01 Introduction to Accountancy Profession & Preface to PFRS

Question 1

What is wrong with ASC’s definition of accounting?

Answer 1

Accounting is a service activity - Definition is too clerical

Question 2

What is wrong with AICPA’s definition of accounting?

Answer 2

Accounting is the art of recording, classifying and summarizing… - Definition implies accounting is subject to interpretation (any process to meet the objective)

Question 3

Which accounting definition stood the test of time and who provided that definition?

Answer 3

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information -American Accounting Association

Question 4

What are the characteristics of accounting?

Answer 4

User-based
Quantitative or financial in nature
Subject to interpretation

Question 5

What are accountable and non-accountable events?

Answer 5

Accountable events - affect the accounting equation
Non-Accountable events - do not affect the accounting equation

Question 6

What is the analytical component of the accounting process?

Answer 6

Identifying - analyze whether transaction should be recognized

Question 7

Do you recognize non-accountable events?

Answer 7

No, but disclosed only if relevant

Question 8

What are the types of accountable events?

Answer 8

External - external part/entity/transaction involved
Internal - no external factor/entity involved

Question 9

What are the types of external events? Give examples.

Answer 9

Exchange - reciprocal transfer (e.g. sale and purchase of inventories, payment of liabilities)
Non-reciprocal Transfer - unilateral transfer (e.g. donation/gifts, theft, fines/penalties)
Other events that do not involve Transfer (e.g. changes in FV, obsolescence, vandalism)

Question 10

What are examples of internal events?

Answer 10

Production - conversion of RM to FG
Casualty - decrease in resources resulting from sudden, unexpected or unusual event

Question 11

What is the technical component of the accounting process?

Answer 11

Measuring - need technicalities/measurement basis to assign amounts to items

Question 12

What is the formal component of the accounting process?

Answer 12

Communicating - preparing and distributing reports to potential users formally following a specific format

Question 13

Under what process is classifying and summarizing?

Answer 13

Communicating - classifying (posting) and summarizing (trial balance and FS)

Question 14

What is the end product of accounting?

Answer 14

Financial Statements

Question 15

What is the law that regulates the practice of accounting in the Philippines?

Answer 15

RA 9298: The Philippine Accountancy Act of 2004

Question 16

Which body is authorized by law to promulgate the rules and regulations of the law regulating accountancy?

Answer 16

Professional Regulatory Board of Accountancy (PR BOA)

Question 17

What are the five rules of the law regulating accountancy?

Answer 17

1. Title, Declaration of Policy, Objective, Scope of Practice
2. PR BOA
3. Examination, Registration, Licensure
4. Practice of Accountancy
5. Penal and Final Provisions

Question 18

What is the composition of PRBOA?

Answer 18

1 Chairman
6 members

Question 19

Who appoints PRBOA?

Answer 19

President

Question 20

What is the process of the appointment of PRBOA?

Answer 20

APO (PICPA) submits 5 nominees per position to PRC
PRC submits 3 out of 5 nominees per position to the President
The President appoints

Question 21

What is the term of PR BOA? What are rules on renewability?

Answer 21

3 years, renewable
2 successive complete terms require a lapse of 1 year
Maximum of 12 years

Question 22

Who appoints PR BOA Vice Chairman? What is their term?

Answer 22

PR BOA among themselves, 1 term

Question 23

What are the qualifications of PR BOA?

Answer 23

1. natural-born and resident of the Philippines
2. duly registered CPA with at least 10 years of work experience
3. good moral character, never convicted for crimes involving moral turpitude
4. no pecuniary interest in any academic institution or review centers at the time of appointment
5. not director or officer of PICPA at time of appointment

Question 24

What should PR BOA members do if their active professional job is involved in a case?

Answer 24

Leave the company

Question 25

What are the powers and functions of PR BOA?

Answer 25

1. prescribe and adopt rules and regulations of RA 9298 2. supervise registration, licensure, practice of accountancy in the Philippines 3. administer oath 4. issue, suspend, revoke, reinstate COR for practice of accountancy 5. adopt official seal 6. prescribe and adopt a Code of Ethics 7. monitor conditions affecting accountancy and adopt measures 8. conduct oversight into quality of audits of financial statements 9. investigate violations of RA 9298 10. issue cease or desist to entities violating RA 9298 11. punish for contempt of the board 12. prepare, adopt, issue or amend syllabi of subjects for examination 13. comply with CHED 14. other powers to achieve objectives of RA 9298

Question 26

Who has the power to suspend PR BOA members and what at are grounds for suspension or removal?

Answer 26

The President can suspend. > neglect of duty or incompetence > violation or tolerance of RA 9298 violations > final conviction of crimes involving moral turpitude > manipulation or rigging of CPALE and results

Question 27

What are the 4 sectors of the accountancy profession? Give descriptions.

Answer 27

Public Accountancy - accounting and auditing services to one or more clients on a fee basis Commerce and Industry - private accounting Academe - teaching CPALE subjects in educational institutions Government - employed in a government agency or GOCC where civil service as a CPA is a pre-requisite

Question 28

What are the usual services offered by a CPA?

Answer 28

* auditing - attest function * taxation - tax planning and tax compliance (does not include representation in tax investigations) * management advisory services - consulting

Question 29

What are the limitations of public accountancy?

Answer 29

No corporations allowed - accountants cannot have limited liability Certificate of accreditation is required for accountants who want to put up their own firm > need 3 years of meaningful experience > requires 120 CPD units

Question 30

Highest accounting officer in any business entity

Answer 30

Controller

Question 31

What are the requirements for the dean or department head of educational institutions offering accounting degrees?

Answer 31

duly registered CPA

Question 32

What does APO stand for?

Answer 32

Accredited Professional Organization

Question 33

Which organization is the APO for CPAs?

Answer 33

PICPA (Philippine Institute of CPAs)

Question 34

What are the requirements to be an APO?

Answer 34

1. established for the benefit/welfare of CPAs and the accountancy profession 2. membership is open to all CPAs without discrimination 3. include CPAs in all sectors 4. creditable plan to enlist in active membership within 3 years at least majority of CPAs 5. adequate chapters/regions in major areas of the Philippines 6. judicious and prudent in management of its financial resources 7. full-time career Executive Director 8. duly registered as a non-stock corporation/association by the SEC 9. paid prescribed accreditation fee

Question 35

What are the sectoral organizations of CPA?

Answer 35

ACPAPP - public practice ACPACI - commerce and industry NACPAE - national ... education GACPA - government

Question 36

How many national directors should there be?

Answer 36

15 (unless there is a valid reason to have additional representation) distributed based on ratio of latest available number of members in good standing per area

Question 37

How can you be a director of a region?

Answer 37

Member in good standing Member of that region for at least 2 years

Question 38

How often is the Certificate of Accreditation for APO renewed?

Answer 38

every 3 years