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About Us

WHAT IS QUALITY ASSURANCE REVIEW (QAR)?

Quality Assurance Review is a comprehensive appraisal or review conducted by the Board of Accountancy, or its duly authorized representative, of the quality of audit of financial statements (FS) by CPA public practitioners. The evaluation process focuses on:

  • A review of the quality control (QC) measures the CPA has instituted in his practice, and
  • An ascertainment on compliance with prescribed professional, ethical and technical standards of public practice.

A quality control system consists of a structured plan for maintaining quality control over an accounting and auditing practice. This implies that the practitioner, whether small, medium or large, has established and is following a disciplined and systematic intellectual approach to producing good quality work. The QAR shall determine whether the quality control system is in place and is operating effectively.

BASIS FOR QAR REQUIREMENT

The conduct of a Quality Assurance Review derives from both regulatory/legal compliance requirements related to supervisory and oversight functions as well as from the need too uphold excellence of standards of the accounting profession.

Legal


R.A. 9298, Section 9. The Board of Accountancy (BOA) is mandated by law to supervise the accounting profession and provide oversight on the quality of audits. Among the powers and functions of BOA under the Revised Accountancy Law is "to conduct an oversight into to the quality of audits of financial statements through a review of the quality control measures instituted by auditors in order to ensure compliance with the accounting and auditing standards and practices" (Sec. 9, R.A. 9298).

Implementing Rules and Regulations of R.A. 9298. The Implementing Rules and Regulations (IRR) of the R.A. 9298 states that the BOA shall require as a condition or any renewal thereof for individual CPAs, firms or partnerships of CPAs to undergo quality review in such a manner that the BOA may specify, provided however that any such requirement shall include reasonable provisions for compliance by a registrant showing that he/she has undergone satisfactory quality review performed for other purposes which is substantially equivalent to quality review and shall be made applicable to all individual CPAs, firms or partnerships of CPAs.

The law also requires the BOA to create a Quality Review Committee (QRC) to "conduct an oversight into the quality of financial statements through a review of the quality control measures instituted by CPAs in public practitioners." (IRR, R.A. 9298). The functions of the QRV are to:

  • Conduct quality review on applicants for registration to practice public accountancy and render a report which shall be attached to the application for registration; and
  • Recommend to the BOA the revocation of the Certificate of Registration and the professional identification card on an individual CPA including any of his/her staff members, firms including sole proprietors, and any of his/her staff members thereof who has not observed the quality control measures and who has not complied with standards of quality prescribed for the practice of public accountancy.
In the event that the QRC cannot accomplish the aforesaid functions for any reason whatsoever, the law provides that the BOA or its duly authorized representatives may conduct the quality review. For this purpose, the BOA with the approval of the Professional Regulation Commission, organized the Quality Assurance Review Department to assist the Board in conducting the quality assurance review.

PRC Modernization Act (R.A. 8981). In addition to R.A. 9298, the Section 9 of the PRC Modernization Act allows the BOA as a professional regulatory board to monitor the conditions affecting the practice of the profession and, when necessary, to adopt such measures for the maintenance of high professional, ethical and technical standards, and to conduct ocular inspection in the professional establishments.

Professional Regulatory Board of Accountancy Resolution Nos. 88, Series of 2009 and 23, Series of 2010. These resolutions cover the Rules and Regulation for the Conduct by the Professional Regulatory Board of Accountancy of Oversight into the quality of audits of financial statements. Resolution No. 88, Series of 2009, was initially issued but was amended by Resolution No. 23, Series of 2010. The latter resolution was made effective on April 7, 2010 and considered as part of the rules and regulations for the practice of accountancy in the Philippines.

Professional


Quality Control and Auditing Standards. Auditing standards and practices require among others compliance with the Philippine Standard of Auditing (PSA) No. 2020, Quality Control for an Audit of Financial Statements, as well as with the Philippine Standard on Quality Control (PSQC) No. 1, Quality Control for Firms that perform Audits and Review of Financial Statements, and other Assurance and Related Services Engagement.

IFAC Statement of Membership Obligations (SMO) No. 1 on Quality Assurance Review. On the international level, the Philippine Institute of Certified Public Accountants (PICPA), the duly Accredited Professional Organization (APO) of Certified Public Accountants in the Philippines is a member body of the IFAC and is bound by Statement of Membership Obligations (SMO) 1, paragraph 6 on Quality Assurance which states that "Where government, regulators or other appointed authorities perform any of the functions covered in this Statement, member bodies should be use their best endeavors to encourage those responsible for those functions to follow this SMO in the implementing them, and assist them in that implementation where appropriate."

BENEFITS

An oversight system is a major step in strengthening public trust and confidence in public accountancy and enhances transparency in financial reporting. Thus, a quality assurance review yields a number of benefits for the profession, CPA Firms, Individual CPA Public Practitioner, PICPA and Regulatory bodies.

