CODE OF ETHICS
FOR CERTIFIED PUBLIC ACCOUNTANTS
Certified Public Accountants
must adhere to a code of professional ethics which
provides for the maintenance of high standards of competence and integrity.
They must have a clear concept of and commitment to their obligations to their
profession to their clients or employers, to their colleagues in the profession,
and to the public.
Section 1. Definition of Terms
Certified Public Accountant (CPA) A person who holds a valid certificate
issued by the Board of Accountancy, or a firm or partnership of two or more
of such persons.
Client The person or entity which retains a CPA or an accounting firm
engaged in the practice of public accounting for the performance of professional
Enterprise Any person or entity, whether organized for profit or which
CPA wherein professional services.
Firm A proprietorship or professional partnership engaged in the practice
of public accounting, including individual partners thereof.
Financial statements Statements and footnotes related thereto that purport
to show financial position which relate to a period and statements which use
cash or other incomplete basis of accounting. Balance sheets, statements of
income, statements of retained earnings, statements of changes in financial
position, and statements of changes in owners equity are financial statements.
Section 2. Applicability of Code
Part I of the Code applies to all CPAs whether engaged in public accounting
or employed in private business and industry, in the government, or in educational
Part II of the Code applies to CPAs in particular fields of accounting practice
as indicated therein.
A. RULES APPLICABLE TO ALL CPAs
These rules shall apply to every CPA whether engaged in public accountancy or
employed in private enterprise, a government agency, or an educational institution.
Section 3. Conduct in General
A certified Public Accountant (CPA) shall at all times conduct himself in a
manner that upholds the honor, dignity and prestige of the accountancy profession.
Section 4. Obligation to Client, Employer and the Public
A CPA shall be guided by high ideals of personal honor in all his professional
work, practicing in the spirit of fidelity to his client or employer and of
loyalty to the public, While he owes fidelity to his client or employer, his
obligation to the public is paramount.
Section 5. Competence
A CPA shall not undertake any engagement or accept any employment which he
cannot reasonably expect to complete or discharge with professional competence.
He shall continually strive to improve his knowledge, skills and techniques.
Section 6. Integrity and Objectivity
A CPA shall maintain a high degree of integrity and objectivity in all his
actuations. He must be guided by a strict sense of honesty, fairness and uprightness
in the exercise of his profession.
Section 7. Accounting Principles
A CPA shall see to it that financial statements, not otherwise restricted for
special or internal purposes, of his client or employer are presented in conformity
with generally accepted accounting principles, he shall indicate the nature
of the departure, the approximate effects thereof, and the reasons why compliance
with the principles would result in a misleading statement, if such is a fact.
Section 8. Confidential Information
A CPA shall not disclose any confidential information obtained in the course
of a professional engagement or employment, except with the consent of his client
or employer or in defense of himself if he is sued by his client or employer
or when the security of the State so requires.
Section 9. Acts Discreditable to the Profession
A CPA shall not commit any act discreditable to the profession.
Section 10. Advertising
A CPA shall not advertise, or cause or allow to be advertised, his professional
attainments or services, except in stating qualifications in applications for
employment. However, publication of authorship of books, technical reports and
studies, lectures or papers delivered in conferences and seminars and similar
activities which are beneficial to the profession as a whole are not considered
Section 11. Incompatible Occupations
A CPA shall not concurrently engage in any business or occupation which impairs
his objectivity in rendering professional services or which is inconsistent
with his practice or employment.
Section 12. Dummy for Unqualified Person
A CPA shall not be a party to any stratagem which would permit any person not
qualified nor registered with the Board of Accountancy to practice accountancy,
nor shall he act as a dummy of such person.
Section 13. Social Responsibility
As a responsible citizen, a CPA shall accept his social responsibilities and
engage in activities devoted to community betterment and national well-being.
B. RULES APPLICABLE TO CPAs IN PUBLIC ACCOUNTING
Section 14. Independence
A CPA in public accounting or a firm of which he is a partner shall not express
an opinion on financial statements of an enterprise unless he or his firm are
independent with respect to such enterprise. Independence will be considered
to be impaired if:
- During the period of his professional engagement, or at the time of expressing
his opinion, he:
- Had or was committed to acquire any direct or material indirect financial
interest in the enterprise; or
- Had any joint, closely-held business investment with the enterprise or any
officer, director or principal stockholder thereof which was material in relation
to his or his firms net worth; or
- Had any loan to or from the enterprise or any officer, director or principal
stockholder thereof. This latter prescription does not apply to the following
loans from a financial institution when made under normal lending procedures,
terms and requirements:
- Loans obtained by him or a member of his firm which are not material in relation
to the net worth of such borrower.
