The Official Receipt (OR) for sale tele-tax-novela now shifts to the episode of the investigation to be conducted by the Board of Accountancy (BOA) and a Hearing Officer designated by the Professional Regulations Commission (PRC). The Bureau of Internal Revenue (BIR) previously filed an administrative case against the Certified Public Accountant (CPA) for violating the Philippines Accountancy Act of 2004 and the various rules and regulations.
In the BIR complaint, the BIR sought to have the BoA revoke the professional license of the erring CPA. The CPA was charged with being grossly negligent in conducting his external audit of the financial reports and records of the Mastermind who defrauded the government of billions of pesos of tax revenues. This crime was perpetrated by the Mastermind who printed fake or ghost ORs and sold these to opportunistic Buyers who illegally used these to pad their business deductions and value-added tax credits. The CPA’s participation in this OR for sale crime was his issuance of a clean unqualified opinion on the fairness of the financial statements of the Buyers of these fake ORs.
The BoA now has to deliberate on the merits of the case and the submissions of the CPA respondent and his lawyer, and the complainant BIR. The BoA, in the conduct of its hearings, will have to assess the likely contention of the lawyer of the CPA that his client has dutifully complied with all the accounting and auditing standards in his external audit engagement and issuing the unqualified opinion on the fairness of the Buyers’ financial statements. The lawyers will argue that the CPA auditor is not responsible for perusing each of the many voluminous documents and ORs of the Buyers to detect if there are fake ORs.The CPA will argue that detecting fraud arising from ghost ORs is beyond the scope of his audit engagement.
The BoA will have to assess the complaint of the BIR, by requiring documents and processes, that were not included in the submission of the BIR. I have not yet read the BIR complaints, but I am quite certain that this contains general information on the alleged violations of the CPAs with details limited to documents and representations that are readily available. The BIR may not even present any witnesses to bolster its case.
It is in the best interest of BoA and the image of the accountancy profession for it to pro-actively exhaust all remedies and actions to ensure that there is a thorough and judicious investigation of this case. The BoA can invoke the Modes of Discovery provision of Section 6 of the PRC Resolution 2017-1033(A) during its conduct of the investigation. This will allow the submission or securing of previously undisclosed documents that will help the BoA assess the extent of the respondent CPA’s professional conduct, or the material lack of this, in this OR for sale episode.
My article next week will dwell on this.
To be continued.
Joel L. Tan-Torres was the former 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. He is now back to his tax practice with his firm JL2T Consulting. He can be contacted at email@example.com