WEEK 1.

I.

1.

INTRODUCTION
a. CLASS RULES
b. SEEMING INCOMPATIBILITY OF LAWYERS AND
NUMBERS

Mansibang, Ch. 1, Looking at Accounting Differently

Information is necessary for the purposes of planning, organizing, directing,
controlling, monitoring, and evaluating. Also, for decision-making.
Fig. 1. Management Information Chart
INFORMATION
1. QUALITATIVE INFORMATION
2. QUANTITATIVE INFORMATION
a. Operating Information
b. Managerial Accounting Information
c. Financial Accounting Information
Qualitative Information: visual impressions, conversations, policies,
procedures and stories
Quantitative Information: numbers; i.e. sales, costs, expenses,
investments, debts, market share, growth rates, manpower, number of
inventory line items, number of customers
Accounting: a type of quantitative information, which is usually expressed
in monetary amounts.
Accounting information: revenues, costs & expenses, profits, assets,
liabilities, equities, investments
Quantitative Information
1. Operating Information: needed to manage day-to-day
operations; i.e. employees salaries, level of inventories for sale,
uncollected receivables, cash in bank
2. Financial Accounting Information: main users are the manager
of companies and external parties (i.e. shareholders, bankers,
suppliers, creditors) who want to know [Shareholders] how well the
company is doing, how much dividend they are expected to
receive; [Creditors, Bankers] creditworthiness of the company; and
[suppliers] liquidity of the company to pay its current obligations.
3. Managerial Accounting Information: the operating and
financial accounting data are fed into the managerial accounting
information system of the company, to be used for planning,
budgeting, implementation and control. I.e. financial budgets, cost
control analysis, financial forecasts, capital expenditures.
Perspectives of Accounting

2.

Accountant: deals with the concepts and techniques in collecting,

summarizing and reporting accounting information [to be
interpreted by the user]
Manager: demands accounting information to know the results of
operation and for decision-making.
*Financial accounting information to better manage the company
operations.
- includes analyzing the cause and effect of revenue
changes over time, cost under and overruns, profit level changes,
risk and cost exposures of asset resources, financing [critical to the
operating, investing and financing decisions of the firm].

The Accounting Traps

1. Numbers Myth: fear of mathematics, teaching accounting in
abstract terms.
- Its true that accounting deals with numbers but the process for
generating, classifying and summarizing numbers is both an art
and an application of logic and judgment. The minimum
requirement is for the student to know hot to use logic and
calculate.
2. Technical and Mechanistic: for CPAs [bookkeeping, accounting,
financial analysis], not MBAs [managers, management decision
making, practical business application]
3. Accounting Course Content: voluminous, accounting
terminologies and principles [jargon], contents keeps on changing
because of globalization and corporate ethical and responsibility
concerns; help MBU students understand the accounting process
and financial data essential for managers to identify the
information important to their work
4. Less Debits and Credits: The process of generating and
accumulating financial data is also important; it forms the
foundation for the preparation of accounting reports and
statements The importance of accounting for the manager is in
knowing how much the department is earning money, has it
exceeded target, or has the cost of operations been reduced. To be
more useful, accounting information should be processed and
analyzed to enable the manager to make the appropriate
decisions.
5. Emphasis on Financial Analysis: availability, accuracy,
timeliness and integrity of accounting financial data for critical
analysis, effective communication and rational decision making.
Accounting Course as Deliverable
1. Train for critical thinking: student to be a critical & rational
manager
2. Facilitate learning of principles and assumptions: for
practical reasons; impact and effect of financial info generated
3. Provide a general framework of analysis: framework of
process of generation and accumulation of financial info; what,
why, how fin data are presented; impact of principles, changes,
error on the financial statements

4. Emphasize the critical numbers: metrics of profitability,

liquidity, efficiency/activity, leverage [integrative, not isolated from
each other all part /consequences of the multivariate
characteristics if financial and operations managements
5. Use actual business cases; accounting to be a living, practical
course
6. Apply adult learner methods of delivery: not just lectures for
effectivity
7. Use a strategic [accounting] framework that defines the
course: objective is for the students to understand critical
analysis, communication, strategic decision making, aided by
transparent, accurate , reliable and timely financial data as a
language of business
8. Have lots of fun

Rowell and Bregant, Numeracy and Legal Decision

Making
OBJECTIVE: An empirical study of whether numeracy or peoples ability to
understand and use numbers interacts with decision making
FINDINGS: As to the role of numeracy in legal decision-making
1. The study shows a surprisingly high level of math skill among law
students, especially given the common folk wisdom that lawyers
are bad at math. [Our study provides no support for the widely held
belief that attorneys are bad at math]
2. Although prior research in non-legal contexts has shown that
people with low numeracy are particularly susceptible to cognitive
bias, we detect no significant relationship between law students
math skills and their susceptibility to bias or framing effects.
[Although research in non-legal contexts has shown that lownumerate individuals have an increased susceptibility to framing
effects and cognitive bias, we find no evidence that lowernumerate law students are more susceptible to cognitive bias than
their more highly numerate colleagues, or at least not when they
are acting within their zone of expertise]
3. [Finally and most worryingly] Our findings show that the substance
of legal analysis varies with math skill for at least some subset of
cases. [We do find strong evidence suggesting that substantive
legal decision making can indeed vary with numeracy, at least for
some types of legal question.]

In health and financial decision-making, it is suggested that

decision makers numeracy does not only affect their ability to
perform mathematical calculations: it is also related to the
substance of their decisions. People with high numeracy make
different decisions than people with low numeracy, even when the
decisions are not obviously numerical. Some studies even suggest
that people with lower numeracy are more subject to manipulation
through cognitive biases and heuristics because they are more

likely to change their decisions based on how information is

presented to them.
PART I

Objective numeracy tests used in the decision-making literature:

Schwartz test, Lipkus scale

Subjective measures for evaluating numeracy: Subjective

Numeracy Scale (SNS), math confidence

Although lower numeracy can be associated with certain

demographics (female, less educated, African-American, Hispanic,
elderly, having lower general mental ability), numeracy should not
be conflated with any of these characteristics it is an individual
characteristic on its own, and one which can vary widely within
otherwise similar groups.
PART II

Evaluation of relationship between legal decision-making and

numeracy

158 aw students at the University of Illinois College of Law/152

completed responses questionnaires with a series of simulated
legal problems (an experimental methodology): test (1) numeracy;
(2) legal analysis of several simplified legal problems
o questionnaires: measures of numeracy, legal judgment or
prediction, demographic/non-legal questions
o 3-question Schwartz test highly correlated with
performance on Lipkus scale and SNS

3 puzzles to solve: (1) w/n attys/people with legal training are bad
at math; (2) w/n attys with lower numeracy tend to be more
susceptible to manipulation of cognitive biases and framing effects
[such as whether the outcome in a case is framed as a potential
loss or a potential win, whether the chance of a bad outcome is
framed as a percentage or a likelihood; (3) w/n the math skill of a
decision maker can affect the substance of legal decision making
[such as whether a particular action was negligent]

Results and Discussion

o Numeracy of Law Students
o Likelihood of Settlement [instead of going to trial]: risk
aversion [settle!!!], loss aversion: Students were
significantly more likely to counsel their clients to settle
when the chances of success at trial were phrased in
negative terms (loss) than when the same chances were
phrased in positive terms (gain frame). This is a
potentially worrisome finding, insofar as it suggests that
substantive legal counsel may vary based upon loss
aversion and more specifically, upon whether an attorney
ends up focused on the chance of success or the chance of
failure

HOWEVER!!! Although legal decision makers are

subject to loss aversion, they do not appear to be
differently susceptible to it depending upon their
math skills.
o Likelihood of counseling release of a patient

o Substantive Legal Judgments: probability of Negligence

General Discussion and Limitations
o Numeracy of Law Students

The commonly held belief that attorneys are bad at

math is untrue, or at least untrue for Illinois law
students

It is misleading to categorically dismiss attys as

bad at math especially as compared to the rest of
the population
o Law Students Susceptibility to Cognitive Bias

Our findings do not support the hypothesis that

lower-numerate persons with legal training are
particularly susceptible to cognitive bias.

We found no measurable effect of numeracy across

multiple tests for risk aversion, loss aversion, or
percentage/likelihood framing effects.

This suggests that existing non-legal literature on

the relationship between numeracy and bias should
not be generalized to legal contexts, or at least not
without significant further research.

But this does not suggest that people with legal

training are immune to cognitive bias.
o Numeracys effect on the substance of legal decisions

While susceptibility to cognitive biases does not

seem to vary by numeracy among law students,
substantive legal analysis can vary significantly
with the numeracy of legal decision makers. It
matters if attys and other legal decisions makers
treat cases differently based upon their own math
skills. Attys as gatekeepers to legal action, in
settlement at the behest of attys.

