Requiring the Submission of Engagement Letters for Financial Audit by Independent Certified Public Accountants (CPAs) for Internal Revenue Tax Purposes.

June 29, 1990 REVENUE REGULATIONS NO. 06-90 SUBJECT : Requiring the Submission of Engagement Letters for Financial Audit by Independent Certified Public Accountants (CPAs) for Internal Revenue Tax Purposes TO : All Internal Revenue Officers, Independent Certified Public Accountants (CPAs) and Others Concerned SECTION 1 . Scope and Objective . Pursuant to the provisions of Sections 245 and 16(h), in relation to Section 232 of the National Internal Revenue Code (NIRC), as amended, these regulations are hereby promulgated to govern the requirement for submission by independent Certified Public Accountants (CPAs) and their respective taxpayer-clients of engagement letters for financial audit. These regulations are being issued to effectively monitor the engagements of independent CPAs with their taxpayer-clients and thereby enhance the integrity and reliability for tax purposes of financial statements as well as other statements certified by them in the exercise of their accounting profession. SECTION 2 . Submission of Engagement Letter Financial Audit . Independent CPAs shall submit in behalf of their taxpayer-clients. These engagement letters shall prominently reflect the date of acceptance of said engagement by the taxpayer-client and the name of the representative of said taxpayer-client who agreed to or accepted the terms of the engagement letter. SECTION 3 . When and Where to File Engagement Letters . The independent CPA shall file the copy of the engagement letter and renewals or subsequent agreements thereon with the (a) Commissioner of Internal Revenue, Diliman, Quezon City, for taxpayer-clients whose principal places of business are located in Metro Manila, or (b) Revenue District Officer who has jurisdiction over the taxpayer's principal place of business or residence, for taxpayer-clients outside of Metro Manila, not later than two (2) months before the beginning of the client's taxable year covered by the engagement. In order to have a complete master list and be able to monitor all practising accountants relative to their clientele, the Revenue District Officers outside of Metro Manila are required to immediately forward to the Commissioner of Internal Revenue the copies of the engagement letters as well as the agreements received by them not later than twenty (20) days after the same are submitted to them. SECTION 4 . Working Papers . The Commissioner of Internal Revenue may at any time require the independent CPA to show or prove the existence of his working papers relative to a particular taxpayer-client to confirm the fact that the books of accounts and other accounting records were actually audited by the CPA. SECTION 5 . Delayed or Non-submission of Engagement Letters . The taxpayer-clients and the CPAs shall be jointly responsible for the submission of the engagement letters. In cases of non-submission and/or late submission of said engagement letter, the CPA and the taxpayer-client shall be held liable to the penalties provided for in Section 274 of the Tax Code. Subject to certain exceptions as determined by the Commissioner of Internal Revenue, returns of taxpayer-clients whose engagement letters were not submitted or were submitted out of time or failed to comply with the certification as to taxes required under Revenue Regulations 3-90 shall be given first priority in the strict audit of tax returns, and they shall be presumed not to have been properly audited. SECTION 6 . Sanctions in Section 256 and Revenue Regulations No. 3-90 . The Commissioner of Internal Revenue is hereby enjoined to strictly apply the sanctions under Section 256 of the Tax Code in relation to Revenue Regulations No. 3-90 regarding additional requirements for certification by independent CPAs, and other requirements under these regulations. SECTION 7 . Repealing Clause . All existing rules and regulations or part(s) thereof which are inconsistent with the provisions of these regulations are hereby revoked or modified accordingly. SECTION 8 . Effectivity . These regulations shall apply to engagements for financial audits for the taxable year ending November 30, 1990 and all subsequent years. (SGD.) JESUS P. ESTANISLAO Secretary of Finance Recommended by: (SGD.) JOSE U. ONG Commissioner of Internal Revenue