Accountancy Practice Regulation in PH

Policy, objectives, and coverage

The State recognizes the importance of accountants in nation building and development and shall develop and nurture competent, virtuous, productive, well-rounded professional accountants through inviolable, honest, effective, credible licensure examinations and regulatory measures (Section 2).
The law provides for and governs: (a) standardization and regulation of accounting education; (b) examination for registration of certified public accountants; and (c) supervision, control, and regulation of the practice of accountancy in the Philippines (Section 3).
The “practice of accountancy” includes Public Accountancy, Commerce and Industry, Education/Academe, and Government practice (Section 4).
The prohibition on practice covers practicing accountancy in the country and using the CPA titles, abbreviations, and related identifying devices (Section 26).

Practice of accountancy defined

Public Accountancy exists when a person, whether individually, as a partner, or as staff in an accounting or auditing firm, holds out as skilled in accounting and as qualified to render professional services as a certified public accountant (Section 4).
Public Accountancy includes offering or rendering services (such as audit or verification of financial transactions and accounting records) on a fee basis, and preparing, signing, or certifying reports (including audits, balance sheets, and other related accounting schedules/exhibits/statements/reports) for publication, credit purposes, filing with courts or government agencies, or other purposes (Section 4).
Public Accountancy includes designing, installing, and revising accounting systems, and preparing income tax returns when related to accounting procedures (Section 4).
Public Accountancy includes representing clients before government agencies on tax and other matters related to accounting, or rendering professional assistance in accounting procedures and in recording and presenting financial facts or data (Section 4).
Practice in Commerce and Industry exists when a person involved in decision making requires professional knowledge in accounting, or when the employment/position requires that the holder be a certified public accountant (Section 4).
Practice in Education/Academe exists when teaching accounting, auditing, management advisory services, finance business law, taxation, and other technically related subjects in an educational institution (Section 4).
Members of the Integrated Bar of the Philippines may teach business law and taxation subjects (Section 4).
Practice in the Government exists when a person holds (or is appointed to) a position in an accounting professional group in government or in a government-owned or controlled corporation, including proprietary functions, where decision making requires professional knowledge in accounting or where civil service eligibility as a CPA is a prerequisite (Section 4).

Professional Regulatory Board of Accountancy

The Professional Regulatory Board of Accountancy (the Board) is under the supervision and administrative control of the Professional Regulation Commission (the Commission) (Section 5).
The Board is composed of a chairman and six (6) members appointed by the President from ranked recommendees; each position uses a list of three (3) recommendees ranked by the Commission and a list of five (5) nominees submitted by the accredited national professional organization of certified public accountants (Section 5).
The Board elects a vice-chairman from among its members for a term of one (1) year; the chairman presides, and in a vacancy the vice-chairman assumes duties until a chairman is appointed (Section 5).
A member must be a natural-born citizen and a resident of the Philippines, a duly registered CPA with at least 10 years work experience in any scope of practice of accountancy, of good moral character with no conviction of crimes involving moral turpitude, and must not have pecuniary interest in schools/colleges/universities/institutions conferring required academic degrees or offering review classes, nor be faculty/administration of such institutions at appointment (Section 6).
The chairman and members hold office for three (3) years; vacancies are filled only for the unexpired portion; no person who served two (2) successive complete terms may be reappointed until one (1) year has lapsed; filling an unexpired term is not a complete term (Section 7).
Board compensation and allowances are comparable to those received by the chairman and members of existing regulatory boards under the Commission as provided in the General Appropriations Act (Section 8).