PART IV

The study presented in this Article tested the proposition that math
skill might matter to the substance of legal decision making. Our
findings
suggest that, at least for some subset of legal questions,
substantive legal
analysis can indeed vary with underlying math skill. Our findings
also
confirm that numerically-related cognitive heuristics and biases
can
demonstrably impact substantive legal analyses. Importantly, this
study
demonstrates the necessity of thinking beyond arithmetic errors
when
considering the role of math in law. In the context of legal
decisions,
numeracy concerns also arise whenever decision makers most
evaluate
probabilities, risks, or calculations. These results hint at the

complex relationship between law and numeracy, and they raise a

variety of concerns
and questions for practitioners, researchers, and educators.
o ACCURACY IN LEGAL PREDICTIONS

Given the centrality of legal prediction to most

attorneys practices, our findings that numeracy
affects legal predictions should be taken very
seriously. We find that law students predict
different outcomes for identical cases, depending
upon numerical cognitive biases and their own
math skill.
o MATH AND NUMERACY IN LEGAL EDUCATION AND LEGAL
SCHOLARSHIP

Our studies find that law students substantive

legal analyses vary with their underlying math skill,
for at least some subset of legal questions.

Our findings suggest that law schools should

reconsider their general agnosticism towards their
students math skills. For good or ill, numeracy
appears to affect students substantive legal
decisions.
o DISTINCTIVENESS OF LEGAL DECISION MAKING AND LEGAL
TRAINING

This Article has been concerned, in large part, with

testing whether
existing findings about numeracy and decision
making from non-legal
contexts apply to legal questions, and it has found
that at least some of the
findings from other contexts seem not to apply to
legal decisions made by
people trained in the law.
o NUMERACY AND LEGAL DECISIONS IN NON-LAWYERS

The implications we have noted share a common

thread; they all
raise the question of how non-law-trained people
might evaluate legal
questions. The accuracy of lawyers predictions
relies not only on how
attorneys and judges might view a case, but
perhaps more importantly
on how clients and jurors view it. If, as we have
argued, numeracy
constructs affect decision making in legal contexts,
and if, as our results
suggest, lawyers are significantly more numerate
than the general public (at
least as measured by prior research), then we
should be very interested in
the question of how numeracy interacts with legal

training. The answer

would, of course, also shed light on how legal
decision making varies from
decisions in other contexts; if legal decisions differ
primarily based on
context alone, we would expect lay people to
answer similarly to
attorneys. If, however, legal decisions differ
because of the decision
makers, asking the same questions of nonattorneys should yield very
different results. Similarly, where legislators and
regulators must make
decisions based on the legal and numerical
decision making of lay-people,
understanding how lay decision making is affected
by numeracy could help
improve those decisions.
CONCLUSION
This Article presents the first empirical evidence regarding the relationship
between numeracy and legal decision making. It concludes that,
despite common wisdom to the contrary, people with legal training are
surprisingly good at math. It also finds evidence that, while law students
are
susceptible to numerically-related cognitive biases in their legal decision
making, their susceptibility does not vary significantly by numeracy.
However, we do find that the substance of legal analysis can vary by the
numeracy level of the legal decision maker.

Milot, Illuminating Innumeracy

INTRO
I.

Enumerating Legal Innumeracy

a. Innumeracy through miscalculation
b. Innumeracy through oversimplification
c. Innumeracy through misunderstanding
II.
The significance of legal innumeracy
a. Overvaluing numerical information
b. Failing to speak the language of numbers
c. Legitimacy, meaning and the practice of law
III.
Defining the problem: competence or confidence?
a. Objective innumeracy
i. Deficits in cognitive functioning
ii. Deficits in mathematics education
b. Subjective innumeracy
i. Math anxiety
ii. Relative competence
CONCLUSIONS

II.

ACCOUNTING PROFESSION

Philippine Accountancy Act of 2014 (RA9298)

AN ACT REGULATING THE PRACTICE OF ACCOUNTANCY IN THE PHILIPPINES,
REPEALING FOR THE PURPOSE PRESIDENTIAL DECREE NO 692, OTHERWISE
KNOWN AS THE REVISED ACCOUNTANCY LAW, APPROPRIATING FUNDS
THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
ARTICLE I
TITLE, DECLARATION OF POLICY, OBJECTIVE AND SCOPE OF PRACTICE
SECTION 1 Short Title This Act shall be known as the Philippine
Accountancy Act of 2004.
SEC 2 Declaration of Policy The State recognizes the importance of
accountants in nation building and development Hence, it shall develop
and nurture competent, virtuous, productive and well rounded professional
accountants whose standards of practice and service shall be excellent,
qualitative, world class and globally competitive through inviolable, honest,
effective, and credible licensure examinations and through regulatory
measures, programs and that foster their professional growth and
development.
SEC 3 Objectives This act shall provide for and govern:
(a) The standardization and regulation of accounting education;
(b) The examination for registration and certified public accountants; and
(c) The supervision, control and regulation of the practice of accountancy
in the Philippines.
SEC 4 Scope of Practice The practice of accountancy shall include, but
not limited to the following:
(a) Practice of Public Accountancy shall constitute in a person, be it
his/her individual capacity, or as a partner or as a staff member in an
accounting or auditing firm, holding out himself/herself as one skilled in the
knowledge, science and practice of accounting, and as a qualified person
to render professional services as a certified public accountant; or offering
or rendering, or both, to more than one client on a fee basis or otherwise,
services such as the audit or verification of financial transaction and
accounting records; or the preparation, signing, or certification for clients
of reports of audit, balance sheet, and other financial, accounting and
related schedules, exhibits, statements or reports which are to be used for
publication or for credit purposes, or to
be filed with a court or government agency, or to be used for any other
purpose; or the design, installation, and revision of accounting system; or
the preparation of income tax returns when related to accounting
procedures; or when he/she represents clients before government agencies

on tax and other matters related to accounting or renders professional

assistance in matters relating to accounting procedures and the recording
and presentation of financial facts or data.
(b) Practice and Commerce and Industry shall constitute in a person
involved in decision making requiring professional knowledge in the
science of accounting, or when such employment or position requires that
the holder thereof must be a certified public accountant.
(c) Practice in Education/Academe shall constitute in a person in an
educational institution which involve teaching of accounting, auditing,
management advisory services, finances, business law, taxation and other
technically related subjects: Provided that members of the Integrated Bar
of the Philippines may be allowed to teach business law and taxation
subjects.
(d) Practice in the Government shall constitute in a person who holds or is
appointed to, a position in an accounting professional group in government
or in a government-owned and/or controlled corporation including those
performing proprietary functions, where decision making requires
professional knowledge in the science in accounting, or where a civil
service eligibility as a certified public accountants is a prerequisite.
ARTICLE II
PROFESSIONAL REGULATORY BOARD OF ACCOUNTING
SEC 5 The Professional Regulatory Board of Accountancy and its
Composition The Professional Regulatory Board of Accountancy,
hereinafter referred to as the Board, under the supervision and
administrative control of the Professional Regulation Commission,
hereinafter referred to as the Commission, shall be composed of a
chairman and six (6) members to be appointed by the President of the
Philippines from a list of three (3) recommendees each position and ranked
by the Commission, from list of five (5) nominees for each position
submitted by the accredited national professional organization of certified
public accountants The board shall elect a vice-chairman from among its
members for a term of one (1) year meetings of the board and in the event
of a vacancy in the office of the chairman, the vice chairman shall assume
such duties and responsibilities until such time as a chairman is appointed.
SEC 6 Qualification of members of the Professional Regulatory Board A
member of the board shall, at the time of his/her appointment, possess the
following qualifications:
(a) Must be a natural born citizen and a resident of the Philippines;
(b) Must be a duly registered Certified Public Accountant with at least ten
(10) years of work experience in any scope of practice of accountancy;
(c) Must be a good moral character and must not have been convicted of
crimes involving moral turpitude; and
(d) Must not have any pecuniary interested, directly or indirectly, in any
schools, college, university or institution conferring an academic degree
necessary for admission to the practice of accountancy or where review
classes in preparation for the licensure examination, are being offered or
conducted, nor shall he/she be a member of the faculty or administration
thereof at the time of his/her appointment to the Board.

