Professional Accountants

7/25/2019 Professional Accountants

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ROLE OF PROFESSIONAL

ACCOUNTANTS


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Public Accounting as a profession

Professions are generally considered as an elite

occupational classification

5 Characteristics of a Profession (Attributes of aProfession by Ernest Greenwood)

1. Systematic Theory for accounting, theunderlying theory of the profession is accountingtheory and auditing theory

2. Professional authority basis for CPAs authority is

his expertise in the systematic theory of accountingand auditing

3. Community Sanction admission to the publicaccounting profession is controlled. To become a

CPA, a candidate must satisfy educationalex erience re uirements and


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Pass the CPA Licensure ExamLicensing is controlled by the Professional

Regulation Commission (PRC) through the Board ofAccountancy (BOA)

4. Regulations Code the Code of Ethics waspromulgated to prevent abuse of monopoly ofpowers and privileges of CPAs and to disciplinemembers


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5. Culture-a CPA is a member of a time-honored profession

-The status of the profession and the

responsibilities that come with the status affectsthe CPAs behavior in society.

-Accounting has developed a professional cultureevidenced by factors such as the Code of Ethicsand other informal rules that guidesrelationships among practitioners


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Profession (Code of Ethics)

The Code of Ethics for CPAs in the Phils. statesthat:

A profession has certain characteristics:

1. Mastery of a particular intellectual skill,acquired by education & training

2. Adherence of members to a common codeof values and conduct

3. Acceptance of a duty to society


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Organizations surrounding the PublicAccountancy Profession

A. REGULATORY GOVERNMENT AGENCIESA1. PRC has overall jurisdiction over regulatoryboards, including the Board of Accountancy

(BOA)A2. BOA agency empowered to administer theAccountancy Law. It is the only body that mayissue and revoke CPA certificates and grant

licenses to practice. Its functions are providedfor in the Phil. Accountancy Act of 2004


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A3. Securities and Exchange Commission (SEC) regulates the registration and operations of corporations,

partnership and other forms of associations in the Phils.

- has great influence in setting GAAPs & disclosure

requirements useful to investors/users of FS.- has representatives in the Accounting Standards Council

(ASC), Auditing Standards and Practices Council (ASPC), andin the Quality Review Committee created by PRC-BOA


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A4. Commission on Audit (COA)

audits and determines whether governmentunits handle their funds according to existinglaws and whether their programs are conductedefficiently and economically


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B. PROFESSIONAL ORGANIZATIONS

B1. Phil. Institute of Certified PublicAccountants (PICPA)

accredited national professional organizationof CPAs.

- Serves members in different sectors by

providing technical and social services(seminars, technical sessions, symposiumsand dialogues)


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PICPA (cont.)

-Fellowship and sports activities for members

-Publishes the Accountants Journal which contains

technical and formal papers, bulletins andpronouncements released by the FinancialReporting Standards Council (FRSC) and the

Auditing and Assurance Standards Council (AASC)


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B2. Sectoral Organizations

B2a. Associations of CPAs in Public Practice(ACPAPP)

B2b. Association of CPAs in Education

(ACPAE)

B2c. Association of CPAs in Commerce andIndustry (ACPACI)

B2d. Government Association of CPAs(GACPA)


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C. STANDARD-SETTING BODIES

C1. Financial Reporting Standards Council

(FRSC) assists in the BOA in carrying out itspowers

-Consists of 15 members, with the Chairmanwho had been or is presently a senior

accounting practitioner in any of the scope ofaccounting practice, and has


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14 representatives from the ff:

BOA 1

SEC 1

BSP 1

BIR 1

COA - 1

Major organization composed of preparers and usersof financial statement 1


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(14 representatives cont.)

Accredited National Professional Organization

of CPAs in:Public Practice 2

Commerce and Industry 2

Academe/Education 2Government 2


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C2. Auditing and Assurance Standards Council(AASC)

-Composed of 15 members, with Chairmanwho had been or is presently a senioraccounting practitioner in any of the scope ofaccounting practice, and

-Has 14 representatives from:


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14 representatives from the ff:

BOA 1

SEC 1BSP 1

COA - 1

Association/Organization of CPAs in activepublic practice of Accountancy 1


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(14 representatives cont.)

