International and Local Professional Standards Alignment
- The Philippine Institute of Certified Public Accountants (PICPA) must encourage adherence to international quality assurance standards.
- The Board's rules align with global best practices and membership obligations of PICPA in IFAC.
Adoption of Rules and Regulations for Quality Assurance Review (QAR) Program
- The Board adopted rules for implementing the QAR Program to fulfill its statutory mandate.
- The rules became effective 15 days after publication in a major newspaper or Official Gazette.
Definitions and Key Terms
- Accredited Professional Organization (APO): PICPA as the recognized CPA body assisting the Board.
- Audit Inspection Unit (AIU): The auditors conducting the quality reviews.
- CPA Practitioners: Individuals or firms practicing public accountancy.
- Quality Assurance Review (QAR): A review of audit quality and compliance with professional and ethical standards.
Quality Assurance Review Council (QARC) Structure
- Created as an independent body under the administrative supervision of the Board.
- Neither the Board nor QARC delegates statutory functions to each other; however, the Board may adopt QARC's findings.
- Composed of a Chair from the business sector, Vice Chair as Board’s Chair or designated alternate, plus members from key regulatory bodies.
- Members must have no direct or indirect financial interest or close relations with firms subject to review.
- Terms of office are tied to their appointing bodies or fixed three years.
Duties and Responsibilities of QARC
- Promotes high-quality external audits.
- Monitors audits via the Audit Inspection Unit.
- Approves annual QAR plans and reports.
- Recommends disciplinary actions and assists the Board in oversight.
- Publishes annual reports for public information.
Audit Inspection Unit (AIU) Composition and Functions
- Reports to QARC and staffed by a Chief Inspector, Chief of Administration, assistants, and staff auditors.
- AIU personnel enjoy security of tenure and are removable only for just cause.
- Chief Inspector must have significant senior audit experience, good moral character, current CPA license, and communication skills.
- Chief Inspector oversees preparation and approval of inspection plans, reports, and assists QARC in policy matters.
- Chief of Administration manages non-technical operations including registration, fees, financial reports, training, and communications.
- Assistants support technical and administrative tasks under the supervision of the Chief Inspector and Chief of Administration respectively.
- Staff auditors conduct fieldwork, must have substantial audit experience, and must have good employment records.
Scope and Mandatory Enrollment in the QAR Program
- Applies to all CPAs practicing public accountancy, including individuals, firms, or partnerships.
- Enrollment in QAR is mandatory for accreditation or renewal of accreditation as CPA practitioners.
- PICPA is tasked to provide necessary infrastructure for QAR operations and manage fees separately.
- Enrollment through the PICPA QAR Division satisfies mandatory coverage requirements.
Guidelines for QAR Program Accreditation and Registration
- QAR Program conducted by AIU reporting to QARC.
- Registration valid for one year and renewable annually for active practitioners without sanctions.
- Practitioners classified into two categories based on client types and number: Category A (public-interest entities using full IFRS) and Category B (companies using IFRS for SMEs).
- Subcategories specify client volume and affect registration requirements and fees.
- Registration rules restrict crossover between categories without upgrading registration.
- Applicants must provide sworn declarations regarding client classifications.
- Registration fees vary by category and subcategory, reflecting risk, client profile, scope, and frequency of QAR.
- Fees are subject to adjustment; rationale for fees does not limit QAR scope.
Confidentiality and Use of QAR Information
- All QAR information, findings, and reports are confidential.
- Disclosure is limited strictly to enforcement purposes or court orders.
Penalties and Sanctions for Non-Compliance
- Violations subject to fines of at least P50,000, imprisonment up to two years, or both, plus administrative penalties.
- Administrative penalties include warning, admonition, fines, suspension, or cancellation of CPA licenses.
- Specific penalties for failure to comply with registration and corrective measures range from daily fines escalating with repeated offenses, suspension, cancellation, and possible criminal prosecution.
- Penalties consider offenses within a four-year period.
Miscellaneous Provisions
- Separability clause ensures unaffected validity of other provisions if any declared unconstitutional.
- Rules take effect 15 days after publication in the Official Gazette or major newspaper.