SEC 7 Term of Office The chairman and members of the board shall hold
office for a term of three years Any vacancy occurring within the term or a
member shall be filled up for the unexpired portion of the term only No
person who has served two (2) successive complete terms shall be eligible
for reappointment until the lapse of one (1) year Appointment to fill-up an
expired term is not to be considered as a complete term.
SEC 8 Compensation and Allowances of the Board The chairman and
members of the board shall receive compensation and allowances
comparable to that being received by the chairman and members of
existing regulatory boards under the commission as provided for in the
General Appropriations Act.
SEC 9 Powers and Functions of the Board The board shall exercise the
following specific powers, functions and responsibilities:
(a) To prescribe and adopt the rules and regulations necessary for carrying
out the provisions of this Act;
(b) To supervise the registration, licensure and practice of accountancy in
the Philippines;
(c) To administer oaths in connection with the administration of this Act;
(d) To issue, suspend, revoke, or reinstate the Certificate of Registration for
the practice of the accountancy profession;
(e) To adopt an official seal of the Board;
(f) To prescribe and/or adopt a Code of Ethics for the practice of
accountancy;
(g) To monitor the condition affecting the practice of accountancy and
adopt such measures, including promulgation of accounting and auditing
standards, rules and regulations and best practices as may be deemed
proper for the enhancement and maintenance of high professional, ethical,
accounting and auditing standards: Provided, That domestic accounting
and auditing standards rules and regulations shall include the international
accounting and auditing standards, and generally accepted best practices;
(h) To conduct an oversight into the quality of audits financial statements
through a review of the quality control measures instituted by auditors in
order to it sure compliance with the accounting and auditing standards and
practices;
(i) To investigate violations of this act and rules and regulations
promulgated hereunder and for this purpose, to issue summons, subpoena
and subpoena ad testificandum and subpoena duces tecum to violators or
witness thereof and compel their attendance to such investigation or
hearing in the productions of documents in connection therewith: Provided,
That the Board upon approval of the commission may, subject to such rules
and regulations that may be promulgated to implement this SEC, delegate
the fact finding aspect of such investigations to the accredited national
professional organization of certified public accountants: Provided, further,
that the Board or the commission may adopt their findings of fact as it may
seems fit;
(j) The Board may motu proprio in its discretion, make such investigations
as it deems necessary to determine whether any person has violated any
provisions of this law, any accounting or auditing standards or rules duly

promulgated by the Board as part of the rules governing the practice of

accountancy;
(k) To issue a cease or desist order to any person, association, partnership
or corporation engaged in violation of any provision of this Act, any
accounting or auditing standards or rules duly promulgated by the Board
as part of the rules governing the practice of accountancy in the
Philippines;
(l) To punish for contempt of the Board, both direct and indirect in
accordance with the pertinent of the penalties prescribed by the Rules of
Court;
(m) To prepare, adopt, issue or amend the syllabi of the subjects for
examinations in consultation with the academe, determine and prepare
questions for the licensure examination which shall strictly be within the
scope of the syllabi of the subjects for examinations as well as administer,
correct and release the results of the licensure examinations;
(n) To ensure, in coordination with the Commission on Higher Education
(CHED) or other authorized government offices that all higher educational
instruction and offering of accountancy comply with the policies, standards
and requirements of the course prescribed by CHED or other authorized
government offices in the areas of curriculum, faculty, library and facilities;
and
(o) To exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental to
the carrying out of, the express powers granted to the Board to achieve the
objectives and purposes of this Act.
The policies, resolutions, rules and regulations, issued as promulgated by
the Board shall be subject to review and approval of the Commission
However, the Boards decisions, resolutions or orders rendered in
administrative cases shall be subject to review only if on appeal.
SEC 10 Administrative, Supervisions of the Board, Custodian of its Records,
Secretariat and Support Services The Board shall be under the
administrative supervision of the Commission All records of the Board,
including applications for examination and administrative and other
investigative cases conducted by the Board shall be under the custody of
the Commission The Commission shall designate the secretary of the Board
and shall provide the secretariat and other support services to implement
the provisions of this Act.
SEC 11 Grounds for Suspension or Removal of Members of the Board The
President of the Philippines, upon the recommendation of the Commission,
after giving the concerned member an opportunity to defend himself in a
proper administrative investigation to be conducted by the Commission,
may suspend or remove any member on the following grounds.
(a) Neglect of duty or incompetence;
(b) Violation or tolerance of any violation of this Act and its implementing
rules and regulations or the Certified Public Accountants Code of Ethics
and the technical and professional standards of practice for Certified Public
Accountants;
(c) Final judgment of crimes involving moral turpitudes; and
(d) Manipulation or rigging of the certified accountants licensure

examination results, disclosure of secret and confidential information in the

examination questions prior to the conduct of the said examination or
tampering of grades.
SEC 12 Annual Report The Board shall, at the close of each calendar year,
submit an annual report to the President of the Philippines through the
Commission giving a detailed account of its proceedings and
accomplishments during the year and making recommendations for the
adoption of measures that will upgrade and improve the conditions
affecting the practice of accountancy in the Philippines.
ARTICLE III
EXAMINATION, REGISTRATION AND LICENSURE
SEC 13 The Certified Public Accountant Examinations All applicants for
registration for the practice of accountancy shall be required to undergo a
licensure to be given by the Board in such places and dates as the
Commission may designate subject to compliance with the requirements
prescribed by the Commission in accordance with Republic Act No 8981.
SEC 14 Qualifications of Applicants for Examinations Any person applying
for examination shall establish the following requisites to the satisfaction of
the Board that he/she:
(a) is a Filipino citizen;
(b) is of good moral character;
(c) is a holder of the degree of Bachelor of Science in Accountancy
conferred by a school, college, academy or institute duly recognized and/or
accredited by the CHED or other authorized government offices; and
(d) has not been convicted of any criminal offense involving moral
turpitude.
SEC 15 Scope of Examination The licensure examination for certified
public accountants shall cover, but are not limited to the following
subjects:
(a) Theory of Accounts
(b) Business Law and Taxation
(c) Management Services
(d) Auditing Theory
(e) Auditing Problems
(f) Practical Accounting Problems I
(g) Practical Accounting Problems II
The Board, subject to the approval of the Commission, may revise or
exclude any of the subjects and their syllabi, and add new ones as the
need arises.
SEC 16 Rating in the Licensure Examination To be qualified as having
passed the licensure examination for accountants, a candidate must obtain
a general average of seventy-five percent (75%), with no grades lower
than sixty-five percent (65%) in any given subject In the event a candidate
obtains the rating of seventy-five percent (75%) and above in at least a
majority of subjects as provided for in this Act, he/she shall receive a

conditional credit for the subjects passed: Provided, That a candidate shall
take an examination in the remaining subjects within two (2) years from
the preceding examination: Provided, further, That if the candidate fails to
obtain at least a general average of seventy-five percent (75%) and a
rating of at least sixty-five percent (65%) in each of the subjects
reexamined, he/she shall be considered as failed in the entire examination.
SEC 17 Report of Ratings The Board shall submit to the Commission the
ratings obtained by each candidate within ten (10) calendar days after the
examination, unless extended for just cause Upon the release of the results
of the examination, the Commission shall send by mailing the rating
received by each examinee at his/her given address using the mailing
envelope submitted during the examination.
SEC 18 Failing Candidates to Take Refresher Course Any candidate who
fails in two (2) complete Certified Public Accountant Board Examinations
shall be disqualified from taking another set of examinations unless he/she
submits evidence to the satisfaction of the Board that he/she enrolled in
and completed at least twenty-four units of subject given in the licensure
examination.
For purposes of this Act, the examination in which the candidate was
conditioned together with the removal examination on the subject in which
he/she failed shall be counted as one complete examination.
SEC 19 Oath All successful candidates in the examination shall be
required to take an oath of profession before an member of the Board or
before any government official, authorized by the Commission or any
person authorized by law to administer oaths upon presentation of proof of
his/her qualification, prior to entering upon the practice of the profession.
SEC 20 Issuance of Certificates of Registration and Professional
Identification Card A certificate of registration shall be issued to
examinees who pass the licensure examination subject to payment of fees
prescribed by the Commission The Certificate of Registration shall bear the
signature of the chairperson of the Commission and the chairman and
members of the Board, stamped with the official seal of the Commission
and of the Board, indicating that the person named therein is entitled to
the practice of the profession with all the privileges appurtenant thereto
The said certificate shall remain in full force and effect until withdrawn,
suspended or revoked in accordance with this Act.
A Professional Identification Card bearing the registration number, date of
issuance, expiry date, duly signed by the chairperson of the Commission,
shall likewise be issued to every registrant renewable every three (3)
years.
SEC 21 Roster of Certified Public Accountants A roster showing the names
and place of business of all registered certified public accountant shall be
prepared and updated by the Board, and copies thereof shall be made
available to any party as may be deemed necessary.
SEC 22 Indication of Certificate of Registration, Identification Card and

Professional Tax Receipt The certified public accountant shall be required

to indicate his/her certificate of registration number, and date of issuance,
the duration of validity, including the Professional Tax Receipt number on
the documents he/she signs, uses or issues in connection with the practice
of his/her profession.
SEC 23 Refusal to Issue Certificate of Registration and Professional
Identification Card The Board shall not register and issue a certificate of
registration and professional identification card to any successful examinee
convicted by a court of competent jurisdiction of a criminal offense
involving moral turpitude or guilty of immoral and dishonorable conduct or
to any person of unsound mind In the event of refusal to issue certificate
for any reason, the Board shall give the applicant a written statement
setting forth the reasons for such action, which statement shall be
incorporated in the record of the Board.
SEC 24 Suspension and Revocation of Certificates of Registration and
Professional Identification Card and Cancellation of Special Permit The
Board shall have the power, upon due notice and hearing, to suspend or
revoke the practitioners certificate of registration and professional
identification card or suspend him/her from the practice of his/her
profession or cancel his/her special permit for any of the causes or grounds
mentioned under section 23 of this Act or for any unprofessional or
unethical conduct, malpractice, violation of any of the provisions of this
Act, and its implementing rules and regulations, the Certified Public
Accountants Code of Ethics and the technical and professional standards
of practice for certified public accountants.
SEC 25 Reinstatement, Reissuance and Replacement of Revoked or Lost
Certificates The Board may, after the expiration of two (2) years from the
date of revocation of a certificate of registration and upon application and
for reasons deemed proper and sufficient, reinstate the validity of a
revoked certificate of registration and in so doing, may, in its discretion,
exempt the applicant from taking another examination.
A new certificate of registration to replace lost, destroyed, or mutilated
certificate/license may be issued, subject to the rules promulgated by the
Board and the Commission, upon payment of the required fees.
ARTICLE IV
PRACTICE OF ACCOUNTANCY
SEC 26 Prohibition in the Practice of Accountancy No person shall
practice accountancy in this country, or use the title Certified Public
Accountant, or use the abbreviated title CPA or display or use any title,
sign, card, advertisement, or other device to indicate such person practices
or offers to practice accountancy, or is a certified public accountant, unless
such person shall have received from the Board a certificate of
registration/professional license and be issued a professional identification
card or a valid temporary/special permit duly issued to him/her by the
Board and the Commission.

