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News and Events » Bureaucratic accounting requirement

By: Raul J. Palabrica
The cost of doing business in the country has gone one notch higher, no thanks to the Professional Regulatory Board of Accountancy (PRBA), the regulatory board of the Professional Regulation Commission (PRC) that is tasked with the regulation and licensing of the accounting profession.
Effective today, pursuant to PRBA Resolution No. 03, Series of 2016, all certified public accountants (CPA) who assist in the preparation of the financial statements (FS) that various entities are required to file with the Bureau of Internal Revenue (BIR) and Securities and Exchange Commission (SEC) are required to submit a Certificate of Compilation Services (CCS) together with the FS.
The CCS is a sworn statement of the CPA concerned that he has “performed the compilation services related to the preparation and presentation of financial information of an entity in accordance with an applicable financial reporting framework and reports as required by accounting and auditing standards.”
In addition, he certifies that he “was not assisted by or did not avail of the services of the (name of external auditor) who/which is the external auditor who rendered the audit opinion for the said Financial Statements and Notes to the Financial Statements.”
The CCS requirement applies to all organizations that have annual gross sales or revenues that exceed P10 million. It is in addition to the Statement of Management Responsibility (SMR) and Independent Auditor’s Report that form part of the FS.
The CCS can be signed only after the CPA has applied with, and granted accreditation, by the PRC Standards and Inspection Division.
The requirement covers all FS ending Dec. 31, 2015. If the accreditation has not been issued before the deadline for the filing of the FS, the CCS can be submitted on condition the CPA indicates in the Accreditation Number line the words “CPA accreditation filed on _____ still in process.”
However, for the FS ending June 30, 2016 and succeeding years, the accreditation will be mandatory.
To ensure compliance with this order, PRBA has coordinated with the BIR and SEC to monitor the submission of the CCS in the FS filed with their offices.
It’s not yet clear yet whether sanctions will be imposed on filings without the CCS or have a fraudulent CCS. Will the FS be considered defective or noncompliant with the filing requirements and therefore subject to a fine?
For PRBA, however, the penalty for violation is a fine of not less than P50,000 or imprisonment for a period not exceeding two years, or both.
According to PRBA, the requirement aims “to ensure that professional accountant (sic) in business shall comply with their responsibility of preparing the financial statement and notes of their employing organizations.”
Stripped of verbiage, the resolution rests on the assumption that by compelling the covered businesses to engage the services only of PRBA-accredited CPAs in the preparation of the FS, the external auditors will be able to perform their audit functions efficiently and independently.
This new requirement is, hands down, a bonanza to the accounting profession. Since non-CPAs will be barred from participating in the preparation of the FS, the CPAs will have this field all to themselves.
On the pretext of improving the system of accountancy in the country, PRBA has made life more challenging to thousands of businesses whose annual sales or revenues are in the P10 million and above bracket.
These are the businesses that employ the most Filipinos and, with their productivity and taxes, contribute substantially to the country’s economy.
With the possibility of their FS being rejected for filing by the BIR and SEC, the affected businesses will be obliged to allocate additional funds to pay for the services of CPAs in the preparation of their FS in spite of the fact that these filings can be competently prepared by non-CPAs or CPAs who do not have to go through another accreditation process with PRBA.
Take note, this expense is on top of the fees and charges that have to be paid to the external auditor to complete the submission of the FS.
It does not take rocket science to understand that the costs that will be incurred to comply with PRBA’s employment program for CPAs will eventually be passed on to the consumers.
So what pushed the PRBA to come up with this scheme that will make doing business here less inviting?
Other than motherhood statements about upgrading audit standards, no research data or findings have been cited to justify making PRBA-accredited CPAs the repository of expertise and integrity in the preparation of the FS.
Have the FS filed in recent years by businesses with gross sales or revenue of over P10 million been so infected with inaccuracies, misrepresentations and manifestations of gross ignorance of accounting standards that PRBA has to require that they be prepared only by CPAs who pass muster with them?
What value will the CCS requirement add to the reliability of an FS if it already bears an SMR that is signed by the filer’s top executives?
Unless the signatories to the SMR are scoundrels, it is doubtful if they will assume responsibility for the accuracy of the facts and figures in the FS without reviewing them and making sure they conform to accounting standards. By their signature, they put their personal and business’ integrity on the line.
The CCS requirement is more than an accounting issue that should be left to PARB to deal with.
It is a matter that should concern the Departments of Trade and Industry and Finance because it adversely affects their campaign to improve and develop the business climate in the country.
SOURCE : http://business.inquirer.net/206824/bureaucratic-accounting-requirement

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