information.
• Philippine Standards on Assurance Engagements (PSAEs) are to be applied in
assurance engagements dealing with subject matters other than historical
information.
• Philippine Standards on Related Services (PSRSs) are to be applied to compilation
engagements, engagements to apply agreed upon procedures to information
and other related services engagements as specified by the AASC.
• Philippine Standard on Quality Management (PSQM) [previously Philippine
Standards on Quality Control (PSQCs)] are to be applied for all services falling
under AASC engagement standards.
Practice Statements

• The AASC issues Philippine Auditing Practice Note (PAPN) [previously

referred to as Philippine Auditing Practice Statements (PAPSs) that
provide interpretative guidance and practical assistance to professional
accountants in implementing PSAs and to promote good practice.
• Philippine Review Engagement Practice Statements (PREPSs), Philippine
Assurance Engagement Practice Statements (PAEPSs), and Philippine
Related Services Practice Statements (PRSPSs) are issued to serve the
same purpose for implementation of PSREs, PSAEs, and PSRSs,
respectively.
Summary of Services Performed by
Practitioners
Assurance Non Assurance
Audit Review AUP Compilation
References PSA and PAPs PSREs and PREPs PSRS and PRSPS PSRS and PRSPS
Objective Express on Express a Perform Use of
opinion whether conclusion procedures as accounting
FS are prepared whether material agreed upon expertise
in accordance modifications with client
with PFRS are to be made
to the FS to
conform with
PFRS
Ethical Independence Independence Fundamental Fundamental
Requirements plus plus ethical principles ethical principles
fundamental fundamental
ethical principles ethical principles
Summary of Services Performed by
Practitioners
Assurance Non Assurance
Audit Review AUP Compilation
Level of High but not Moderate No assurance No assurance
assurance absolute
Procedures are Auditor Auditor Agree-upon by May or may not
determined by parties be agreed upon
Report Ind. Auditor’s Review Report Report on Compilation
Report Factual Findings Report
Availability of To all users To all users For limited use To all users
Report only
End
 Practice and Regulation of
the Accountancy Profession
Sources: Philippine Accountancy Act of 2004, IRR, AASC, FRSC, BSP, IC,
SEC, BIR, COA
Objectives

The standardization and regulation of accounting

education;
The examination for registration of certified
public accountants; and
The supervision, control, and regulation of the
practice of accountancy in the Philippines
Question
The objectives of the PAA of 2004 are the following except:
a. The standardization and regulation of accounting education.
b. Examination for registration of CPAs
c. Supervision, control and regulation of the practice of accountancy
d. Integration of accountancy profession
 Enforcement of the Act

Organization Duty
Professional Regulation Commission (PRC) and Professional It is the primary duty of PRC and BOA to effectively enforce
Regulatory Board of Accountancy (BOA) or implement the provisions of RA 9298.
All duly constituted law enforcement agencies and others of Upon the call or request of PRC or BOA, these organizations
national, provincial, city or municipal government or of any shall render assistance in enforcing the provisions of RA
political subdivision. 9298 and to prosecute any person violating the provisions
of the same.
Secretary of Justice or his duly designated representative He/She shall act as legal adviser to PRC and BOA and shall
render legal assistance as may be necessary in carrying out
the provisions of RA 9298.
 Practice of Public Accountancy

Practice in Commerce and

Scope of Industry
Practice Practice in Government

Practice in Education/Academe
Practice of Public Accountancy

• Shall constitute in a person, be it his/her individual capacity, or as a

partner or as a staff member in an accounting or auditing firm, holding
out himself/herself as one skilled in the knowledge, science and practice
of accounting, and as a qualified person to render professional services
as a CPA; or offering or rendering, or both, to more than one client on a
fee basis or otherwise, services such as
✓The audit or verification of financial transaction and accounting records;
✓The preparation, signing, or certification for clients or reports of audit,
balance sheet, and other financial accounting and related schedules.
Practice of Public Accountancy

✓The design, installation and revision of accounting system;

✓The preparation of income tax returns when related to accounting
procedures; or
✓When he/she represents clients before government agencies on tax and
other matters related to accounting or renders professional assistance in
matters relating to accounting procedures and the recording and
presentation of financial facts or data.
Practice in Commerce and Industry

Shall constitute in a person

✓Involved in decision making requiring professional knowledge in the
science of accounting;
✓When he/she represents his/her employer before government agencies
on tax and other matters related to accounting; or
✓When such employment or position requires that the holder thereof
must be a certified public accountant
Practice in Commerce and Industry

RA 9298 requires that if business or company in the private sector has a

paid-up capital of at least five million pesos (P5,000,000) and or/an annual
revenue of at least ten million pesos (P10,000,000), shall be occupied only
by a duly registered CPA.
Practice in Government

Shall constitute in a person who holds, or is appointed to, a

position in an accounting professional group in government or
in a government–owned and/or controlled corporation,
including those performing proprietary functions, where
decision making requires professional knowledge in the science
of accounting, or where a civil service eligibility as a certified
public accountant is a prerequisite.
Practice in Education or Academe