SEC 27 Vested Rights: Certified Public Accountants Registered When This

Law is Passed All certified public accountants registered at the time this
law takes effect shall automatically be registered under the provisions
hereof, subject however, to the provisions herein set forth as to future
requirements Certificates of registration/professional license held by such
persons in good standing shall have the same force and effect as though
issued after the passage of this Act.
SEC 28 Limitation of the Practice of Public Accountancy Single
practitioners and partnerships for the practice of public accountancy shall
be registered certified public accountants in the Philippines: Provided, That
from the effectivity of this Act, a certificate of accreditation shall be issued
to certified public accountants in public practice only upon showing, in
accordance with rules and regulations promulgated by the Board and
approved by the Commission, that such registrant has acquired a minimum
of three (3) years meaningful experience in any of the areas of public
practice including taxation: Provided, further, That this requirement shall
not apply to those already granted a certificate of accreditation prior to the
effectivity of this Act The Securities and Exchange Commission shall not
register any corporation organized for the practice of public accountancy.
SEC 29 Ownership of Working Papers All working papers, schedules and
memoranda made by a certified public accountant and his staff in the
course of an examination, including those prepared and submitted by the
client, incident to or in the course of an examination, by such certified
public accountant, except reports submitted by a certified public
accountant to a client shall be treated confidential and privileged and
remain the property of such certified public accountant in the absence of a
written agreement between the certified public accountant and the client,
to the contrary, unless such documents are required to be produced
through subpoena issued by any court, tribunal, or government regulatory
or administrative body.
SEC 30 Accredited Professional Organization All registered certified public
accountants whose names appear in the roster of certified public
accountants shall be united and integrated through their membership in a
one only registered and accredited national professional organization of
registered and licensed certified public accountants, which shall be
registered with the Securities and Exchange Commission as a nonprofit
corporation and recognized by the Board, subject to the approval by the
Commission The members in the said integrated and accredited national
professional organization shall receive benefits and privileges appurtenant
thereto upon payment of a required fees and dues Membership in the
integrated organization shall not be a bar to membership in any other
association of certified public accountants.
SEC 31 Accreditation to Practice Public Accountancy Certified public
accountants, firms and partnerships of certified public accountants,
engaged in the practice of public accountancy, including partners and staff
members thereof, shall register with the Commission and the Board, such
registration to be renewed every three (3) years: Provided, That subject to

the approval of the Commission, the Board shall promulgate rules and
regulations for the implementation of registration requirements including
the fees and penalties for violation thereof.
SEC 32 Continuing Professional Education (CPE) Program All certified
public accountants shall abide by the requirements, rules and regulations
on continuing professional education to be promulgated by the Board,
subject to the approval of the Commission, in coordination with the
accredited national professional organization of certified public
accountants or any duly accredited educational institutions For this
purpose, a CPE Council is hereby created to implement the CPE program.
SEC 33 Seal and use of Seal All licensed Certified Public Accountants shall
obtain and use a seal of a design prescribed by the Board bearing the
registrants name, registration number and title The auditors reports shall
be stamped with said seal, indicating therein his/her current Professional
Tax Receipt (PTR) number, date/place of payment when filed with
government authorities or when used professionally.
SEC 34 Foreign Reciprocity Subjects or citizens of foreign countries may
be allowed to practice accountancy in the Philippines in accordance with
the provisions of existing laws, international treaty obligations including
mutual recognition agreements entered into by the Philippine government
with other countries A person who is not a citizen of the Philippines shall
not be allowed to practice accountancy in the Philippines unless he/she can
prove, in the manner provided by the Rules of Court that, by specific
provision of law, the country of which he/she is a citizen, subject or
national admits citizens of the Philippines to the practice of the same
profession without restriction.
SEC 35 Coverage of Temporary/Special Permits Special/temporary permit
may be issued by the Board subject to the approval of the Commission and
payment of the fees the latter, has prescribed and charged thereof to the
following persons:
(a) A foreign certified public accountant called for consultation or for a
specific purpose which, in the judgment of the Board, is essential for the
development of the country: Provided, That his/her practice shall be limited
only for the particular work that he/she is being engaged: Provided, further,
That there is no Filipino Certified Public Accountant qualified for such
consultation or specific purposes;
(b) A foreign certified public accountant engaged as professor, lecturer or
critic in fields essential to accountancy education in the Philippines and
his/her engagement is confined to teaching only; and
(c) A foreign certified public accountant who is an internationally
recognized expert or with specialization in any branch of accountancy and
his/her service is essential for the advancement of accountancy in the
Philippines.
ARTICLE V
PENAL AND FINAL PROVISIONS

SEC 36 Penal Provision Any person who shall violate any of the provisions
of this Act or any of its Implementing rules and regulations as promulgated
by the Board subject to the approval of the Commission, shall, upon
conviction, be punished by a fine of not less than Fifty thousand pesos
(P50,000.00) or by imprisonment for a period not exceeding two (2) years
or both.
SEC 37 Implementing Rules and Regulations Within ninety (90) days after
the effectivity of this Act, the Board, subject to the approval of the
Commission and in coordination with the accredited national professional
organization of certified public accountants, shall adopt and promulgate
such rules and regulations to carry out the provisions of this Act and which
shall be effective fifteen (15) days following their publication in the Official
Gazette or in any major daily newspaper of general circulation.
SEC 38 Interpretation of this Act Nothing in this Act shall be considered to
effect or prevent the practice of any other legally recognized profession.
SEC 39 Enforcement of the Act It shall be the primary duty of the
Commission and the Board to effectively enforce the provisions of this Act
All duly constituted law enforcement agencies and offices of national,
provincial, city or municipal government or of any political subdivision
thereof, shall, upon the call or request of the Commission or the Board,
render assistance in enforcing the provisions of this Act and to prosecute
any person violating the provisions of the same The Secretary of Justice or
his duly designated representative shall act as legal adviser to the
Commission and the Board and shall render legal assistance as may be
necessary in carrying out the provisions of this Act.
Any person may bring before the Commission, Board or the
aforementioned officers of the law, cases of illegal practice or violations of
this Act committed by any person or party.
The Board she assist the Commission in filing the appropriate charges
through the concerned prosecution office in accordance with law and Rules
and Court.
SEC 40 Funding Provision The chairperson of the Professional Regulation
Commission shall immediately include in the Commissions programs the
implementation of this Act, the funding of which shall be included in the
annual General Appropriations Act.
SEC 41 Transitory Provisions The incumbent chairman and members of
the Board shall continue to serve in their respective positions under the
terms for which they have been appointed under Presidential Decree No
692, without the need of new appointments.
All graduates with a Bachelors Degree, major in Accounting shall be
allowed to take the CPA Licensure Examination within two (2) years from
the effectivity of this Act under the rules and regulations to be promulgated
by the Board subject to the approval by the Commission.
SEC 42 Separability Clause If any clause, provision, paragraph or part
thereof shall be declared unconstitutional or invalid, such judgment shall

not affect, invalidate or impair any other part hereof, but shall be merely
confined to the clause, provision, paragraph or part directly involved in the
controversy in which such judgment has been rendered.
SEC 43 Repealing Clause Presidential Decree No 692 is hereby repealed
and all other laws, orders, rules and regulations or resolutions or part/s
thereof inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.
SEC 44 Effectivity This Act shall take effect after fifteen (15) days
following its publication in the Official Gazette or in any major daily
newspaper of general circulation.

the examination. Within ten (10) days from such date, he/she may file his/her request for
reconsideration of ratings. Reconsideration of rating shall be effected only on grounds of
mechanical error in the grading of his/her testpapers or answer sheets, or malfeasance.
Second, Domondon clarified that the Board was precluded from releasing the Examination
Papers (other than petitioners answer sheet) by Section 20, Article IV of PRC Resolution No.
338, series of 1994, which provides:
Sec. 20. Illegal, Immoral, Dishonorable, Unprofessional Acts The hereunder acts shall
constitute prejudicial, illegal, grossly immoral, dishonorable, or unprofessional conduct:
Providing, getting, receiving, holding, using or reproducing questionsthat have been given
in the examination except if the test bank for the subject has on deposit at least two thousand
(2,000) questions.

