IT is the first day of June and the submission of attachments to 2021 annual income tax returns (AITRs), most specially audited financial statements for that year, has finally been accomplished. Special thanks to the BIR (Bureau of Internal Revenue) for allowing tentative AITRs to be filed by April 18, 2022, which may be amended on or before May 16, 2022 without the imposition of interest, surcharge and penalties, and submission of relevant attachments by May 31, 2022. It has again been a longer tax season than usual and the BIR initiative was very welcome. I congratulate all CPAs in public practice for another feather in our hats.
We all take some rest after every tax season but the cycle continues. As early as now, we must prepare and plan for the 2022 tax season since as things go back to normal, the possibility is high that the BIR will extend no more relief come April 15, 2023 when it comes to filing AITRs.
On another note, as we issue engagement letters for 2022 to our clientele, the examination of costs to arrive at reasonable professional fees is always nerve-wracking. Staff costs increase every year, for example, especially since the number of CPAs in the Philippines has substantially fallen since no board examinations were conducted at the height of the pandemic. Add to this the low licensure exam passing rate and the strengthening of our quality assurance system as the Board of Accountancy is now preparing to impose its mandate on all accredited firms and practitioners. Increased digitalization and automation costs are also factors. Balancing fees against costs is always challenging.
The licensure exam for CPAs was held last May 22 to 24, and I am also reminded of proposed revisions to the "Philippine Accountancy Act of 2004" (RA 9298). It may be high time that professional CPA organizations consider establishing a standard minimum fee schedule, especially for CPAs in public practice. This is similar to the standard minimum fees that lawyers follow as established by their organization's local chapters.
The following are points to consider:
Too many laws and regulations. Regulatory agencies involved in the issuance of accounting standards continuously amend and adopt new practices that affect financial reporting standards. We especially monitor the websites of the Securities and Exchange Commission, Bureau of Internal Revenue, Philippine Economic Zone Authority, Bangko Sentral ng Pilipinas, Insurance Commission and other government regulators.
Continuing professional development (CPD). We are required to complete 120 CPD units every three years to renew accreditation with the Board of Accountancy (BoA) and this is true for every partner of the firm. A separate requirement is needed for external auditors.
The cost of risk. As auditing procedures involve examination on a test basis, there is always the possibility that misstatements in financial statements are not identified. Parties and regulators could include external auditors in litigations, fines and penalties.
Quality assurance review system. This is a cost center, not just compliance with a BoA requirement, and is also necessary to keep the practice at par with the industry.
"Notarial CPAs." I always hear this description when audit reports are signed by CPAs without any audit procedures having been conducted. Private entities that need the service of CPAs will be discouraged from engaging "notarial practitioners" as the cost of auditing services between scrupulous and legitimate practitioners could be at the same level.
In establishing standard minimum fees for CPAs in public practice, we may also need to look closely into the 2015 Philippine Competition Act (PCA). The PCA, through its salient provisions, seeks to penalize all forms of anti-competitive agreements with the objective of protecting consumer welfare and advancing economic development. Based on personal research, the Supreme Court has yet to decide on a case involving the PCA.
Floyd C. Paguio is the chairman and CEO of Paguio, Dumayas and Associates, CPAs-PDAC (PrimeGlobal Philippines) and a member of the national board of the Acpapp. The views and opinions expressed in this article are the author's and do not necessarily reflect those of these institutions.