Shall constitute in a person in an educational institution which

involve teaching of accounting, auditing, management advisory
services, finance, business law, taxation, and other technically
related subjects: Provided, That members of the Integrated Bar
of the Philippines may be allowed to teach business law and
taxation subjects.
Question
The following is deemed a practice of accountancy, except:
a. Appointment to a position in the government that requires a CPA
license as a prerequisite.
b. Employment as budget officer in a local government unit regardless
of the officer being a holder of a CPA license or not.
c. Teaching professional subjects in a collegiate program leading to the
degree of Bachelor of Science in Accountancy.
d. Representing his clients before government agencies on tax and
other matters related to accounting.
Professional
Regulatory
Board of
Accountancy
Composition & Appointment Process

BOA is composed of a chairman and six (6) members.

Appointment Process
1. APO / PICPA (5 nominees)
2. PRC (3 recommendees)
3. President (1 appointee)
Composition & Appointment Process

Who is the current chairman of the Board of Accountancy?

Qualification of Members

Must be a natural-born citizen and a resident of the Philippines;

Must be a duly registered Certified Public Accountant with a least ten
(10) years of work experience in any scope of practice of accountancy.
Must be of good moral character and must not have been convicted of
crimes involving moral turpitude; and
Must not have any pecuniary interest, directly or indirectly, in any school,
college, university or institution conferring an academic degree necessary
for admission to the practice of accountancy or where review classes in
preparation for the licensure examination are being offered or conducted,
nor shall he/she be a member of the faculty or administration thereof at
the time of his/her appointment to the Board.
Must not be a director or officer of the APO at the time of his
appointment.
Terms of Office

Chairman and members – hold office for 3 years

Any vacancy shall be filled for the unexpired portion term only
No person who has served two consecutive years as chairman
or member shall be eligible for reappointment as chairman or
member until lapse of one year.
Appointment to fill up an unexpired term is not be considered
as a complete term.
No person shall serve in the Board for more than 12 years.
Question
Which of the following is not a qualification of a member of the Board
of Accountancy?
a. He must be a natural-born citizen and a citizen of the Philippines.
b. He must not be a director or officer of the Accredited National
Professional Organization of CPAs at the time of his appointment.
c. He must be of good moral character and must not have been
convicted of crimes involving moral turpitude.
d. He must be a duly registered CPA with at least ten years of
experience in public accounting.
Question
No person shall serve the Professional Regulatory Board of
Accountancy for more than
a. 3 years
b. 6 years
c. 9 years
d. 12 years
Powers and Functions

To prescribe and adopt the rules and regulations necessary for

carrying out the provisions of this Act;
To supervise the registration, licensure and practice of
accountancy in the Philippines;
To administer oaths in connection with the administration of
this Act;
To issue, suspend, revoke, or reinstate the Certificate of
Registration for the practice of the accountancy profession;
To adopt an official seal of the Board;
Powers and Functions

To prescribe and/or adopt a Code of Ethics for the practice of

accountancy;
To monitor the conditions affecting the practice of accountancy
and adopt such measures, including promulgation of
accounting and auditing standards, rules and regulations and
best practices as may be deemed proper for the enhancement
and maintenance of high professional, ethical, accounting and
auditing standards:
Powers and Functions

To conduct an oversight into the quality of audits of financial

statements through a review of the quality control measures
instituted by auditors in order to ensure compliance with the
accounting and auditing standards and practices;
To investigate violations of this act and the rules and
regulations promulgated hereunder and for this purpose, to
issue summons, subpoena and subpoena ad testificandum and
subpoena duces tecum to violators or witness thereof and
compel their attendance to such investigation or hearings and
the production of documents in connection therewith
Powers and Functions

The Board may, motu propio in its discretion, make such

investigations as it deems necessary to determine whether any
person has violated any provisions of this law, any accounting
or auditing standard or rules duly promulgated by the Board as
part of the rules governing the practice of accountancy;
To issue a cease or desist order to any person, association,
partnership or corporation engaged in violation of any
provision of this Act, any accounting or auditing standards or
rules duly promulgated by the Board as part of the rules
governing the practice of accountancy in the Philippines;
Powers and Functions

To punish for contempt of the Board, both direct and indirect,

in accordance with the pertinent provisions of and penalties
prescribed by the Rules of Court;
To prepare, adopt, issue or amend the syllabi of the subjects for
examinations in consultation with the academe, determine and
prepare questions for the licensure examination which shall
strictly be within the scope of the syllabi of the subjects for
examinations as well as administer, correct and release the
results of the licensure examinations;
Powers and Functions