Board powers, supervision, and discipline

The Board prescribes and adopts rules and regulations necessary to carry out the Act (Section 9).
The Board supervises registration and licensure practice in the Philippines (Section 9).
The Board administers oaths connected with the Act’s administration (Section 9).
The Board issues, suspends, revokes, or reinstates the Certificate of Registration for practice of accountancy (Section 9).
The Board adopts an official seal (Section 9).
The Board prescribes and/or adopts a Code of Ethics for the practice of accountancy (Section 9).
The Board monitors conditions affecting the practice of accountancy and adopts measures, including promulgation of accounting and auditing standards, rules and regulations, and best practices to enhance and maintain high professional, ethical, accounting, and auditing standards, and domestic standards must include international accounting and auditing standards and generally accepted best practices (Section 9).
The Board conducts oversight into the quality of audits of financial statements by reviewing auditors’ quality control measures to ensure compliance with accounting and auditing standards and practices (Section 9).
The Board investigates violations of the Act and its implementing rules and regulations and can issue summons, and subpoenas (subpoena ad testificandum and subpoena duces tecum) to compel attendance and document production in investigations/hearings (Section 9).
Upon Commission approval, the Board may delegate the fact-finding aspect of investigations to the accredited national professional organization of certified public accountants, subject to implementing rules and regulations (Section 9).
The Board and/or the Commission may adopt findings of fact as they deem fit (Section 9).
The Board may, motu proprio, investigate to determine whether any person violated any provision of the law, any accounting or auditing standard, or any rules duly promulgated by the Board as part of practice rules (Section 9).
The Board may issue a cease or desist order against any person, association, partnership, or corporation engaged in violation of the Act, accounting or auditing standards, or rules duly promulgated by the Board (Section 9).
The Board may punish for contempt (direct and indirect) in accordance with the Rules of Court (Section 9).
The Board prepares, adopts, issues, or amends examination syllabi in consultation with the academe, determines and prepares licensure exam questions strictly within the syllabi, and administers, corrects, and releases results (Section 9).
The Board ensures, in coordination with CHED or other authorized government offices, compliance of higher education instruction and offering of accountancy with policies, standards, and requirements on curriculum, faculty, library, and facilities (Section 9).
Board policies, resolutions, rules, and regulations are subject to review and approval of the Commission; Board decisions/resolutions/orders in administrative cases are subject to review only if appealed (Section 9).
The Board is administered under Commission supervision; records of the Board, including applications for examination and administrative/investigative cases, are kept by the Commission; the Commission designates the secretary of the Board and provides secretariat and support services (Section 10).
The President, upon Commission recommendation and after giving the concerned member an opportunity to defend himself in an administrative investigation conducted by the Commission, may suspend or remove Board members for: neglect of duty or incompetence; violation or tolerance of violation of the Act/implementing rules/CPA Code of Ethics/technical and professional standards; final judgment of crimes involving moral turpitude; and manipulation or rigging of licensure exam results, disclosure of confidential exam questions prior to the exam, or tampering of grades (Section 11).
The Board must submit an annual report at the close of each calendar year to the President through the Commission detailing proceedings and accomplishments and making recommendations to upgrade and improve conditions affecting the practice of accountancy (Section 12).

CPA examinations, qualifications, and results

All applicants for registration to practice accountancy must undergo a licensure examination given by the Board in places and dates designated by the Commission, subject to Commission requirements under Republic Act No. 8981 (Section 13).
Applicants must establish, to the Board’s satisfaction: Filipino citizenship; good moral character; a Bachelor of Science in Accountancy degree from a CHED-recognized and/or accredited institution; and no conviction of any criminal offense involving moral turpitude (Section 14).
The CPA licensure exam covers: Theory of Accounts, Business Law and Taxation, Management Services, Auditing Theory, Auditing Problems, Practical Accounting Problems I, and Practical Accounting Problems II (Section 15).
The Board may, with Commission approval, revise or exclude subjects and their syllabi and add new ones as need arises (Section 15).
To pass, a candidate must obtain a general average of seventy-five percent (75%), with no subject grades lower than sixty-five percent (65%) (Section 16).
A candidate with a general average of seventy-five percent (75%) and above in at least a majority of subjects receives conditional credit for passed subjects (Section 16).
A conditional candidate must take an examination in the remaining subjects within two (2) years from the preceding examination (Section 16).
If the candidate fails to obtain at least a general average of seventy-five percent (75%) and at least sixty-five percent (65%) in each of the reexamined subjects, the candidate is considered failed in the entire examination (Section 16).

Reports, re-takes, and licensing

The Board submits each candidate’s ratings to the Commission within ten (10) calendar days after the examination unless extended for just cause (Section 17).
After results release, the Commission sends each examinee their rating by mailing to the address provided during the examination using the mailing envelope submitted (Section 17).
A candidate who fails in two (2) complete CPA Board Examinations is disqualified from taking another set of examinations unless the candidate submits evidence to the Board that he/she enrolled in and completed at least twenty-four (24) units of subjects given in the licensure examination (Section 18).
For this Act, the examination where the candidate was conditioned together with the removal examination for the subject in which the candidate failed counts as one complete examination (Section 18).
All successful candidates must take an oath of profession before the Board or an authorized government official authorized by the Commission or a person authorized by law to administer oaths, after presenting proof of qualification, prior to entering practice (Section 19).