Accredited National Professional Organization ofCPAs in:

Public Practice 6

Commerce and Industry 1

Academe/Education 1

Government 1


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C3. International Federation of Accountants(IFAC) formally approved in Munich in 1977for the development and enhancement ofthe profession to provide high qualityservices in the public interest. Non-profit,non-political international organization of

accountancy bodies.


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C4. International Accounting Standards Board(IASB)

- Began operations in 2001, when it assumed fromthe IASC the responsibility for settinginternational accounting standards is based inLondon.

- Is committed to developing a single set of highquality, global accounting standards that requiretransparent and comparable information ingeneral purpose FS.


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On Dec. 26, 2004, the BOA approved theadoption in the Phils. of the revised IAS andIFRS effective Jan 1, 2005 and designated them

as Phil. Financial Reporting Standards (PFRS)

C5. International Auditing Practices Committee(IAPC) develops and issues standards to

improve the degree of uniformity of auditingpractices and related services globally.


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SCOPE OF PRACTICE

Art 1. Sec 4. of the Accountancy LawThe practice of accountancy includes, but isnot limited to the ff:

a) Practice of Public Accountancyconstitutes persons,whether individually oras a partner or staff member in anaccounting or auditing firm, offering or

rendering to more than one client on a feebasis or otherwise, services such as:


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SCOPE OF PRACTICE

- - Audit or verification of financial transaction

and accounting records- - Preparation/signing/certification of for clientsof reports of audit, balance sheet and otherfinancial, accounting and related schedules,

exhibits, statements or reports which are to beused for publication or for credit purposes, or tobe filed with a court or government agency, or

to be used for any other purpose


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SCOPE OF PRACTICE

-design, installation and revision of accounting

system-Preparation of income tax returns when relatedto accounting procedures

-Represents clients before government agencieson tax and other matters related to accounting or

-Renders professional assistance in mattersrelating to accounting procedures and the

recording and presentation of financial facts ordata.


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SCOPE OF PRACTICE

B. Practice in Commerce and Industry

-Constitutes persons involved in decision makingrequiring professional knowledge in accounting, orwhen such employment or position requires thatthe holder must be a CPA

C. Practice in Academe/Education

-Constitutes persons in an educational institutionwhich involves teaching of accounting, auditing,

management advisory services, finance, businesslaw, taxation and other technically relatedsubjects. Provided that members of the IntegratedBar of the Phil. may be allowed to teach business

law and taxation subjects.


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SCOPE OF PRACTICE

4. Practice in the Government- Constitutes persons who hold or isappointed to a position in the accountingprofessional group in government or in a

government-owned and controlledcorporation(GOCC), including thoseperforming proprietary functions, where

decision making requires professionalknowledge in accounting, or where a civilservice eligibility as a CPA is a prerequisite.


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REQUIREMENTS TO BE A CPA

Qualifications of Applicants for CPA Licensure

Examination:

1. A Filipino Citizen

2. Of Good moral character

3. A holder of the degree of Bachelor ofScience in Accountancy, conferred by aschool, college, academy or institute duly

recognized and accredited by the CHED orother authorized government offices

4. Has not been convicted of any criminaloffense involving moral turpitude


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Scope of Examination covers the ff: subjects1. Theory of Accounts

2. Business Law and Taxation

3. Management Services4. Auditing Theory

5. Auditing Problems

6. Practical Accounting Problems I7. Practical Accounting Problems II


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- To qualify as having passedthe CPA licensure exam, a

candidate must obtain ageneral average of 75%, withno grade lower than 65% inany given subject.


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REQUIREMENTS TO BE A CPA In the event that a candidate obtains the rating of 75% and

above in at least majority (4) of the subjects, he shall receive aconditional credit for the subjects passed, provided that thecandidate shall take an exam in the remaining subjects within 2years from the preceding exam. Provided further that if acandidate fails to obtain at least a general average of 75% and a

rating of at least 65% in each of the subjects reexamined, heshall be considered as failed in the entire examination

Any candidate who fails in two (2) complete CPA Board Exam,shall be disqualified from taking another set of exams unless he

submits to the BOA evidence that he has enrolled andcompleted at least 24 units in subject given in the licensureexam.