To ensure, in coordination with the Commission on Higher

Education (CHED) or other authorized government offices that
all higher educational instruction and offering of accountancy
comply with the policies, standards and requirements of the
course prescribed by CHED or other authorized government
offices in the areas of curriculum, faculty, library and facilities;
and
To exercise such other powers as may be provided by law as
well as those which may be implied from, or which are
necessary or incidental to the carrying out of, the express
powers granted to the Board to achieve the objectives and
purposes of this Act.
Question
Which of the following is not a function of the BOA as specified in the PAA of
2004?
a. To investigate violations of the Accountancy Law and rules and
regulations promulgated therewith.
b. To look from time to time into the conditions affecting the practice of the
accountancy profession.
c. To create and direct accrediting agencies that are entrusted the functions
of reviewing higher educational institutions’ policies and practices
leading to accreditation/reaccreditation of BSA Program.
d. To determine and prescribe minimum requirements leading to the
admission of candidates to the CPA licensure examination.
Grounds for Suspension or Removal of
Members of the Board

Neglect of duty or incompetence;

Violation or tolerance of any violation of this Act and its
implementing rules and regulations or the Certified Public
Accountant’s Code of Ethics and the technical and professional
standards of practice for certified public accountants;
Final judgment of crimes involving moral turpitude; and
Manipulation or rigging of the certified public accountant’s
licensure examination results, disclosure of secret and
confidential information in the examination questions prior to
the conduct of the said
Other Provisions

Compensation and Allowances

The chairman and members of the Board shall receive
compensation and allowances comparable to that being received by
the Chairman and members of existing regulatory boards under the
Commission as provided for in the General Appropriations Act.
Annual Report
The Board shall, at the close of each calendar year, submit an annual
report to the President of the Philippines through the Commission
giving a detailed account of its proceedings and accomplishments
during the year and making recommendations for the adoption of
measures that will upgrade and improve the conditions affecting the
practice of accountancy in the Philippines.
Other Provisions