Registration certificates and identification cards

A Certificate of Registration is issued to examinees who pass the licensure examination subject to payment of fees prescribed by the Commission (Section 20).
The Certificate of Registration bears the signature of the chairperson of the Commission and the chairman and members of the Board, stamped with the official seals of the Commission and the Board, indicating the named person is entitled to practice with appurtenant privileges, and remains effective until withdrawn, suspended, or revoked under the Act (Section 20).
A Professional Identification Card bearing the registration number, date of issuance, expiry date, and signed by the chairperson of the Commission is issued to every registrant and is renewable every three (3) years (Section 20).
The Board prepares and updates a roster showing the names and place of business of all registered CPAs and makes copies available to any party as deemed necessary (Section 21).

Required indications and refusal conditions

A CPA must indicate the certificate of registration number and date of issuance, duration of validity, and the Professional Tax Receipt number on documents he/she signs, uses, or issues in connection with practice (Section 22).
The Board shall not register or issue a certificate of registration and a professional identification card to: a successful examinee convicted by a court of competent jurisdiction of a criminal offense involving moral turpitude; a successful examinee guilty of immoral and dishonorable conduct; or a person of unsound mind (Section 23).
When the Board refuses to issue a certificate for any reason, it must give the applicant a written statement of the reasons, and the statement must be incorporated into the Board record (Section 23).

Suspension, revocation, and reinstatement

The Board may, upon due notice and hearing, suspend or revoke a practitioner’s certificate of registration and professional identification card, suspend the practitioner from practice, or cancel a special permit for causes under Section 23 or for any unprofessional or unethical conduct, malpractice, or violation of the Act, its implementing rules and regulations, the CPA Code of Ethics, and the technical and professional standards of practice (Section 24).
After two (2) years from revocation, the Board may reinstate the validity of a revoked certificate upon application for reasons deemed proper and sufficient, and may exempt the applicant from taking another examination (Section 25).
A new certificate of registration may be issued to replace a lost, destroyed, or mutilated certificate/license subject to Board and Commission rules, upon payment of required fees (Section 25).

Prohibited practice and vested CPA status

No person may practice accountancy in the country, use the title “Certified Public Accountant”, use the abbreviated title “CPA”, or display or use any title, sign, card, advertisement, or other device indicating he/she practices or offers to practice accountancy, or indicates he/she is a CPA, unless the person has received from the Board a certificate of registration/professional license and is issued a professional identification card or a valid temporary/special permit duly issued by the Board and the Commission (Section 26).
All CPAs registered at the time the law takes effect are automatically registered under its provisions, subject to future requirements, and their existing certificates in good standing have the same force and effect as if issued after passage of the Act (Section 27).

Limits on public accountancy practice

Single practitioners and partnerships for the practice of public accountancy must be registered certified public accountants in the Philippines (Section 28).
From the effectivity of the Act, a certificate of accreditation for CPAs in public practice is issued only upon proof, under Board rules approved by the Commission, that the registrant has acquired a minimum of three (3) years meaningful experience in any public practice area including taxation (Section 28).
The three (3) years requirement does not apply to those already granted a certificate of accreditation prior to the effectivity of the Act (Section 28).
The Securities and Exchange Commission shall not register any corporation organized for the practice of public accountancy (Section 28).

Working-paper confidentiality rule

Working papers, schedules, and memoranda made by a CPA and staff in the course of an examination are confidential and privileged and remain the property of the CPA, including documents prepared and submitted by the client, except reports submitted by the CPA to a client (Section 29).
These privileged documents remain with the CPA in the absence of a written agreement between CPA and client to the contrary, unless required to be produced through a subpoena issued by any court, tribunal, or government regulatory or administrative body (Section 29).