A complete exam shall compose of the conditioned subjectsand the removal exam on the failed subjects.


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COMPETENCIES REQUIRED IN PUBLICACCOUNTING PROFESSION

In a study conducted by the AmericanInstitute of CPAs (AICPA) in year 2000,several competencies were found to berelevant. Competencies include both whatthe individual CPA knows, and what theindividual CPA and audit teams do.


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High opportunity competencies

-Have a high likelihood of being buildingblocks for selling or delivering new assuranceservices

Low opportunity competencies

- Are less likely to be exploited in the

development of future services


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High opportunity competencies

Analytical skills

Business Advisory skills

Business Knowledge

Capacity for Work

Comprehension of Clients Business Processes

Communication Skills

Efficiency


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High opportunity competencies (cont.)

* Intellectual Capability

* Learning and Rejuvenation

* Marketing and Selling

* Model Building

* People Development

* Relationship Management

* Responsiveness and Timeliness


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High opportunity competencies (cont.)

*Technology

*Verification

Low opportunity competencies

Accounting and Auditing Standards

Administrative Capability

Managing Audit Risk


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1. Analytical Skills include the ff

- Research skills (finding and assessing data)

- Analyzing commercial and financial data

- Systems analysis and review

- Using sophisticated analytic models in support of audit judgment

- Using industry-specific data bases in the audit

- Using extra-organizational information in the audit

- Organizational analysis of functions (ex. financing, marketing, production)

and of structures- Seeing anomalies and recognizing their implications

- Knowing what should be there and sensing what is not there


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2. Business Advisory Skills- helping clients think through the implications ofcritical business issues, create innovative ideas, decide and implementthe action steps. Includes the ff skills:

- Applying technical knowledge to provide insightful recommendations toclients regarding the accounting for and the business and economicaspects of contemplated transactions

-Applying the level of synthesis and type of knowledge required to generate

sound solutions to client issues.- Proactively provide recommendations that have an impact on the

clients business across a broad range of issues

- Taking the intellectual risk necessary to present creative business ideasthat help clients achieve their objectives


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3. Business Knowledge broad base of knowledge concerningmacro environmental, economic, and industry issues,business process structures, functions and practices, theimplication of such matters including the inherentopportunities and risks to a clients businesses.

Includes understanding how organizational design andincentive system affect organizational performance andattainment of goals.

Includes knowledge of best practices, business analysis andcontrol practices


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4. Capacity for Work Demonstrates a strong work ethic,responds well to pressure

5. Comprehension of Clients Business Processes Understanding

how business processes affects clients businesses throughoutthe value-creating chain of their industries

Understand how processes link clients people, criticalbusiness activities and goals and how they can be

continuously improved.Understanding how clients run their businesses and create value,

who their customers are and what they want, who theircompetitors are and the key competitive risks they represent,what the clients business strategy is and the information

needed to implement that strategy.


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6. Communication Skills Expresses thoughts clearly and sufficiently, bothoral and in writing

Skillfully tailors communications for different audiences

Listens well and effectively, contributes to discussions

Makes technical points understandable Demonstrates ability tonegotiate effectively

Demonstrates ability to think on his/her won feet

Includes the ff. skills:

-Using collaborative approaches to establish and build support forobjectives

-Conveying ideas and information, leading discussions and harnessing thegroups potential to make decisions and generate solutions

-Explaining procedures or recommendations firmly, clearly, and concisely toinspire clients confidence


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7. Efficiency Demonstrates strong organizational skills, manages time well,leverages staff well, uses technology to improve efficiency.