Administrative Supervision of BOA

BOA shall be under administrative supervision of PRC.
Custodian of Records and Secretariat
All records of the Board, including applications for examination
and administrative and other investigative cases conducted by
the Board shall be under the custody of the Commission. The
Commission shall designate the Secretary of the Board and
shall provide the secretariat and other support services to
implement the provisions of this Act.
Examination,
Registration and
Licensure
Examinations for
CPAs
 Requirements
Requirements Documents
a. Is a Filipino citizen Certificate of Live Birth authenticated by the
Philippine Statistics Authority
b. Is of good moral character Valid NBI clearance
c. Has not been convicted of any criminal offense Valid NBI clearance
involving moral turpitude
d. Is a holder of the degree of Bachelor of Science in Transcript of Records with scanned picture and
Accountancy remarks “For Board Examination pursposes”
Question
Which of the following is not a requisite in applying for the CPA
licensure examinations?
a. Natural-born citizen of the Philippines
b. Good moral character
c. Holder of the degree of Bachelor of Science in Accountancy
d. Has not been convicted of any criminal offense involving moral
turpitude
 Scope of Examination
• Advanced Financial Accounting and Reporting (AFAR)
• Auditing
• Financial Accounting and Reporting (FAR)
• Management Services (MS)
• Taxation (TAX)
• Regulatory Framework for Business Transactions (RFBT)
 Scope of Examination
OLD NEW *
Theory of Accounts Financial Accounting and Reporting
Practical Accounting I
Practical Accounting II Advanced Financial Accounting and Reporting
Auditing Theory
Auditing
Auditing Problems
Taxation
Business Law and Taxation
Regulatory Frame for Business Transactions
Management Services Management Advisory Services - reverted to “Management Services”**
*PRBOA Resolution No. 262 Series of 2015 – “Reduced the number of the BLECPA subjects that are included in the scope of
the Board Licensure Examination for Certified Public Accountant from seven (7) to six (6)” effective March 9, 2016
*PRBOA Resolution No. 30 Series of 2022 – “Reverting to the Six (6) Subjects in the Licensure Examination for CPAs under
Board Resolution No. 262 S. 2015, Renaming of the Subject Title “Management Advisory Services” to “Management
Services” and Adopting Syllabi and Tables of Specifications for Six Subjects in LECPA starting October 2022
Question
What are the changes made by the Board to the existing subjects of the
CPA licensure examination pursuant to the BOA resolution No. 262
series of 2015 (choose the exception)
a. Reducing the CPA Licensure Examination subjects from 7 to 6
b. Merging “Auditing Theory” and “Auditing Problems” in one subject
“Auditing”
c. Splitting “Business Law and Taxation” into two separate subjects
“Taxation” and “Regulatory Framework for Business Transactions”
d. Removal of the subject “Management Advisory Services”
 Ratings in the Examination
Passed – general average of at least 75% with no grade lower than 65%
in any given subject
Conditional – general average of less than 75%, has a grade of less than
65% or both, but has obtained 75% and above in at least majority (4
out of 6) of the subjects covered in the licensure examination
*Removal – within two years from preceding examination
Failed – who did not meet the above two ratings
*Failing two complete examination would require a refresher course
 Other Provisions
Report of Ratings
Within 10 days after examination
Oath
All successful candidates shall be required to take an oath of profession
before any member of BOA or any government official authorized by
PRC.
Roaster of CPAs
A roster showing names and place of business of all registered CPAs
shall be prepared and updated by BOA.
Question
Which of the following is incorrect?
a. Candidates who fails to obtain a general weighted average of 75% but
obtains a rating of at least 75% in at least four subjects shall receive
conditional credit for the subjects passed.
b. To successfully pass the licensure examination, the candidates should
obtain a general weighted average of at least 75% with no rating lower
than 65% in any subject.
c. Conditional candidates shall take an examination in the conditional
subjects within two years from the preceding examination.
d. Candidates who failed in three complete examinations must enroll in
refresher course consisting of 24 units of the subjects given in the
licensure examination.
 Registration
Certificate of Registration
It shall be issued to
a. Examinees who pass the licensure examination
b. Person admitted under reciprocity or other international agreement
It shall bear the following
a. Full name and the assigned registration number of the registrant
b. Signature of the chairperson of PRC and the chairman and members
of BOA
c. Official seal of PRC and BOA
 Registration
Professional Identification Card
A professional identification card bearing the registration number, date
of issuance, expiry date, duly signed by the chairperson of PRC, shall be
issued to every registrant, renewable every three (3) years.
 Registration
Special or Temporary Permit
1) A foreign certified public accountant called for consultation or for a
specific purpose which, in the judgment of the Board, is essential for
the development of the country: Provided, That his//her practice shall
be limited only for the particular work that he/she is being engaged:
Provided, further, That there is no Filipino certified public accountant
qualified for such consultation or specific purposes;
2) A foreign certified public accountant engaged as professor, lecturer
12 or critic in fields essential to accountancy education in the
Philippines and his/her engagement is confined to teaching only; and
 Registration
Special or Temporary Permit
3) A foreign certified public accountant who is an internationally
recognized expert or with specialization in any branch of accountancy
and his/her service is essential for the advancement of accountancy in
the Philippines.
 Indication of Certificate of Registration,
Identification Card and Professional Tax
Receipt
Whenever a CPA signs, uses or issues documents in connection with
the practice of accountancy profession, the CPA shall be required to
indicate his/her:
a. Certificate of registration number and date of issuance
b. The duration of validity
c. Professional Tax Receipt Number
 Refusal to Issue
BOA will not register those:
a. Convicted by a court of competent jurisdiction of a criminal offense
involving moral turpitude
b. Guilty of immoral and dishonorable conduct
c. Of unsound mind
 Suspension and Revocation
Grounds:
a. As mentioned in the grounds for refusal to issue;
b. Any unprofessional or unethical conduct;
c. Malpractice; or
d. Violation of any of the following:
✓Any of the provisions of RA 9298 and its IRR
✓The CPAs Code of Ethics
✓The Technical and Professional Standards of Practice for CPAs
*BOA has discretion to reinstate the validity of revoked certification of
registration after the expiration of two years.
Question
A CPA whose certificate of registration has been revoked:
a. Can no longer be reinstated
b. Is automatically reinstated as a CPA by the PRC after two years if he
has acted in an exemplary manner
c. May be reinstated by the Professional Regulation Commission after
two years if he has acted in exemplary manner
d. May be reinstated as a CPA by the BOA after two years if he has
acted in an exemplary manner
Practice of
Accountancy
 Limitations on the Practice
Single practitioners and partnerships – allowed
Corporation – not allowed

Names
Individual CPAs – Ernie M. Lat, CPA
Firm (sole) – Do business under registered firm name (Ernie M Lat &
Associates)
Partnership – Do business under registered firm under the Articles of
Partnership (e.g. SGV & Co.)
 Accreditation to Practice Public Accountancy

Certificate of Accreditation
Certificate issued under seal, issued by PRC upon recommendation by
BOA attesting that individual CPAs including staff members thereof,
firms, including the sole proprietors and staff members thereof, and
partnerships of CPAs including the partners and staff members thereof,
are “duly accredited” to practice public accountancy in the Philippines.

Requirement
Three (3) year meaningful experience
 Meaningful Experience
Commerce & Industry – significant involvement in general accounting,
budgeting, tax administration, internal auditing, liaison with external
auditors, representing his/her employer before government agencies
on tax and matters related to accounting or any other related
functions; or
Academe & Education – shall include teaching for at least three (3)
trimesters or two (2) semesters subjects in either financial accounting,
business law and tax, auditing problems, auditing theory, financial
management and management services. Provided, That the
accumulated teaching experience on these subjects shall not be less
than three (3) school years; or
 Meaningful Experience
Government - significant involvement in general accounting,
budgeting, tax administration, internal auditing, liaison with the
Commission on Audit or any other related functions; and

Public Practice - shall include at least one year as audit assistant and at
least two years as auditor in charge of audit engagement covering full
audit functions of significant clients.
 Renewal and Expiration
The certificate of accreditation shall be valid for a period of three
years and may be renewed every three years on or before September
30 on the year of expiry upon compliance with requirements.
 Renewal and Expiration

