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Non-CPAs as competent professionals in audit engagements

THE period spanning from January to April 15 each year is commonly known as the "audit season" in the Philippines. In anticipation of this busy period, audit firms initiate their hiring and training processes for competent professional staff as early as November and December.

Two critical components of the International Standard on Quality Management, namely Engagement Performance and Resources, emphasize the necessity for audit firms to maintain an ample supply of skilled professional staff capable of delivering high-quality audit services. This brings to light the pivotal question: Do we possess a sufficient number of competent professional staff, with a particular emphasis on competency?

In light of the constrained availability of certified public accountants (CPAs) within the market, addressing this pressing concern becomes paramount.

In global perspective, more than 300,000 accountants and auditors in the United States left their jobs in the past two years — a 17-percent decline in employed accountants and auditors from a 2019 peak, according to The Wall Street Journal in a December 2022 article.

In the last several years, the number of students majoring in accounting has declined significantly.

The latest American Institute of CPAs 2023 Trends report shows some statistics in the 2021-2022 academic year, including a 7.77-percent decrease in accounting bachelor's graduates after steady decline of 1 to 3 percent per year since 2015-2016, a 6.4-percent decrease in accounting master's graduates and a 6-percent decrease in new CPA exam candidates. At many universities, this trend seems to be continuing through 2023 and 2024.

Joel Tan-Torres, the chairman of the Board of Accountancy from 2014-2018, said in his Business Mirror column in December 2022 that the trend in 2019, where two tests were given and three pandemic-era examinations, indicates passing rates reaching the lowest levels for the CPA examination in recent history. For these five examinations, only 6,847 out of 35,918 examinees passed. This concerning trend highlights a significant decline in both the number of new CPAs and the number of individuals pursuing licensure.

Various factors are contributing to this troubling scenario, including the impact of the pandemic, dwindling interest among students in the accountancy profession, the state of accounting education and schools in the Philippines, the decreasing supply of new CPAs and the image of the Philippine CPA brand on the global stage. Additionally, the shortage of accountants is exacerbated by licensed professionals opting to work abroad or for foreign companies remotely.

Over the past century, the Philippines has produced approximately 200,000 CPAs, but this raises questions about how many are still actively practicing in the field. Local auditing firms have reached a critical juncture, necessitating the recruitment of non-CPAs to address the widening talent gap that emerged five years ago.

Considering non-CPAs in the hiring process while maintaining audit quality is essential. Key considerations include:

Relevant educational background: Non-CPA candidates should possess a strong educational foundation in accounting, finance or related fields. Their degrees, certifications or coursework should align with the skills required for audit work.

Professional certifications: While not CPAs, non-CPA candidates may hold other pertinent certifications like CIA (certified internal auditor) or CMA (certified management accountant), demonstrating their dedication to professional growth.

Analytical and critical thinking skills: Assess candidates' ability to analyze complex data, discern trends and think critically. These skills are vital for making informed audit decisions.

Communication skills: Effective communication is paramount in audit engagements.

Evaluate candidates' capacity to convey complex financial information clearly and succinctly to diverse stakeholders.

Adaptability and learning agility: The audit profession is constantly evolving, with changing standards and technologies. Seek candidates who exhibit adaptability and a willingness to learn, keeping abreast of industry developments.

This discussion underscores the dynamic nature of the accounting profession, where CPAs must step up and should possess not only traditional accounting skills but also adaptability and technological proficiency to navigate the rapidly changing business landscape. While the future holds promise, it challenges us to rise to the occasion and meet its demands head-on.


Ken John B. Asadon, CPA, CTT, MBA is the tax partner of Paguio, Dumayas & Associates, CPAs (PrimeGlobal Philippines), an institutional member of the Association of CPAs in Public Practice (Acpapp). The opinion of the writer does not reflect in any way the opinion of these institutions.

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