IRR of RA 9298
a. PRIVATE AND PUBLIC ACCOUNTANTS
b. BECOMING A CPA
Antolin v. Domondon, GR 165036 (2010)
Examinations have a two-fold purpose. First, they are summative; examinations are intended
to assess and record what and how much the students have learned. Second, and perhaps more
importantly, they are formative; examinations are intended to be part and parcel of the
learning process. In a perfect system, they are tools for learning. In view of the pedagogical
aspect of national examinations, the need for all parties to fully ventilate their respective
positions, and the view that government transactions can only be improved by public scrutiny,
we remand these cases to the trial court for further proceedings.
Facts
Petitioner took the accountancy licensure examinations (the Certified Public Accountant
[CPA] Board Exams) conducted by the Board of Accountancy (the Board) in October 1997.
The examination results were released on October 29, 1997; out of 6,481 examinees, only
1,171 passed. Unfortunately, petitioner did not make it. When the results were released, she
received failing grades in four out of the seven subjects. Convinced that she deserved to pass
the examinations, she wrote to respondent Domondon, Acting Chairman of the Board of
Accountancy, and requested that her answer sheets be re-corrected. On November 3, 1997,
petitioner was shown her answer sheets, but these consisted merely of shaded marks, so she
was unable to determine why she failed the exam. Thus, on November 10, 1997, she again
wrote to the Board to request for copies of (a) the questionnaire in each of the seven subjects
(b) her answer sheets; (c) the answer keys to the questionnaires, and (d) an explanation of the
grading system used in each subject. Domondon denied petitioners request on two grounds:
first, that Section 36, Article III of the Rules and Regulations Governing the Regulation and
Practice of Professionals, as amended by Professional Regulation Commission (PRC)
Resolution No. 332, series of 1994, only permitted access to the petitioners answer sheet
(which she had been shown previously), and that reconsideration of her examination result
was only proper under the grounds stated therein:
Sec. 36 An examinee shall be allowed to have access or to go over his/her test papers or
answer sheets on a date not later than thirty (30) days from the official release of the results of

After a further exchange of correspondence, the Board informed petitioner that an

investigation was conducted into her exam and there was no mechanical error found
in the grading of her test papers. Undeterred, on January 12, 1998, petitioner filed a
Petition for Mandamus with Damages against the Board of Accountancy and its
membersbefore the Regional Trial Court (RTC) of Manila. The case was raffled to
Branch 33, and docketed as Civil Case No. 98-86881. The Petition included a prayer
for the issuance of a preliminary mandatory injunction ordering the Board of
Accountancy and its members (the respondents) to furnish petitioner with copies of
the Examination Papers. Petitioner also prayed that final judgment be issued ordering
respondents to furnish petitioner with all documents and other materials as would
enable her to determine whether respondents fairly administered the examinations
and correctly graded petitioners performance therein, and, if warranted, to issue to her
a certificate of registration as a CPA. In an Order dated October 16, 1998, the trial
court granted respondents Motion to Dismiss Petitioners Application for a Writ of
Preliminary Mandatory Injunction (not the main case), ruling that the matter had
become moot since petitioner passed the May CPA Licensure 1998 Examination and
had already taken her oath as a CPA. Undaunted, petitioner sought and obtained
leave to file a Second Amended Petition for Mandamus with Damages.
Issues
Before us, petitioner argues that she has a right to obtain copies of the examination
papers so she can determine for herself why and how she failed and to ensure that
the Board properly performed its duties. She argues that the Constitution as well as
the Code of Conduct and Ethical Standards for Public Officials and Employees
support her right to demand access to the Examination Papers. Furthermore, she
claims that there was no need to exhaust administrative remedies, since no recourse
to the PRC was available, and only a pure question of law is involved in this case.

Finally, she claims that her demand for access to documents was not rendered moot
by her passing of the 1998 CPA Board Exams.
Our Ruling
Propriety of Writ of Mandamus
At the very outset let us be clear of our ruling. Any claim for re-correction or revision of her
1997 examination cannot be compelled by mandamus. This much was made evident by our
ruling in Agustin-Ramos v. Sandoval where we stated:
After deliberating on the petition in relation to the other pleadings filed in the
proceedings at bar, the Court resolved to DENY said petition for lack of merit.
The petition at bar prays for the setting aside of the Order of respondent Judge
dismissing petitioners mandamus action to compel the other respondents
(Medical Board of Examiners and the Professional Regulation Commission)
to reconsider, recorrect and/or rectify the board ratings of the petitioners from
their present failing grades to higher or passing marks. The function of
reviewing and re-assessing the petitioners answers to the examination
questions, in the light of the facts and arguments presented by them x x x
is a discretionary function of the Medical Board, not a ministerial and
mandatory one, hence, not within the scope of the writ of mandamus. The
obvious remedy of the petitioners from the adverse judgment by the Medical
Board of Examiners was an appeal to the Professional Regulation
Commission itself, and thence to the Court of Appeals; and since they did not
apply for relief to the Commission prior to their institution of the special civil
action of mandamus in the Regional Trial Court, the omission was fatal to the
action under the familiar doctrine requiring exhaustion of administrative
remedies. Apart from the obvious undesirability of a procedure which would
allow Courts to substitute their judgment for that of Government boards in the
determination of successful examinees in any administered examination an
area in which courts have no expertise and the circumstance that the law
declares the Court of Appeals to be the appropriate review Court, the Regional
Trial Court was quite correct in refusing to take cognizance of an action
seeking reversal of the quasi-judicial action taken by the Medical Board of
Examiners. (Emphasis ours)
For a writ of mandamus to issue, the applicant must have a well-defined, clear, and certain
legal right to the thing demanded. The corresponding duty of the respondent to perform the
required act must be equally clear. No such clarity exists here; neither does petitioners right to
demand a revision of her examination results. And despite petitioners assertions that she has
not made any demand for re-correction, the most cursory perusal of her Second Amended
Petition and her prayer that the respondents make the appropriate revisions on the results of
her examination belies this claim.
Like the claimants in Agustin, the remedy of petitioner from the refusal of the Board to release
the Examination Papers should have been through an appeal to the PRC. Undoubtedly,
petitioner had an adequate remedy from the Boards refusal to provide her with copies of the
Examination Papers. Under Section 5(a) of Presidential Decree No. 223, the PRC has the
power to promulgate rules and regulations to implement policies for the regulation of the
accounting profession. In fact, it is one such regulation (PRC Resolution No. 338) that is at
issue in this case. In addition, under Section 5(c), the PRC has the power to review,

coordinate, integrate and approve the policies, resolutions, rules and regulations, orders
or decisions promulgated by the various Boards with respect to the profession or
occupation under their jurisdictions including the results of their licensure examinations but
their decisions on administrative cases shall be final and executory unless appealed to the
Commission within thirty (30) days from the date of promulgation thereof.
Petitioner posits that no remedy was available because the PRCs power to review and approve
in Section 5(c) only refers to appeals in decisions concerning administrative investigations and
not to instances where documents are being requested. Not only is this position myopic and
self-serving, it is bereft of either statutory or jurisprudential basis. The PRCs quasi-legislative
and enforcement powers, encompassing its authority to review and approve policies,
resolutions, rules and regulations, orders, or decisions cover more than administrative
investigations conducted pursuant to its quasi-judicial powers. More significantly, since the
PRC itself issued the resolution questioned by the petitioner here, it was in the best position to
resolve questions addressed to its area of expertise. Indeed, petitioner could have saved herself
a great deal of time and effort had she given the PRC the opportunity to rectify any purported
errors committed by the Board.
One of the reasons for exhaustion of administrative remedies is our well-entrenched doctrine
on separation of powers, which enjoins upon the Judiciary a becoming policy of noninterference with matters falling primarily (albeit not exclusively) within the competence of
other departments. Courts, for reasons of law, comity and convenience, should not entertain
suits unless the available administrative remedies have first been resorted to and the proper
authorities have been given an appropriate opportunity to act and correct their alleged errors, if
any, committed in the administrative forum.
However, the principle of exhaustion of administrative remedies is subject to exceptions,
among which is when only a question of law is involved. This is because issues of law such as
whether petitioner has a constitutional right to demand access to the Examination Papers cannot be resolved with finality by the administrative officer.
Issues of Mootness
We now turn to the question of whether the petition has become moot in view of petitioners
having passed the 1998 CPA examination. An issue becomes moot and academic when it
ceases to present a justiciable controversy, so that a declaration on the issue would be of no
practical use or value.
In this jurisdiction, any citizen may challenge any attempt to obstruct the exercise of his or her
right to information and may seek its enforcement by mandamus. And since every citizen
possesses the inherent right to be informed by the mere fact of citizenship, we find that
petitioners belated passing of the CPA Board Exams does not automatically mean that her
interest in the Examination Papers has become mere superfluity. Undoubtedly, the
constitutional question presented, in view of the likelihood that the issues in this case will be
repeated, warrants review.
The crux of this case is whether petitioner may compel access to the Examination
Documents through mandamus. As always, our inquiry must begin with the Constitution.
Section 7, Article III provides: The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well to government research data used

as basis for policy development, shall be afforded the citizen, subject to such limitations as
may be provided by law.
Together with the guarantee of the right to information, Section 28, Article II promotes full
disclosure and transparency in government, viz: Subject to reasonable conditions prescribed
by law, the State adopts and implements a policy of full public disclosure of all its transactions
involving public interest.
Like all the constitutional guarantees, the right to information is not absolute. The people's
right to information is limited to "matters of public concern," and is further "subject to such
limitations as may be provided by law." Similarly, the State's policy of full disclosure is
limited to "transactions involving public interest," and is "subject to reasonable conditions
prescribed by law". The Court has always grappled with the meanings of the terms "public
interest" and "public concern." As observed in Legaspi v. Civil Service Commission:
In determining whether x x x a particular information is of public concern
there is no rigid test which can be applied. "Public concern" like "public
interest" is a term that eludes exact definition. Both terms embrace a broad
spectrum of subjects which the public may want to know, either because these
directly affect their lives, or simply because such matters naturally arouse the
interest of an ordinary citizen. In the final analysis, it is for the courts to
determine on a case by case basis whether the matter at issue is of interest or
importance, as it relates to or affects the public.