Profession

  • Raises the bar of quality and excellence in the accounting profession
  • Promotes a culture of quality, best practices and enhanced quality practice
  • Strengthens discipline within the practice of public accountancy
  • Enhances public trust and confidence and reliance on the work of auditors
  • Promotes self assessment within CPA Firm and providing remedial actions in cases of correcting deficiencies
  • Ensures compliance with International Standards (ISAs, IASS/IFRSS, International Code of Ethics, ISQC)

CPA Firms

  • Practices good governance (Tone at the Top)
  • Promotes culture of quality
  • Complies with standards and Quality Control policies
  • Encourages continuing effort to improve practice
  • Adheres to quality standards
  • Fosters a culture of Continuing Professional Development
  • Leads to acceptance and retention of client who values and recognizes quality and professionalism
  • Reduces risks of audit failures and possibility of penalty and sanctions; enhances firm's reputation
  • Promotes cost reduction

Individual CPA Public Practitioner

  • Practices good governance
  • Promotes culture of quality
  • Helps identify needs for professional development
  • Strengthens self confidence
  • Enhances knowledge on ISAs, IASs/IFRSs, and Professional Code of Ethics and laws, rules and regulations
  • Embraces new initiatives requiring a different mindset and behavior

PICPA

  • Complies with IFAC SMO No. 1 - Quality Assurance
  • Enhances its role as the Accredited Professional Organization
  • Provides feedback mechanism for Continuing Professional Development requirements
  • Strengthens self confidence
  • Promotes the culture of quality

Regulatory Bodies (BOA, SEC, BIR, BSP, IC, etc.)

  • Provides added assurance of auditor's compliance with legal requirements and rules and regulations
  • Complements the regulatory inspection functions
  • Provides feedback mechanism and identifies areas for improvement and corrective actions

It cannot be overemphasized that excellent audit quality ensures high client satisfaction levels and a continuing relationship, leading to sustained revenue streams from professional fees.

Conversely, sub-standard or poor audit leads to client dissatisfaction and inevitable loss of clientele and professional fees.

Moreover, the quality of audit of financial statements is also relevant to interested third parties who make economic decisions based on audited financial statements.

QUALITY ASSURANCE REVIEW ORGANIZATION

As envisioned, the formal structure of the review unit is laid out in the following table of organization. It also presents the relationship of the Quality Assurance Review Department with the supervising Board of Accountancy and with the consultative Council for Accreditation and Quality Control.

PARTIES IN THE IMPLEMENTATION

The parties involved in the implementation are vested with the following responsibilities:

Board of Accountancy 

  • Promulgates Rules and Regulations to carry out effectively the provisions of Sec. 9 (h) of the said Act relative to the "conduct of oversight into the quality of audits of financial statements";
  • Coordinates implementation of QARP, if necessary with the Council for Accreditation and Quality Control of Practicing CPAs;
  • Conducts an oversight into the quality of audits of financial statements through the review of the quality control measures instituted by auditors in order to ensure compliance with the accountancy and auditing standards and practices:
  • Set policies to organize and supervise the operation of the QARD.

Council for Accreditation and Quality Control of Practicing CPAs

  • The Board of Accountancy (BOA) shall coordinate with and may seek assistance in the proper implementation of the Quality Assurance Review Program from the Council for Accreditation and Quality Control of Practicing CPAs created under the Memorandum of Agreement dated 12 August 2009, executed by the BOA, Securities and Exchange Commission, the Bangko Sentral ng Pilipinas and the Insurance Commission;
  • Paragraph 9 of the said Agreement further provides that "The SEC, BOA, BSP and IC shall form a “Council of Accreditation and Quality Control of Practicing CPAs.” The Council shall discuss policy issues of quality control standards of accredited external auditors. It shall likewise oversee the implementation of the MOA and possible improvement and/or enhancement of the synchronized accreditation/selection procedures and requirements. The Council shall on a periodic basis report to the Financial Sector Forum on the foregoing matters.”

PICPA

  • Nominates a representative to the QAR Executive Committee;
  • Enters into contract of service for personnel;
  • Assist in personnel training
  • Provides infrastructure/facilities such as office space, etc.

QAR Executive Committee (Resolution No. 23, Section 5)

  • Composed of the Chairman and Vice Chairman of the BOA, the President of the APO. The Chairman is from the appointees of the BOA. Alternates, if necessary may be designated from their respective Boards;
  • The term of office of the Chairman and members is co- terminus with their respective term in the BOA or the APO unless replaced earlier by the Board or the APO but in no case is more than three (3) years. The Chairman and members of the Executive Committee should not be in active practice of public accountancy during his term in the Executive Committee;
  • Sets policies that will ensure effective implementation of the quality assurance review program;
  • Ensures independence and quality of audit inspections of the QARD;
  • Appoints the Chief Inspector and Chief of Administration of QARD and other personnel;
  • Recommends to the BOA a rolling QAR plan for three (3) years;
  • Implements the approved QAR plan through the QARD;
  • Obtains independent technical advice when needed and appropriate;
  • Reviews and approves the reports of the Chief Inspector;
  • Submits regularly to the BOA a list of CPA practitioners reviewed including findings and actions. Policies adopted and implementing issues settled for the oversight review of the Board. Report to the BOA any form of interference by the APO on its policy making or on QARD's operation;
  • Submits to the BOA the QAR annual report for the general public.

