Game-changing initiative in the accounting profession

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part one

When I was Chair of the Professional Accounting Regulatory Board from 2014-2018, a groundbreaking initiative I initiated was the release of BOA Resolution 03-2016 (on Compilation Services).

For the first time from 2016, business establishments with gross sales or revenues exceeding 10 million pesos for a particular accounting year were mandated to submit certificates of compilation services for the preparation of financial statements and notes thereto. related, prepared by duly accredited chartered accountants. The requirement for preparers or compilers of financial statements to be accredited with the BOA was an integral part of this initiative. The same resolution also provided that the CPAs preparing the financial statements would be accredited by the BOA after those CPAs had completed their continuing professional development requirements.

As the resolution indicates, this practice will improve the quality of the financial statements and minimize the risks associated with the preparation of these statements. Moreover, this certification and provision of compilation services by a competent CPA is a global best practice adapted to the Philippine context.

A series of implementation guidelines were issued, including BOA Resolution 68-2016 which directed external auditors to monitor covered audit clients’ compliance with the requirement to submit the Compilation Certificate and report to the BOA any omission or non-compliance; BOA Resolution 115-016 which provided for the extension of the deadline for filing the application for accreditation and the period covered for the financial statements, as well as the revision of the sales/gross income threshold of 10 million pesos; BOA Resolution 163-2017 which deferred the implementation of the notification requirement for external auditors and BOA Resolution 185-2017 which clarified the guidelines for the effective implementation of the compilation certificate requirement.

The road to this important regulatory reform has had its share of bumps and potholes. In pushing for this, a lesson I experienced and learned was that changes, especially drastic changes, would lead to resistance and difficulties in implementation. In the case of the compilation services measure, despite efforts to communicate and collaborate with stakeholders (which included several entities such as the Philippine Chamber of Commerce and Industry, the Philippine CPA Institute and various professional accountancy industry organisations, the Accounting and Auditing Standards Board, etc.), there were still a number of parties who opposed the engagement, for dubious reasons. These include the Ministry of Finance (with the Secretary of Finance himself and one of his under-secretaries intervening for the “opponents”). In March 2017, DOF Secretary Carlos Dominguez had the nerve to cross interdepartmental autonomy and jurisdiction (since the BOA falls under the Department of Labor and Employment) when he called and demanded that the President of the Professional Regulation Commission directs me and BOA to withdraw BOA Resolution 03-2016.

To be continued

Joel L. Tan-Torres is Dean of the Virata School of Business at the University of the Philippines. Previously, he was Commissioner of the Bureau of Internal Revenue, Chairman of the Professional Regulatory Board of Accountancy, and Partner of Reyes Tacandong & Co. and SyCip Gorres and Velayo & Co. He is a Certified Public Accountant who earned #1 at the May 1979 CPA board review.

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