We have also recognized the need to preserve a measure of confidentiality on some matters,
such as national security, trade secrets and banking transactions, criminal matters, and other
confidential matters.
We are prepared to concede that national board examinations such as the CPA Board Exams
are matters of public concern. The populace in general, and the examinees in particular, would
understandably be interested in the fair and competent administration of these exams in order
to ensure that only those qualified are admitted into the accounting profession. And as with all
matters pedagogical, these examinations could be not merely quantitative means of
assessment, but also means to further improve the teaching and learning of the art and science
of accounting.
On the other hand, we do realize that there may be valid reasons to limit access to the
Examination Papers in order to properly administer the exam. More than the mere
convenience of the examiner, it may well be that there exist inherent difficulties in the
preparation, generation, encoding, administration, and checking of these multiple choice
exams that require that the questions and answers remain confidential for a limited duration.
However, the PRC is not a party to these proceedings. They have not been given an
opportunity to explain the reasons behind their regulations or articulate the justification
for keeping the Examination Documents confidential. In view of the far-reaching
implications of this case, which may impact on every board examination administered by the
PRC, and in order that all relevant issues may be ventilated, we deem it best to remand these
cases to the RTC for further proceedings.

IN VIEW OF THE FOREGOING, the petitions are GRANTED. The December 11, 2006
and February 16, 2004 Decisions of the Court of Appeals in CA-GR SP No. 76546 and CAGR SP No. 76498, respectively, are hereby SET ASIDE. The November 11, 2002 and January
30, 2003 Orders of the Regional Trial Court of Manila, Branch 33, in Civil Case No. 98-86881
are AFFIRMED. The case is remanded to the Regional Trial Court for further proceedings.
SO ORDERED.

c. RELEVANT ORGANIZATIONS
d. PROFESSIONAL ETHICS
Nakpil v. Valdes, AC 2040 (1998)
The friendship of JOSE NAKPIL and respondent CARLOS J. VALDES dates back to
the 50s during their schooldays in De La Salle and the Philippine Law School. Their
closeness extended to their families and respondent became the business consultant,
lawyer and accountant of the Nakpils. In 1965, Jose Nakpil became interested in
purchasing a summer residence in Moran Street, Baguio City. For lack of funds, he
requested respondent to purchase the Moran property for him. They agreed that
respondent would keep the property in trust for the Nakpils until the latter could buy it
back. Pursuant to their agreement, respondent obtained two (2) loans from a bank (in
the amounts of P65,000.00 and P75,000.00) which he used to purchase and renovate
the property. Title was then issued in respondents name. It was the Nakpils who
occupied the Moran summer house. When Jose Nakpil died on July 8, 1973,
respondent acted as the legal counsel and accountant of his widow, complainant
IMELDA NAKPIL. On March 9, 1976, respondents law firm, Carlos J. Valdes &
Associates, handled the proceeding for the settlement of Joses estate. Complainant
was appointed as administratix of the estate. The ownership of the Moran property
became an issue in the intestate proceedings. It appears that respondent excluded
the Moran property from the inventory of Joses estate. On February 13, 1978,
respondent transferred his title to the Moran property to his company, the Caval
Realty Corporation. On March 29, 1979, complainant sought to recover the Moran
property by filing with the then Court of First Instance (CFI) of Baguio City an action
for reconveyance with damages against respondent and his corporation. In defense,
respondent claimed absolute ownership over the property and denied that a trust was
created over it. During the pendency of the action for reconveyance, complainant filed
this administrative case to disbar the respondent. She charged that respondent
violated professional ethics when he:
1. Assigned to his family corporation the Moran property (Pulong Maulap)
which belonged to the estate he was settling as its lawyer and auditor.
2. Excluded the Moran property from the inventory of real estate properties he
prepared for a client-estate and, at the same time, charged the loan secured
to purchase the said excluded property as a liability of the estate, all for the
purpose of transferring the title to the said property to his family corporation.
3. Prepared and defended monetary claims against the estate that retained him
as its counsel and auditor
On the first charge, complainant alleged that she accepted respondents offer to serve
as lawyer and auditor to settle her husbands estate. Respondents law firm then filed a
petition for settlement of the estate of the deceased Nakpil but did not include the
Moran property in the estates inventory. Instead, respondent transferred the property
to his corporation, Caval Realty Corporation, and title was issued in its name.
Complainant accused respondent of maliciously appropriating the property in trust
knowing that it did not belong to him. She claimed that respondent has expressly
acknowledged that the said property belonged to the late Nakpil in his
correspondences with the Baguio City Treasurer and the complainant.
On the second charge, complainant alleged that respondents auditing firm (C. J.

Valdes and Co., CPAs) excluded the Moran property from the inventory of her
husbands estate, yet included in the claims against the estate the amounts of
P65,000.00 and P75,000.00, which respondent represented as her husbands loans
applied probably for the purchase of a house and lot in Moran Street, Baguio City.
As to the third charge, complainant alleged that respondents law firm (Carlos J.
Valdes and Associates) filed the petition for the settlement of her husbands estate in
court, while respondents auditing firm (C. J. Valdes & Co., CPAs) acted as accountant
of both the estate and two of its creditors. She claimed that respondent represented
conflicting interests when his accounting firm prepared the list of claims of creditors
Angel Nakpil and ENORN, Inc. against her husbands estate which was represented
by respondents law firm. Complainant averred that there is no distinction between
respondents law and auditing firms as respondent is the senior and controlling partner
of both firms which are housed in the same building.
We required respondent to answer the charges against him. In his ANSWER,
respondent initially asserted that the resolution of the first and second charges
against him depended on the result of the pending action in the CFI for reconveyance
which involved the issue of ownership of the Moran property.
On the merit of the first charge, respondent reiterated his defense in the
reconveyance case that he did not hold the Moran property in trust for the Nakpils as
he is its absolute owner. Respondent explained that the Nakpils never bought back
the Moran property from him, hence, the property remained to be his and was rightly
excluded from the inventory of Nakpils estate.
As to the second charge, respondent denied preparing the list of claims against the
estate which included his loans of P65,000.00 and P75,000.00 for the purchase and
renovation of the Moran property. In charging his loans against the estate, he
stressed that the list drawn up by his accounting firm merely stated that the loans in
respondents name were applied probably for the purchase of the house and lot in
Moran Street, Baguio City. Respondent insisted that this was not an admission that
the Nakpils owned the property as the phrase probably for the purchase did not imply
a consummated transaction but a projected acquisition.
Respondent also disclaimed knowledge or privity in the preparation of a letter (Exhibit
H) of his accounting firm to the Baguio City treasurer remitting the real estate taxes
for the Moran property on behalf of the Nakpils. He contended that the letter could be
a mere error or oversight.
Respondent averred that it was complainant who acknowledged that they did not own
the Moran property for: (1) complainants February 1979 Statement of Assets and
Liabilities did not include the said property, and; (2) complainant, as administratrix,
signed the Balance Sheet of the Estate where the Moran property was not mentioned.
Respondent admitted that complainant retained the services of his law and
accounting firms in the settlement of her husbands estate. However, he pointed out
that he has resigned from his law and accounting firms as early as 1974. He alleged
that it was Atty. Percival Cendaa (from the law firm Carlos Valdes & Associates) who
filed the inestate proceedings in court in 1976.
As to the third charge, respondent denied there was a conflict of interest when his law