Validity Expiration Renewal

Certificate of Registration Full force unless cancelled revoked or suspended
PRC ID 3 years Birthday On or before birthday
Certificate of 3 years December 31 On or before September
Accreditation 30
 Renewal and Registration
Sample:
If the application of registration of SGV was approved on August 15,
2020 and has a validity of three years, the registration shall expire on
December 31, 2022. The year of registration is counted as Year 1, 2021
as Year 2 and 2022 as Year 3.
As for the renewal, the partnership shall file for renewal on or before
September 30, 2022 for the three year period beginning January 1,
2023 and shall apply on or before September 30, 2025 for the next
three year period beginning January 1, 2026 and so forth.
Question
Individual CPAs, Firms or Partnerships of CPAs including partners and
staffs thereof shall register with the BOA and the PRC. If the
accreditation of SGV & Co was renewed on September 30, 2017, the
next renewal must be on or before:
a. September 30, 2019
b. September 30, 2020
c. December 31, 2019
d. December 31, 2020
 Seal and Use of Seal
The seal of a Certified Public Accountant shall be circular
in form with a smaller circle within and in the upper
portion of the space between the circles shall be
Name
engraved the name of the individual CPA, firm or
partnership as the case maybe, the lower portion
thereof shall be engraved the CPA Registration Number CPA

of the individual CPA, proprietor of the firm and the

signing partner of the partnership and in the middle of Reg. No.
the smaller circle shall be engraved the letters “CPA”.
Affixing the CPA’s seal and signature is an indication of
compliance by the CPA of the requisite accounting and
auditing standards and rules.
 Ownership of Working Papers
Property of CPA
 Foreign Reciprocity
A person who is not a citizen of the Philippines shall not be allowed to
practice accountancy in the Philippines unless he/she can prove, in the
manner provided by the rules of court that, by specific provision of law,
the country of which he/she is a citizen, subject or national admits
citizens of the Philippines to the practice of the same profession
without restriction.
Continuing
Professional
Development
 RA 10912 Continuing Professional
Development Act (CPD) of 2016
CPD refers to the inculcation of advanced knowledge, skills and ethical
values in post-licensure specialization or in an inter-or multidisciplinary
field of study for assimilation into professional practice, self-directed
research or lifelong learning.
 Required CPE Credit Units
Renewal of PIC – 15 units
Exemptions:
OFWs, newly licensed professional for the first renewal cycle after
obtaining their license
For accreditation – 120 units
Technical competence – 30 u, Professional skills – 5u; Professional
values, ethics, and attitudes – 5u = 40u
Flexible CPD units = 80u; Total = 120u
*Minimum 20u each year
**Flexible may be earned on the 3 different competency
Section 32 – Continuing Professional Education
(CPE) Program
RA 9298 RA 10912*
Units 60 120
Years 3 3
Minimum 15 20
Permanent ≥ 65 years old -
Temporary Provided out of the country for at -
least 2 years
*Continuing Professional Development Act of 2016
**CPD shall be mandatory requirement in the renewal of professional license. The various CPD Councils shall reduce the required CPD credit
units to a minimum, which shall not be more than fifteen (15), as provided for by applicable laws.
Exceptions:
a) Where the Professional Regulatory Laws (PRL) of covered professions require compliance with specific number of CPD Credit Units for the
renewal of the PIC.
b) Where the professional intends to practice the profession in countries covered by bilateral, regional, or international agreements in which
CPD is a recognition and eligibility requirements such as ASEAN Mutual Recognition Agreements (MRAs)
**Source: PRD Resolution 2019-1146
Section 32 – Continuing Professional Education
(CPE) Program
Year of Renewal Required Number of CPD Minimum Units Under Flexible CPD*** Units
Credit Units Required Competency
Areas*
2020 onwards 120 40 80

*Major Competency Areas

a) Technical Competence – 30 cu
b) Professional Skills – 5 cu
c) Professional Values, Ethics and Attitudes – 5 cu