Integrated organization and accreditation renewal

All registered CPAs whose names appear in the roster must be united and integrated through membership in one and only registered and accredited national professional organization of registered and licensed CPAs (Section 30).
The integrated national organization must be registered with the Securities and Exchange Commission as a nonprofit corporation and recognized by the Board, subject to approval by the Commission (Section 30).
Members receive benefits and privileges appurtenant upon payment of required fees and dues (Section 30).
Membership in the integrated organization is not a bar to membership in any other association of CPAs (Section 30).
CPAs, firms, and partnerships engaged in public accountancy (including partners and staff members) must register with the Commission and the Board, and registration must be renewed every three (3) years (Section 31).
With Commission approval, the Board promulgates rules for implementing registration requirements, including fees and penalties for violation (Section 31).

Continuing professional education and seal use

All CPAs must comply with continuing professional education (CPE) requirements, rules, and regulations promulgated by the Board subject to Commission approval, in coordination with the accredited national professional organization or duly accredited educational institutions (Section 32).
A CPE Council is created to implement the CPE program (Section 32).
CPAs must obtain and use a seal designed by the Board bearing the registrant’s name, registration number, and title (Section 33).
Auditor’s reports must be stamped with the seal indicating the CPA’s current Professional Tax Receipt (PTR) number and the date/place of payment when filed with government authorities or when used professionally (Section 33).

Foreign reciprocity and temporary/special permits

Subjects or citizens of foreign countries may practice accountancy in the Philippines under existing laws and international treaty obligations, including mutual recognition agreements entered into by the Philippine government (Section 34).
A non-Filipino may not be allowed to practice unless he/she proves under the Rules of Court that the country he/she is a citizen of admits Filipinos to practice the same profession without restriction (Section 34).
Special/temporary permits may be issued by the Board subject to Commission approval and payment of fees prescribed and charged by the Commission to:
- a foreign CPA called for consultation or for a specific purpose essential for development, limited only to that particular work, and only when there is no Filipino CPA qualified for such consultation or specific purposes (Section 35);
- a foreign CPA engaged as professor, lecturer, or critic in fields essential to accounting education in the Philippines, with engagement confined to teaching only (Section 35); and
- a foreign CPA who is an internationally recognized expert or has specialization in any branch of accountancy and whose service is essential for advancement of accounting in the Philippines (Section 35).

Penal provision and enforcement framework

Any person who violates any provision of the Act or its implementing rules and regulations promulgated by the Board subject to Commission approval is punished, upon conviction, by a fine of not less than PHP 50,000 or imprisonment not exceeding two (2) years, or both (Section 36).
The Board and Commission are primary enforcers; law enforcement agencies and officers of national, provincial, city, or municipal government (or political subdivisions) must, upon call or request, render assistance in enforcing the Act and prosecute violators (Section 39).
The Secretary of Justice or designated representative acts as legal adviser to the Commission and Board and renders legal assistance as necessary (Section 39).
Any person may bring cases of illegal practice or violations before the Commission, the Board, or the law officers described for action (Section 39).
The Board assists the Commission in filing appropriate charges through the concerned prosecution office in accordance with law and the Rules of Court (Section 39).
The chairperson of the Professional Regulation Commission must include the implementation of the Act in Commission programs, with funding included in the annual General Appropriations Act (Section 40).

Implementing rules, interpretation, and transitory

The Board, with Commission approval and in coordination with the accredited national professional organization of CPAs, must adopt and promulgate implementing rules and regulations within 90 days from the Act’s effectivity (Section 37).
The implementing rules take effect 15 days after publication in the Official Gazette or in any major daily newspaper of general circulation (Section 37).
Nothing in the Act prevents the practice of any other legally recognized profession (Section 38).
The incumbent chairman and members continue serving in their positions under terms appointed by Presidential Decree No. 692 without new appointments (Section 41).
Graduates with a Bachelor’s Degree major in Accounting may take the CPA Licensure Examination within two (2) years from the Act’s effectivity under Board rules approved by the Commission (Section 41).

Separability, repeals, and prior law

If any clause, provision, paragraph, or part of the Act is declared unconstitutional or invalid, that judgment does not affect other parts and applies only to the clause, provision, paragraph, or part directly involved (Section 42).
Presidential Decree No. 692 is repealed, and laws, orders, rules, regulations, resolutions, or parts inconsistent with the Act are repealed or modified accordingly (Section 43).