firm represented the estate in the inestate proceedings while his accounting firm (C.
J. Valdes & Co., CPAs) served as accountant of the estate and prepared the claims of
creditors Angel Nakpil and ENORN, Inc. against the estate. He proffered the following
reasons for his thesis: First, the two claimants were closely related to the late Nakpil.
Claimant ENORN, Inc. is a family corporation of the Nakpils of which the late Nakpil
was the President. Claimant Angel Nakpil is a brother of the late Nakpil who, upon the
latters death, became the President of ENORN, Inc. These two claimants had been
clients of his law and accounting firms even during the lifetime of Jose Nakpil.
Second, his alleged representation of conflicting interests was with the knowledge
and consent of complainant as administratrix. Third, there was no conflict of interests
between the estate and the claimants for they had forged a modus vivendi, i.e., that
the subject claims would be satisfied only after full payment of the principal bank
creditors. Complainant, as administratrix, did not controvert the claims of Angel Nakpil
and ENORN, Inc. Complainant has started paying off the claims of Angel Nakpil and
ENORN, Inc. after satisfying the banks claims. Complainant did not assert that their
claims caused prejudice to the estate. Fourth, the work of Carlos J. Valdes and Co. as
common auditor redounded to the benefit of the estate for the firm prepared a true
and accurate amount of the claim. Fifth, respondent resigned from his law and
accounting firms as early as August 15, 1974. He rejoined his accounting firm several
years later. He submitted as proof the SECs certification of the filing of his accounting
firm of an Amended Articles of Partnership. Thus, it was not he but Atty. Percival
Cendaa, from the firm Carlos J. Valdes and Associates, who filed the intestate
proceedings in court. On the other hand, the claimants were represented by their own
counsel Atty. Enrique O. Chan. Sixth, respondent alleged that in the remote possibility
that he committed a breach of professional ethics, he committed such misconduct not
as a lawyer but as an accountant who acted as common auditor of the estate and its
creditors. Hence, he should be held accountable in another forum.
On November 12, 1979, complainant submitted her REPLY. She maintained that the
pendency of the reconveyance case is not prejudicial to the investigation of her
disbarment complaint against respondent for the issue in the latter is not the
ownership of the Moran property but the ethics and morality of respondents conduct
as a CPA-lawyer.
Complainant alleged that respondents Annexes to his Reply (such as the Statement
of Assets & Liability of the Nakpils and the Balance Sheet of the Estate) which
showed that complainant did not claim ownership of the Moran property were all
prepared by C. J. Valdes and Co. as accountant of the estate of Jose Nakpil and filed
with the intestate court by C. J. Valdes and Associates as counsel for the estate. She
averred that these Annexes were not proofs that respondent owned the Moran
property but were part of respondents scheme to remove the property from the estate
and transfer it to his family corporation. Complainant alleged that she signed the
documents because of the professional counsel of respondent and his firm that her
signature thereon was required. Complainant charged respondent with greed for
coveting the Moran property on the basis of defects in the documents he himself
prepared.
Complainant urged that respondent cannot disown unfavorable documents (the list of
claims against the estate and the letter regarding Nakpils payments of realty tax on
the Moran property) which were prepared by his law and accounting firms and invoke
other documents prepared by the same firms which are favorable to him. She averred
that respondent must accept responsibility not just for some, but for all the

representations and communications of his firms.

Complainant refuted respondents claim that he resigned from his firms from
March 9, 1976 to several years later. She alleged that none of the documents
submitted as evidence referred to his resignation from his law firm. The documents
merely substantiated his resignation from his accounting firm.
In his REJOINDER, respondent insisted that complainant cannot hold him liable for
representing the interests of both the estate and the claimants without showing that
his action prejudiced the estate. He urged that it is not per se anomalous for
respondents accounting firm to act as accountant for the estate and its creditors. He
reiterated that he is not subject to the jurisdiction of this Court for he acted not as
lawyer, but as accountant for both the estate and its claimants.
He alleged that his accounting firm merely prepared the list of claims of the creditors
Angel Nakpil and ENORN, Inc. Their claims were not defended by his accounting or
law firm but by Atty. Enrique Chan. He averred that his law firm did not oppose these
claims as they were legitimate and not because they were prepared by his accounting
firm. He emphasized that there was no allegation that the claims were fraudulent or
excessive and that the failure of respondents law firm to object to these claims
damaged the estate.
In our January 21, 1980 Resolution, we deferred further action on the disbarment
case until after resolution of the action for reconveyance between the parties involving
the issue of ownership by the then CFI of Baguio. Complainant moved for
reconsideration on the ground that the issue of ownership pending with the CFI was
not prejudicial to her complaint which involved an entirely different issue, i.e., the
unethical acts of respondent as a CPA-lawyer. We granted her motion and referred
the administrative case to the Office of the Solicitor General (OSG) for investigation,
report and recommendation.
In 1983, the CFI of Baguio dismissed the action for reconveyance. The trial court
ruled that respondent held the Moran property in trust for the Nakpils but found that
complainant waived her right over it.
On appeal, the Court of Appeals reversed the trial court. The appellate court held that
respondent was the absolute owner of the Moran property. The Decision was
elevated to this Court.
On February 18, 1986, during the pendency of complainants appeal to this Court, the
OSG submitted its Report on the disbarment complaint. The OSG relied heavily on
the decision of the Court of Appeals then pending review by this Court. The OSG
found that respondent was not put on notice of complainants claim over the property.
It opined that there was no trust agreement created over the property and that
respondent was the absolute owner thereof. Thus, it upheld respondents right to
transfer title to his family corporation. It also found no conflict of interests as the
claimants were related to the late Jose Nakpil. The OSG recommended the dismissal
of the administrative case.
Prefatorily, we note that the case at bar presents a novel situation as it involves the
disbarment of a CPA-lawyer for his demeanor in his accounting profession and law
practice in connection with the property of his client.

As a rule, a lawyer is not barred from dealing with his client but the business
transaction must be characterized with utmost honesty and good faith. The measure
of good faith which an attorney is required to exercise in his dealings with his client is
a much higher standard than is required in business dealings where the parties trade
at arms length. Business transactions between an attorney and his client are
disfavored and discouraged by the policy of the law. Hence, courts carefully watch
these transactions to assure that no advantage is taken by a lawyer over his client.
This rule is founded on public policy for, by virtue of his office, an attorney is in an
easy position to take advantage of the credulity and ignorance of his client. Thus, no
presumption of innocence or improbability of wrongdoing is considered in an
attorneys favor.
In the case at bar, we cannot subscribe to the findings of the OSG in its Report.
These findings were based mainly on the decision of the Court of Appeals in the
action for reconveyance which was reversed by this Court in 1993.
As to the first two charges, we are bound by the factual findings of this Court in the
aforementioned reconveyance case. It is well-established that respondent offered to
the complainant the services of his law and accounting firms by reason of their close
relationship dating as far back as the 50s. She reposed her complete trust in
respondent who was the lawyer, accountant and business consultant of her late
husband. Respondent and the late Nakpil agreed that the former would purchase the
Moran property and keep it in trust for the latter. In violation of the trust agreement,
respondent claimed absolute ownership over the property and refused to sell the
property to complainant after the death of Jose Nakpil. To place the property beyond
the reach of complainant and the intestate court, respondent later transferred it to his
corporation.
Contrary to the findings of the OSG, respondent initially acknowledged and respected
the trust nature of the Moran property. Respondents bad faith in transferring the
property to his family corporation is well discussed in this Courts Decision, thus:
x x x Valdes (herein respondent) never repudiated the trust during the
lifetime of the late Jose Nakpil. On the contrary, he expressly
recognized it. x x x (H)e repudiated the trust when (he) excluded
Pulong Maulap from the list of properties of the late Jose Nakpil
submitted to the intestate court in 1973. x x x
xxx
The fact that there was no transfer of ownership intended by the
parties x x x can be bolstered by Exh. I-2, an annex to the claim filed
against the estate proceedings of the late Jose Nakpil by his brother,
Angel Nakpil, which was prepared by Carlos J. Valdes & Co., the
accounting firm of herein respondent. Exhibit I-2, which is a list of the
application of the proceeds of various FUB loans contracted as of 31
December 1973 by the late Jose Nakpil, x x x contains the two (2)
loans contracted in the name of respondent. If ownership of Pulong
Maulap was already transferred or ceded to Valdes, these loans should
not have been included in the list.
Indeed, as we view it, what the parties merely agreed to under the
arrangement outlined in Exh. J was that respondent Valdes would x x x
take over the total loan of P140,000.00 and pay all of the interests due
on the notes while the heirs of the late Jose Nakpil would continue to