**The maximum creditable units for self-directed learning and/or lifelong learning is 48 cu.

***The amount of CPD units (hours) beyond the minimum for each Competence Area.
The Learner professional has the option to take CPD activities under ANY OF the Competence Areas according to his/her
development needs depending on his/her Sector or Area of Professional Practice, Role in the organization, Maturity, and the
like
Organizations
Affecting the
Accountancy
Profession
 Accounting and Auditing Standard Setting
Council
FRSC AASC
Board of Accountancy 1 Board of Accountancy 1
Securities and Exchange Commission 1 Securities and Exchange Commission 1
Bangko Sentral ng Pilipinas 1 Bangko Sentral ng Pilipinas 1
Commission on Audit 1 Commission on Audit 1
A major organization composed of preparers and 1 An association or organization of CPAs in active 1
users of financial statements public practice of accountancy
Bureau of Internal Revenue 1
Insurance Commission 1 Accredited Nat’l Prof. Org. of CPAs
Accredited Nat’l Prof. Org. of CPAs Public Practice 9
Public Practice 2 Commerce and Industry 1
Commerce and Industry 2 Academe / Education 1
Academe / Education 2 Government 1
Government 2 17
Total 15
Question
All of the following are represented to the Financial Reporting
Standards Council, except:
a. Commission on Higher Education
b. Board of Accountancy
c. Securities and Exchange Commission
d. Bureau of Internal Revenue
Question
The Financial Reporting Standards Council which is the accounting
standards setting body is composed of a chair and:
a. Fourteen members
b. Fifteen members
c. Sixteen members
d. Seventeen members
Question
The Auditing and Assurance Standards Council which is the accounting
standards setting body is composed of a chair and:
a. Fourteen members
b. Fifteen members
c. Sixteen members
d. Seventeen members
 Education Technical Council
• Composed of 7 members with a chairman, who had been or presently
a senior accounting practitioner in the academe/education and six
representatives:
• BOA - 1
• Accredited National Professional Organization of CPAs
Public Practice –1
Commerce and Industry –1
Academe / Education –2
Government –1
 Quality Review Committee
• Composed of 7 members with a chairman, who had been or presently
a senior accounting practitioner in the public accountancy
• BOA - 1
• Accredited National Professional Organization of CPAs
Public Practice –2
Commerce and Industry –1
Academe / Education –1
Government –1
 Philippine Interpretations Committee
Objectives
• Principally, to issue implementation guidance on Philippine Accounting
Standards (PAS), Philippine Financial Reporting Standards (PFRS) and
related Interpretations (collectively referred to as PFRS) adopted by the
Financial Reporting Standards Council (FRSC) from accounting
pronouncements issued by the International Accounting Standards Board.
• To comment on exposure drafts of proposed PFRS and other documents
that may be issued for comment by the FRSC.
• To comment on exposure drafts of proposed accounting standards or
proposed regulations with accounting relevance that may be issued by
government agencies, such as the Securities and Exchange Commission,
Bangko Sentral ng Pilipinas and Insurance Commission.
 Philippine Interpretations Committee
Membership
 Accredited Professional Organization
• PICPA as APO. PICPA, a non-stock and not-for-profit organization was
recognized by PRC as the APO on October 2, 1975 per Accreditation
No. 15. It is established for the benefit and welfare of the CPAs.
• Sectoral Organizations
1. ACPAPP
2. ACPACI
3. NACPAE
4. GACPA
Regulatory
Agencies
 Professional Regulation Commission
• Agency that administers, implements and enforces the regulatory
policies of the government with respect to the regulation and
licensing of the various professions under its jurisdiction.
 Commission on Audit
• The Supreme Audit Institution, its mission is to ensure accountability
for public resources, promote transparency, and help improve
government operations in partnership with stakeholders for the
benefit of the Filipino people.
 Securities and Exchange Commission
• Is the regulatory agency charged with supervision over the corporate
sector, the capital market, participants and the securities and
investment instruments market, the protection of the investing
public.
 Bureau of Internal Revenue
• Has the primary objective of raising revenue for the government.
 Bangko Sentral ng Pilipinas
• Has the primary objective of maintaining price stability conducive to a
balanced and sustainable economic growth.
 Insurance Commission
• Promulgates and implements policies, rules and regulations governing
the operations of entities engaged in insurance and pre-need
companies.
 Code of Ethics for
Professional Accountants
Lecture 3
Code of Ethics
It represents a set of moral principles, rules of conduct or values.
Why is there a need for Code of Ethics?
1. A distinguishing mark of the accountancy profession is its acceptance of
the responsibility to act in the public interest which is the collective well-
being of the community of people and institutions the CPA serves.
2. All recognized professions have developed codes of professional ethics.
Purpose of the Code
Overarching Discussion
Requirement
Fundamental principles of These principles establish the standard of behavior expected of a
ethics for professional professional accountant (POPIC)
accountants 1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality; and
5. Professional behavior
Conceptual framework The professional accountants shall apply the framework in order to
identify, evaluate and address threats to compliance with the
fundamental principles.
International Established for audits, reviews, and other assurance engagements
independence standards regarding threats to independence specific to these engagements.
Structure of the Code
Part 1. Complying with the Code,
Fundamental Principles and Conceptual
Framework
Scenarios Requirement
Code of Ethics vs. Laws Laws and regulations shall prevail.
and Regulations
Conflicting requirements Apply the code of ethics with stricter requirements.
of two countries
Breaches of the Code
Breach Requirements
Of International Refer to discussion of Parts 4A and 4B of the Code
Independence Standards
Of any other provision of The Professional Accountant (PA) who identifies a breach of any other
the Code provision of the code shall (EAR):
1. Evaluate the significance and impact of the breach; and
2. Take whatever Actions might be available immediately to address the
consequences; and
3. Determine whether to Report the breach to relevant parties.
Fundamental Principles
Fundamental Principle Definition and Requirements
Integrity D: To be straightforward and honest in all professional and business
relationships.