- Other secured loans, except loans guaranteed by a members firm which
are otherwise unsecured.
- During the period covered by the financial statements and during the period
of the professional engagement or at the time of expressing an opinion, he:
- Was connected with the enterprise as a promoter, underwriter or voting trustee,
a director or officer or in any capacity equivalent to that of a member of management
or of an employee; or
- Was a trustee of any trust or executor or administrator of any estate if
such trust or estate had a direct or material indirect financial interest in
the enterprise; or was a trustee for any pension or profit-sharing trust of
The above examples are not intended to be all-inclusive.
Independence may be impaired by the financial interest and business relationships
of the CPAs spouse, dependent children or any relative living in a common
household with or supported by the CPA. The financial interest or business relationships
of such family, dependents or relatives in a CPAs client are ascribed
to the CPA; in such circumstances the independence of the CPA or his firm would
Section 15. Auditing Standards
A CPA in public accounting shall not permit his name to be associated with
financial statements in such a manner as to imply that he is acting as an independent
public accountant unless he has complied with the generally accepted auditing
standards promulgated by the Board of Accountancy.
Section 16. Forecasts
A CPA in public accounting shall not permit his name to be used in conjunction
with any forecast of future transactions unless:
- He makes full disclosures of the source of information used, the major assumptions
made, the character of the work he has performed, and degree of responsibility
he is taking;
- He states clearly that he does not vouch for the attainment of the forecast.
Section 17. Contingent Fees
A CPA in public accounting shall not offer or render Professional service under
an arrangement whereby no fee will be charged unless a specified finding or
result is attained, or where the fee is otherwise contingent upon the findings
or results of such services. However, a CPAs fees may vary depending on
the complexity of the service rendered.
Fees are not regarded as being contingent if fixed by courts or other public
authorities as in tax matters, of if determined based on the results of judicial
proceedings or the findings of governmental agencies.
Section 18. Encroachment
A CPA in public accounting shall not attempt to provide a person or entity
with professional service which is currently provided by another CPA except
- He may respond to a request for a proposal to render services and may furnish
service to those who request it. However, if an audit client of a CPA requests
an other CPA to provide professional advice on accounting or auditing matters
in connection with an expression of opinion on financial statements, the latter
must first consult with the former to ascertain that the latter is aware of
all the available relevant facts.
- Where a CPA is required to express an opinion on consolidated financial statements
which include a subsidiary, branch or other component audited by another CPA,
he may insist on auditing any such component which in his judgment is necessary
to warrant the expression of his opinion.
A CPA who receives an engagement for services by referral from another CPA
shall not accept the clients request to extend his service beyond the
specific engagement without first notifying the referring CPA, nor shall he
seek to obtain any additional engagement from the client.
Section 19. Offers of Employment
A CPA in public accounting shall not make a direct or indirect offer of employment
to an employee of another CPA on his own behalf or that of his client without
first informing such CPA. This rule shall not apply if the employee on his own
initiative or in response to a public advertisement applied for employment.
Section 20. Solicitation and Advertising
A CPA in public accounting shall not seek to obtain clients by solicitation.
Advertising is a form of solicitation. Publication of an announcement is permitted
only for opening of a new office, change in partners, change in office location
or telephone number(s), or reorganization of firm or practice; provided it contains
basic information essential to the announcement and is of reasonable size.
Announcement of any of the above information may also be made to clients and
to individuals other than clients with whom professional contacts are maintained.
Listing of firm name in lobby directory of an office building and on entrance
door solely for the purpose of enabling interested parties to locate an office
is permissible but must be in good taste and modest in size.
The stationer of firm should be in keeping with the dignity of the profession
and should not mention any specialty. It may include the firm name, address,
telephone number, tax account number, names of partners, and membership in professional
Listing in a telephone, business or other directory may appear in the alphabetic
section and/or in the business (yellow page) section under the CPA classification.
It shall not be in bold type or in box or other display form.
Firm publication or brochures may be distributed to clients and to individuals
other than clients with whom professional contacts are maintained.
Section 21. Commission
A CPA in public accounting shall not pay or offer to pay a commission to obtain
a client, nor shall he accept or agree to a commission for a referral to a client
of products or services of others. This rule shall not prohibit payments for
the purchase of an accounting practice of retirement payments to individuals
formerly engaged in the practice of public accounting or payments to their heirs
Section 22. Form of Practice and Name
A CPA may practice public accounting, whether as an owner or employee, only
in the form of proprietorship or partnership.
