Game-changing initiative in the accounting profession

When I was the chairman of the Professional regulatory Board of Accountancy from 2014 to 2018, one gamechanging initiative that I put in place was the issuance of BOA resolution 03-2016 (on compilation services).

For the first time beginning 2016, business establishments with gross sales or revenues exceeding P10 million for a particular accounting year were mandated to submit Certificates of Compilation Services for the preparation of Financial Statements and notes thereto as prepared by duly accredited Certified Public Accountants. Integral to this initiative was the requirement for the preparers or compilers of financial statements to be accredited with the BOA. The same resolution provided also that Certified Public Accountants preparing the financial statements shall be accredited by the BOA after these CPAS have completed their Continuing Professional Development requirements.

As inferred in the Resolution, this practice will enhance the quality of financial statements and minimize the risks attendant to the preparation of such statements. Furthermore, this certification and performance of compilation services by a competent CPA is a global best practice that is appropriate for the Philippine setting.

A series of implementing guidelines were issued, including BOA Resolution 68-2016 that mandated the external auditors to monitor compliance by covered audit clients with the requirement to submit the Compilation Certificate and to report to BOA any omission or non-compliance therewith; BOA Resolution 115-016 that provided for the extension of the deadline in the filing of the application for accreditation and the covered period for the financial statements, as well as the review of the P10 million gross sale/revenue threshold; BOA Resolution 163-2017 that deferred the implementation of the notification requirement for external auditors and BOA Resolution 1852017 that clarified the guidelines for the effective implementation of the Compilation Certificate requirement.

The path towards this important regulatory reform had its share of bumps and potholes. When pushing for this, one lesson that I experienced and learned was that changes, especially radical ones, would result in resistance and difficulties in the implementation. In the case of the compilation services measure, despite the communication to and collaboration efforts with the stakeholders (that included among several entities such as the Philippine Chamber of Commerce and Industry, the Philippine Institute of CPAS, and the various accounting professional sectoral organizations, the accounting and auditing standards boards, etc) there were still a number of parties that opposed the undertaking, for dubious reasons. These include the Department of Finance (with the Secretary of Finance himself, and one of his Undersecretary intervening for the “oppositors”). In March 2017, DOF Secretary Carlos Dominguez had the gall to cross inter-department autonomy and jurisdiction (since the BOA is reporting to the Department of Labor and Employment) when he called and demanded that the Professional Regulatory Commission Chairman order me and the BOA to withdraw the BOA Resolution 03-2016.

To be continued

Joel L. Tan-torres is the Dean of the University of the Philippines Virata School of Business. Previously, he was the Commissioner of the Bureau of Internal Revenue, the chairman of the Professional Regulatory Board of Accountancy and partner of Reyes Tacandong & Co. and the Sycip Gorres and Velayo & Co. He is a Certified Public Accountant who garnered No. 1 in the CPA Board Examination of May 1979.

This column accepts articles for publication from the business and academic community. Articles not exceeding 600 words can be e-mailed to jltantorres@up.edu.ph.