8.Intellectual Capability

Challenges conventional thinking results in innovations orbreakthroughs in clients business, client service or engagementeconomics and management

Conceptual thinking Identifies the key aspects of complex situationsand understanding the big picture

Diagnostic thinking recognizes patterns in observation of informationand draws appropriate conclusions

Evaluative thinking thoroughly considers alternatives, weighs themand assesses risk


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8.Intellectual Capability Forward thinking Foresees and takes action to deal with

future events, problems and opportunities

Imagination develops creative solutions and new ways ofthinking about situations, problems and opportunities

Information seeking Gathers current information aboutsituations and gets the facts before making decisions.

Systematic thinking has well ordered and logical approach toanalyzing problems, organizing work and planning actions

9 L i d R j i


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9.Learning and Rejuvenation

Creating mechanisms to learn from the environment, clients,competitors and work performed.

Continuously improve services, client relationships, andinternal processes.

Includes self-awareness and development, accurately assessingones capabilities and limitations in order to improve

effectiveness and then taking proactive steps to develop.

10.Marketing and Selling includes:

Having credentials as an expert resource in a relevantindustry/marketplace

Developing proposals

Expanding value-added services to existing clients

Asking open-ended questions to learn about clients businessissues and needs


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10.Marketing and Selling (cont)

Developing a network of contacts and relationships, and usingthese as sources of information, support or business

development Making initial contact and qualifying client interest

Closing sales

11.Model Building - the ability to identify and implement methods

for quantifying enterprise activities, includes the ff: Reviewing reliably the outcomes of measurement projects in

the light of best practice, targeted improvements, presentactivity

Monitoring the currency of measures in terms of practicality,use and reliability

Establishes with clients/colleagues the need for measures toguide organizational or audit processes


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11.Model Building (cont)

Instituting and setting parameters for measurement processes

within the client organization or audit firm Critically reviewing proposed measures in terms of the

processes used in their development, their value to users

Negotiating understanding of defined measurements with

clients or within senior levels of the audit firm Developing methodologies and databases for establishing

performance criteria


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12.People Development - Attracting, developing, motivating, andretaining high quality human resources. Includes:

* Developing performance plans, providing coaching and feedback,

partnering with staff to build their performance

Enhancing the productivity of the team and individuals

capabilities by allocating work quality results

Understanding the feelings, attitudes, concerns and

characteristics of others Using appropriate techniques to interview and select new hires

Projecting a positive role model for subordinates and peers

Creating an environment to sustain highly motivated groups

Conveying knowledge and skill in ways which actively involvethe learner and build capability


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13.Relationships Management the ability to create and maintainobjective relationships founded on trust. Includes:

Understanding clients needs, goals, and strategies, the

industries where they operate and the competitive pressuresthey face, and their markets

Measuring performance for clients to ensure they receive valuefor performance

Leveraging strong relationships through coordination andfrequent contacts with decision makers

Establishing and maintaining credibility with key decisionmakers

Thoroughly understand issues and considers alternatives,assesses risk. Informs clients of issues, conflicts, problems andopposition which might impede progress.


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14.Responsiveness and Timeliness

Available when needed. Willingness to give clients firstpriority. Meets deadlines.

15. Technology Using information technology such as audit software, database

systems, spreadsheets

Applying auditing technologies and proceduresDevelop audit

technologies for reducing audit risk Adapting audit methodologies for evaluating controls in

computer systems

Designing new audit technologies for systems analysis andevaluation

Developing audit technologies for assessing business risk


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16. Verification - the ability to identify and implement methods toattest to compliance with specific standards or criteria.

Disaggregating summarized information into components.

Developing audit objectives for each component

Designing and performing procedures to obtain sufficientevidence relevant to each audit objective

Evaluating the evidence from the performance of auditprocedures to conclude on compliance with criteria.

17. Accounting and Auditing Standards Understanding ofaccounting and auditing literature. Familiarity with currenttechnical developments. Performing thorough and accurate

technical research


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18. Administrative Capability

- Performing administrative responsibilities based on anunderstanding of practice economics, financial management,

staffing and development, and other administrative matters.- Managing the elements of cost, revenue and profit to maximize

the financial return on the engagement

19. Managing Audit Risk

- Understanding and applying risk management knowledge andtechniques in accepting and performing assuranceengagements.

- Differs from understanding client business risks, which isencompassed in business knowledge.

Documents

Professional Accountants