R: A PA shall not knowingly be associate with reports, returns,

communications or other information where the accountant believes that
the information:
• Contains a materially false or misleading statement;
• Contains statements or information provided recklessly;
• Omits or obscures required information where such omission or
obscurity would be misleading.
Fundamental Principles
Fundamental Principle Definition and Requirements
Objectivity D: Not to compromise professional or business judgements because of
bias, conflict of interest, or undue influence of others.

R: A PA shall not undertake a professional activity if a circumstance or

relationship unduly influences the accountant’s professional judgement.
Fundamental Principles
Fundamental Principle Definition and Requirements
Professional Competence D: (1) To attain and maintain professional knowledge and skill at the
and Due Care level required to ensure that a client or employing organization receives
competent professional service; (2) to act diligently and in accordance
with applicable technical and professional standards.

R: A PA shall undertake reasonable steps to ensure that those working in

a professional capacity under the accountant’s authority have
appropriate training and supervision.
Fundamental Principles
Fundamental Principle Definition and Requirements
Confidentiality D: To respect the confidentiality of information acquired as a result of
professional and business relationships.

R: The PA shall:
• Be alert of the possibility of inadvertent disclosure
• Maintain confidentiality of information within the firm or employing
organization
• Not disclose confidential information acquired
• Not use confidential information acquired
Fundamental Principles
Fundamental Principle Definition and Requirements
Professional Behavior D: To comply with relevant laws and regulations and avoid any conduct
that the professional accountant knows or should know might discredit
the profession

R: The PA shall be honest and truthful and shall not make:

• Exaggerated claims
• Disparaging references or unsubstantiated comparisons
Conceptual Framework
Three Step Approach to PAs
1. Identify – threats (I-FASS) to compliance with fundamental principles
2. Evaluate – the threats identified
3. Address – the threats by eliminating or reducing them to an acceptable
level.

Other requirements:
1. Professional judgement
2. Remain alert for new information
3. Use the reasonable and informed third party test.
Three-Step Approach of the Conceptual
Framework
Step Discussion
Identifying threats The PA shall identify the threats to compliance with fundamental
principles which fall into one or more of the following categories:
• Self Interest Threat
• Self Review Threat
• Advocacy Threat
• Familiarity Threat
• Intimidation Threat
Evaluating Threats The PA shall evaluate whether such threat is at an acceptable level.
Addressing Threats Threats identified that are not an acceptable level must be addressed in
one of the three ways (ESE):
a. Eliminating the circumstances
b. Applying safeguards
c. Declining or ending the professional activity
Consideration for Audits, Reviews and
Other Assurance Engagements
Independence Independence is comprised of:
1. Independence of mind
2. Independence of appearance
Professional skepticism An attitude that includes a questioning mind, being alert to conditions
which may indicate possible misstatement due to error or fraud, and a
critical assessment of audit evidence
Professional Accountants in Business
Circumstances Main Threats Main Fundamental Principle/s
Affected
Conflict of Interest Self-interest Objectivity
Preparation and presentation of Self-interest; intimidation All
information
Acting with sufficient expertise Self-interest Professional competence & due
care
Financial interests, Self-interest Objectivity; Confidentiality
compensation & incentives
Inducements, including gifts Self-interest; familiarity; Integrity; objectivity;
and hospitality intimidation professional behavior
Responding to non-compliance Self-interest; intimidation Integrity; professional behavior
with laws and regulations
Pressure to breach fundamental Intimidation All
principles
Professional Accountants in Public
Practice
Circumstances Main Threats Main Fundamental Principle/s
Affected
Conflict of Interest Self-interest Objectivity
Professional appointments All All
Second opinions Self-interest Professional competence & due
care
Fees and other types of Self-interest Professional competence & due
renumeration care; objectivity
Inducements, including gifts Self-interest; familiarity; Integrity; objectivity;
and hospitality intimidation professional behavior
Custody of clients assets Self-interest Objectivity; professional
behavior
Responding to NOCLAR Self-interest; intimidation Integrity; professional behavior
Part 4. International Independence
Standards
4A. Independence for Audit and Review
Engagements, which Applies when
Performing Audit or Review Engagements
Independence shall be maintained during both:
a. The engagement period; and
b. The period covered by the financial statements.

Network Firms
The rule on independence of the network firms would vary depending on the service
provided
Audit and Review Engagements (4A) Audit and Review Engagements (4B)
A network firm shall be independent When a firm has reason to believe
of the audit clients of the other firms that interests and relationships of a
within the network. network firm create a threat to the
firm’s independence, the firm shall
evaluate and address any such threat.
Long Association Provisions
Client Rules on Rotation
Not a public interest Firm shall determine an appropriate period to address the threats
entity (PIE)
PIE 7 year “time-on period” – Key Audit Partner (KAP) roles are not allowed for
a period > 7 cumulative years

After the 7-year time-on period, the individual shall serve a “cooling-off”
period as follows:
• 5 year cooling off – Engagement Partner
• 3-year cooling off – Engagement Quality Control Reviewer (EQCR)
• 2-year cooling off – Other KAP role
Combination of KAP If the individual acted in combination of KAP roles and served as the
roles engagement partner for 4 or more cumulative years, the cooling off period
shall be 5 consecutive years.
7-Year Time-on Period
The seven (7) year time-on period should be counted in a cumulative (NOT
CONSECUTIVE) manner.