live in the disputed property for five (5) years without remuneration
save for regular maintenance expenses. This does not mean, however,
that if at the end of the five-year period petitioner (Nakpil) failed to
reimburse Valdes for his advances, x x x Valdes could already
automatically assume ownership of Pulong Maulap. Instead, the
remedy of respondents Carlos J. Valdes and Caval Realty Corporation
was to proceed against the estate of the late Jose M. Nakpil and/or the
property itself. (emphasis supplied)
In the said reconveyance case, we further ruled that complainants documentary
evidence (Exhibits H, J and L), which she also adduced in this administrative case,
should estop respondent from claiming that he bought the Moran property for himself,
and not merely in trust for Jose Nakpil.
It ought to follow that respondents act of excluding Moran property from the estate
which his law firm was representing evinces a lack of fidelity to the cause of his client.
If respondent truly believed that the said property belonged to him, he should have at
least informed complainant of his adverse claim. If they could not agree on its
ownership, respondent should have formally presented his claim in the intestate
proceedings instead of transferring the property to his own corporation and
concealing it from complainant and the judge in the estate proceedings. Respondents
misuse of his legal expertise to deprive his client of the Moran property is clearly
unethical.
To make matters worse, respondent, through his accounting firm, charged the two
loans of P65,000.00 and P75,000.00 as liability of the estate, after said loans were
obtained by respondent for the purchase and renovation of the property which he
claimed for himself. Respondent seeks to exculpate himself from this charge by
disclaiming knowledge or privity in the preparation of the list of the estates liabilities.
He theorizes that the inclusion of the loans must have been a mere error or oversight
of his accounting firm. It is clear that the information as to how these two loans should
be treated could have only come from respondent himself as the said loans were in
his name. Hence, the supposed error of the accounting firm in charging respondents
loans against the estate could not have been committed without respondents
participation. Respondent wanted to have his cake and eat it too and subordinated
the interest of his client to his own pecuniary gain. Respondent violated Canon 17 of
the Code of Professional Responsibility which provides that a lawyer owes fidelity to
his clients cause and enjoins him to be mindful of the trust and confidence reposed on
him.
As regards the third charge, we hold that respondent is guilty of representing
conflicting interests. It is generally the rule, based on sound public policy, that an
attorney cannot represent adverse interests. It is highly improper to represent both
sides of an issue. The proscription against representation of conflicting interests finds
application where the conflicting interests arise with respect to the same general
matter and is applicable however slight such adverse interest may be. It applies
although the attorneys intentions and motives were honest and he acted in good faith.
However, representation of conflicting interests may be allowed where the parties
consent to the representation, after full disclosure of facts. Disclosure alone is not
enough for the clients must give their informed consent to such representation. The
lawyer must explain to his clients the nature and extent of conflict and the possible
adverse effect must be thoroughly understood by his clients.

In the case at bar, there is no question that the interests of the estate and that of it
creditors are adverse to each other. Respondents accounting firm prepared the list of
assets and liabilities of the estate and, at the same time, computed the claims of two
creditors of the estate. There is clearly a conflict between the interest of the estate
which stands as the debtor, and that of the two claimants who are creditors of the
estate. In fact, at one instance, respondents law firm questioned the claims of creditor
Angel Nakpil against the estate.
To exculpate himself, respondent denies that he represented complainant in the
intestate proceedings. He points out that it was one Atty. Percival Cendaa, from his
law firm Carlos J. Valdes & Associates, who filed the intestate case in court. However,
the fact that he did not personally file the case and appear in court is beside the point.
As established in the records of this case and in the reconveyance case, respondent
acted as counsel and accountant of complainant after the death of Jose Nakpil.
Respondents defense that he resigned from his law and accounting firms as early as
1974 (or two years before the filing of the intestate case) is unworthy of merit.
Respondents claim of resignation from his law firm is not supported by any
documentary proof. The documents on record only show respondents resignation
from his accounting firm in 1972 and 1974. Even these documents reveal that
respondent returned to his accounting firm on July 1, 1976 and as of 1978, the
intestate proceedings for the settlement of Joses estate had not yet been terminated.
It does not escape us that when respondent transferred the Moran property to his
corporation on February 13, 1978, the intestate proceedings was still pending in
court. Thus, the succession of events shows that respondent could not have been
totally ignorant of the proceedings in the intestate case.
Respondent claims that complainant knew that his law firm Carlos J. Valdes &
Associates was the legal counsel of the estateand his accounting firm, C.J. Valdes &
Co., CPAs, was the auditor of both the estate and the two claimants against it. The
fact, however, that complainant, as administratrix, did not object to the set-up cannot
be taken against her as there is nothing in the records to show that respondent or his
law firm explained the legal situation and its consequences to complainant. Thus, her
silence regarding the arrangement does not amount to an acquiescence based on an
informed consent.
We also hold that the relationship of the claimants to the late Nakpil does not negate
the conflict of interest. When a creditor files a claim against an estate, his interest is
per se adverse to the estate. As correctly pointed out by complainant, if she had a
claim against her husbands estate, her claim is still adverse and must be filed in the
intestate proceedings.
Prescinding from these premises, respondent undoubtedly placed his law firm in a
position where his loyalty to his client could be doubted. In the estate proceedings,
the duty of respondents law firm was to contest the claims of these two creditors but
which claims were prepared by respondents accounting firm. Even if the claims were
valid and did not prejudice the estate, the set-up is still undesirable. The test to
determine whether there is a conflict of interest in the representation is probability, not
certainty of conflict. It was respondents duty to inhibit either of his firms from said
proceedings to avoid the probability of conflict of interest.
Respondent advances the defense that assuming there was conflict of interest, he
could not be charged before this Court as his alleged misconduct pertains to his

accounting practice.
We do not agree. Respondent is a CPA-lawyer who is actively practicing both
professions. He is the senior partner of his law and accounting firms which carry his
name. In the case at bar, complainant is not charging respondent with breach of
ethics for being the common accountant of the estate and the two creditors. He is
charged for allowing his accounting firm to represent two creditors of the estate and,
at the same time, allowing his law firm to represent the estate in the proceedings
where these claims were presented. The act is a breach of professional ethics and
undesirable as it placed respondents and his law firms loyalty under a cloud of doubt.
Even granting that respondents misconduct refers to his accountancy practice, it
would not prevent this Court from disciplining him as a member of the Bar. The rule is
settled that a lawyer may be suspended or disbarred for ANY misconduct, even if it
pertains to his private activities, as long as it shows him to be wanting in moral
character, honesty, probity or good demeanor. Possession of good moral character is
not only a prerequisite to admission to the bar but also a continuing requirement to
the practice of law.
Public confidence in law and lawyers may be eroded by the irresponsible and
improper conduct of a member of the bar. Thus, a lawyer should determine his
conduct by acting in a manner that would promote public confidence in the integrity of
the legal profession. Members of the bar are expected to always live up to the
standards embodied in the Code of Professional Responsibility as the relationship
between an attorney and his client is highly fiduciary in nature and demands utmost
fidelity and good faith. In the case at bar, respondent exhibited less than full fidelity to
his duty to observe candor, fairness and loyalty in his dealings and transactions with
his clients.
IN VIEW WHEREOF, the Court finds respondent ATTY. CARLOS J. VALDES guilty of
misconduct. He is suspended from the practice of law for a period of one (1) year
effective from receipt of this Decision, with a warning that a similar infraction shall be
dealt with more severely in the future.
Let copies of this Decision be furnished all courts, as well as the Integrated Bar of the
Philippines and the Office of the Bar Confidant.
SO ORDERED.

Revised Code of Ethics for Professional Accountants in

the Philippines, PRC BOA Resolution No. 125-08
Advertising for Philippine Accounting Profession, PRC
BOA Resolution No. 126-08

Mansibang, Ch. 2

WEEK 2.
1. Official receipt
2. Sales invoice
3. Purchase order
4. Voucher
5. Airway bill
6. Deposit Slip
7. Bank statement
8. Check
9. Payslip
10.Promissory note
11.General Journal
12.General Ledger
13.Chart of Accounts
14.Promissory Note
15.Trial Balance
16.Worksheet
17.Balance Sheet
18.Income Statement
19.Statement of Change in Owners Equity
20.Cash Flow Statement
21.Notes to Financial Statements
22.Statement of Managements Responsibility
23.Auditors Report

WEEK 3.
III.

BASIC ACCOUNTING
a. DEFINITION
b. NATURE, PURPOSE, FUNCTION
c. BASIC ACCOUNTING CONCEPTS
d. BOOKS OF ACCOUNTS
e. ACCOUNTING METHODS AND PERIODS
f. ACCOUNTING DIFFERENTIATED
1. AS TO BOOKKEEPING
2. AS TO AUDITING
3. AS TO FINANCE
4. AS TO COST ACCOUNTING
5. AS TO TAX ACCOUNTING
6. AS TO LEGAL ACCOUNTING

IV.

ACCOUNTING EQUATION
a. ASSETS
b. LIABILITIES
c. OWNERS EQUITY
d. DEBIT, CREDIT, T-ACCOUNT
e. ACCOUNTING METHODS AND PERIODS

V.

FINANCIAL STATEMENTS
a. STATEMENT OF FINANCIAL POSITION
b. INCOME STATEMENT
c. STATEMENT OF CHANGES IN OWNERS EQUITY
d. STATEMENT OF CASH FLOWS
e. NOTES TO FINANCIAL STATEMENTS

WEEK 4.
VI.

ACCOUNTING CYCLE
a. JOURNALIZING
b. POSTING TO THE GENERAL LEDGER
c. TRIAL BALANCE PREPARATION
d. WORKSHEET PREPARATION

e.
f.
g.
h.
i.

ADJUSTING THE BOOKS

PREPARING FINANCIAL STATEMENTS
CLOSING THE BOOKS
PREPARING POST-CLOSING TRIAL BALANCE
REVERSING ENTRIES