Quality Assurance Review Department (QARD)

  • Tasked to implement the operation of the QARP;
  • Under the administrative supervision of the QAR Executive Committee but functionally independent in the conduct of its operation;
  • Qualifications and responsibilities of QARD Personnel are discussed in the following sections.

CPA Public Practitioners (Individual CPA, Firm or Partnership of CPAs)

  • Mandated (a) to enroll in the QAR Program as a prerequisite to accreditation or renewal for accreditation and (b) be subject to QAR Inspection.

QARD PERSONNEL

The QARD's personnel shall be composed of a Head (concurrently the Chief Inspector), the Chief Inspector, Assistant Inspectors, the Chief of Administration, Administrative Assistants, Staff Inspectors and such other employees that may be necessary to carry out effectively the functions of the QARD. They shall be appointed by the Executive Committee.  

Chief Inspector
    Qualifications     Responsibilities
  • Must have reached the level of senior manager or partner of an accounting firm that has among its clients publicly listed companies;
  • Must be independent from the practitioners or firms that will be covered by the QAR Program;
  • Must have at least ten (10) years of experience in the practice of public accountancy;
  • Must be of good moral character and has a current license as a CPA;
  • Must not have been found guilty of violating any professional, ethical and regulatory auditing standards;
  • Must have good oral and written communication skills, being especially adept at report writing.
  • Exercises administrative supervision and control over the QARD and over its personnel as its head;
  • Assists the Executive Committee in determining Quality Assurance policies; Prepares the QAR Review Plan for three years for submission to the Executive Committee for consideration;
  • Selects the CPA Practitioners to be reviewed for the year, in accordance with the three-year plan;
  • Approves the specific inspection plan for each practitioner selected for review, which must set forth the nature, extent and timing of such work;
  • Provides for technical training of inspection personnel;
  • Reviews and approves the individual inspection reports;
  • Has the final authority to approve all inspection reports;
  • Has the final authority to approve all inspection reports;
  • Recommends to the Executive Committee the appointment and termination from service of subordinate QARD personnel as well as appropriate disciplinary action to be taken;
  • Performs such duties and functions as the Executive Committee may assign.
Assistant Inspectors
The Executive Committee shall appoint Assistant Inspectors upon the recommendation of the Chief Inspector, who have audit experience to assist him/her carry out the inspection work plan approved by the Board. They shall carry out their inspection work in accordance with the prescribed methodology. They will report directly to the Chief Inspector.


Chief Administration
    Qualifications     Responsibilities
  • Must have appropriate educational qualification, which may not necessarily be on accountancy;
  • Must be independent from the practitioners or firms that will be covered by the QAR Program;
  • Must have at least five (5) years work experience in supervisory capacity;
  • Must be of good moral character;
  • Must have good oral and written communication skills, being especially adept at report writing;
  • Must not have been found guilty of violating any professional, ethical and regulatory auditing standards.
  • Serves as the administrative officer of the QARD;
  • Supervises the registration of CPA Practitioners in their respective categories;
  • Supervises the collection of registration fees; Supervises the preparation of the regular financial reports of the QARD;
  • Supervises the administrative aspect of training of QARD personnel;
  • Supervises communications to all practitioners;
  • Performs such functions as may from to time be assigned by the Chief Inspector.
Administrative Assistant
The Executive Committee shall appoint Administrative Assistants upon the recommendation of the Chief of Administration to help him/her carry out the administrative tasks of QARD. These assistants shall report directly to the Chief of Administration.


Staff Inspectors
    Qualifications     Responsibilities
  • Must have at least five years experience in the statutory or regulatory audit of companies, or teaching financial accounting and practical auditing in a CHED-recognized educational institution, or in the corporate financial reporting or internal auditing function;
  • Must not have been terminated from employment as an auditor due to incompetence or below average rating;
  • Must be of good moral character and has a current license as a CPA;
  • Must not have been found guilty of violating any professional, ethical and regulatory auditing standards; and
  • Must have good oral and written communication skills, being especially adept at report writing;
  • Must have completed the required training for Quality Assurance Reviewer.
  • The APO shall enter into contract of service with inspectors who shall be responsible for the field work of QAR assignment. They shall be screened and selected by the Executive Committee upon the recommendation of the Chief Inspector.