Example:
J Co, CPA served as engagement partner of the audit of SM Inc., a listed
entity, for four (4) consecutive years. After which, J Co took three (3) years
off in the engagement. If J Co, CPA decides to serve a KAP role on the same
engagement, he can only serve it for three more years and would be
required to comply with the 5-year cooling off period.
Exceptions to the 7-year Time-on Period
1. Under IESBA Handbook (up to 1 more year) – (RARE) KAPs whose
continuity is especially important to the audit quality may be permitted
to serve an additional year as KAP
2. Under IESBA Handbook (Up to 2 more years) - If the individual has
served the audit client as KAP for a period of 6 or more cumulative years
when the client becomes PIE, the individual may continue to serve in
that capacity for a maximum of 2 additional years before rotating off the
engagement.
Rotation of External Auditors (under
SRC Rule 68, as amended)
Time-on Period
The independent auditors or the signing partner of the regulated entities
shall be rotated after every five (5) years of engagement.

Cooling-off Period
A 2-year cooling off period shall be observed in the re-engagement of the
same signing partner or individual auditor.
Answer the Drill Exercises
Question 1
Which of the following sentences best describe morality and ethics?
a. Morality and ethics have opposite meanings at the two extremes along the spectrum of
philosophies.
b. Morality applies to human behaviour and the society, while ethics applies to
professional accountants only.
c. Morality is required by the law, while ethics is enforced by professional institutes in
their codes.
d. Morality is generally perceived in a broader sense than ethics and is reflected in human
behaviour and life code.
Question 2
What is the purpose of studying ethics?
a. Become a law enforcement agent.
b. Act as an expert witness in court on the Philippine Financial Reporting Standards.
c. Deal with all dilemmas in the accountancy profession.
d. Decide on ethical issues.
Question 3
Which of the following items is a correct statement in the area of ethical philosophies?
a. Action-based ethics defines good or bad action in terms of its effects on the greatest
number of people.
b. Action-based ethics deals with the right and wrong of the consequences of an action.
c. Result-based ethics defines good or right action in terms of its intrinsic value.
d. Result-based ethics deals with the consequences of a particular action forming the basis
for any valid moral judgement.
Question 4
Miss Li is a CPA and is an employee in a firm of Certified Public Accountants. Miss Li has
been offered a non-executive directorship position (on a part-time basis) by an audit client
of her firm. What should Miss Li do under the Code of Ethics?
a. Miss Li should accept the directorship offer, but she must consult with her manager
and/or partner to ensure appropriate safeguards are in place to reduce the threats to
compliance with the Code of Ethics to an acceptable level.
b. Miss Li should accept the directorship offer and should ask her firm not to engage her
serving that particular audit client.
c. Miss Li should decline the directorship offer because the threats to compliance with the
Code of Ethics would be so significant making it not possible for any safeguard to
reduce them to an acceptable level.
d. Miss Li should decline the directorship offer because her firm would not allow Miss Li
to take up any part-time employment.
Question 5
Taking the case of Miss Li in the previous question, what kinds of threats, potentially
threatening the fundamental principles of the Code of Ethics, are created?
a. Advocacy and familiarity
b. Advocacy and intimidation
c. Self-interest and intimidation
d. Self-interest and self-review
Question 5
Professional Behaviour, as a fundamental principle in the Code of Ethics, requires CPAs:
a. to be straightforward and honest in all professional and business relationships.
b. to comply with relevant laws and regulations and avoid any action that discredits the
profession.
c. to prepare financial statements in accordance with the Philippine Standards on
Auditing.
d. to prepare financial statements in accordance with the Philippine Standards on
Assurance Engagements.
Question 6
Independence of mind refers to a state of mind:
a. separating an individual from the rest of the society.
b. permitting the expression of a conclusion without being affected by influences that
compromise professional judgment.
c. allowing the release of a feeling without compromising professional ethics.
d. integrating an individual with the rest of the society.
Question 7
William is a sole proprietor of PQR-CPA, a firm of Certified Public Accountants, in charge
of the statutory auditor of Big Limited. Which of the following action or behaviour is NOT a
possible threat against the compliance of the fundamental principles of ethics?
a. William becomes a minority shareholder of Big Limited.
b. William lends a moderate sum to a director of Big Limited.
c. William gets married with the finance manager of Big Limited.
d. William gets married with the administrative officer of Big Limited.
Question 8
Which of the following items can help to determine whether an action is ethical?
a. Ethical philosophies
b. Forensic accountancy
c. Profitability
d. Liquidity