A CPA shall not practice under a firm name which includes any fictitious name,
indicates specialization or is misleading as to the type of organization (proprietorship
or partnership). However, the name of one or more past partners may be included
in the firm name of a successor partnership.
A partner surviving the death or withdrawal of all other partner may continue
to practice under the partnership name for two years after becoming a sole practitioner.
Section 23. Acts Discreditable to the Profession
A CPA shall be held guilty of an act discreditable to the profession, if in
expressing an opinion or representation in financial statements which he has
- He fails to disclose a material fact known to him which is not disclosed
in the financial statements but disclosure of which is necessary to make the
financial statements not misleading; or
- He fails to report any material misstatement to him to appear in the financial
- He is grossly negligent in the conduct of his examination or in making his
report thereon; or
- He fails to acquire sufficient information to warrant expression of an opinion,
or his exceptions are sufficiently material to negate the expression of an opinion;
- He fails to direct attention to any material departure from generally accepted
accounting principles or to disclose any material omission of generally accepted
auditing procedures applicable in the circumstances.
Whenever a CPA believes that the financial statements are false or misleading
in any significant respect, he should either require adjustment of the accounts
or adequate disclosure of the facts, as the case may be; otherwise he should
not permit his name to be associated with the statements in any way.
C. RULES APPLICABLE TO CPAs IN
Section 24. Responsibility to apprise employer of profession and ethical standards
A CPA in private industry shall see to it that his employer is made aware of
his responsibilities as a member of the accountancy profession in terms of keeping
up to its technical and ethical standards.
Section 25. Conflict of Interest
A CPA shall not concurrently engage in business or activity which impairs his
professional competence or which would give rise to a conflict of interest between
him and his employer.
Section 26. Act Discreditable
A CPA commits an act discreditable to the profession and shall be held liable
of such act if in the performance of his work:
- He is grossly negligent in performing his job such that material misstatement
of financial information results;
- He willfully and without justification works against the legitimate interest
of his employer;
- He commits, or abets with his employer the commission of, any dishonest act
of whatever nature;
- He fails to observe or to direct attention to non-observance of generally
accepted accounting principles in situations calling for such observance;
- He fails to present or to disclose material, financial facts in connection
with the computation of the of the tax liabilities of his employer, but presentation
or disclosure of which is necessary to make the computation not fraudulent;
- He fails to present fairly financial statements required by any government
regulation or agency; or to make adequate disclosures if the financial statements
do not present fairly financial condition or results of operations;
- He fails to present fairly financial data or information on reports prepared
by him or under supervision; or to make adequate disclosure so that the financial
report will not be misleading; and
- He refuses to cooperate, without valid reason, with the external auditor
in the examination of the accounts of his employer for the specific purpose
of the engagement.
The acts cited in the foregoing are not intended to be all inclusive.
D. RULES APPLICABLE TO CPAs IN THE
Section 27. Public Office is a Public Trust
A CPA in the government service shall endeavor to perform his official duties
thoroughly, faithfully and efficiently, ever conscious that a public office
is a public trust.
Section 28. Service to the Public
A CPA in the government service shall serve the public courteously, justly
and impartially regardless of kindship, friendship, social standing, or religious
or political beliefs.
Section 29. Civil Service Rules
A CPA in the government service shall, at all times, comply with Civil Service
Rules, as well as with regulations prescribed by the duly constituted authorities.
E. RULES APPLICABLE TO CPAs in EDUCATIONAL
Section 30. Contribution to Attainment of Institutional Objective
A CPA in education shall aim to contribute to the attainment of the academic
objectives and policies of the institution.
Section 31. Responsibility for Professional Competence
A CPA in education has the responsibility of achieving professional competence
as a teacher or administrator.
Section 32. Concern for Student Welfare
A CPA in education shall have at heart the welfare of the students, stimulating
in them a deep interest in their studies, exposing them to meaningful experiences
in life and inculcating in their young minds the ideals of honor, justice and
Section 33. Effectiveness of Teaching Profession
A CPA in education shall contribute to the effectiveness, enrichment and dignity
of the teaching profession.
Section 34. Leadership in Research and Professional Matters
A CPA in education shall accept a reasonable degree of responsibility for leadership
in research in professional matters, and in co-curricular and extra-curricular
affairs in the institutions.
Section 35. Effectivity
These rules shall take effect immediately.
Promulgated by the Board of Accountancy on March 15, 1978.