Amendments to Revenue Regulations No. V-1, Otherwise Known as the Bookkeeping Regulations, Covering the Audit and Examination of Books of Accounts by Independent Certified Public Accountants

January 2, 1952 REVENUE REGULATIONS NO. V-20 SUBJECT : Amendments to Revenue Regulations No. V-1, Otherwise Known as the Bookkeeping Regulations, Covering the Audit and Examination of Books of Accounts by Independent Certified Public Accountants TO : All Internal Revenue Officers and Others Concerned In accordance with the provisions of Republic Act No. 658, amending section 334 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following amendments to Revenue Regulations No. V-1, or the Bookkeeping Regulations, are hereby promulgated for the information and guidance of all concerned and shall be known as Revenue Regulations No. V-20. SECTION 1. Section 2 of Revenue Regulations No. V-1, as last amended by Revenue Regulations No. V-13, is hereby further amended by adding a new paragraph to read as follows: "An 'independent certified public accountant' is one who is in fact independent. In other words, an accountant will not be considered independent with respect to any person in whose business the accountant has any financial interest, direct or indirect, or in which he is, or was during the period of report, connected as a promoter, underwriter, voting trustee, director, officer, or employee. A certified public accountant whose work is subject to the supervision and control of the taxpayer, or who is employed to keep the books of accounts or to supervise the keeping of the said accounts, cannot audit the latter's books of accounts. He must, therefore, be employed exclusively to audit the books of accounts of the taxpayer and not for any other purpose, nor bear to him any business or professional relationship which may in any way affect the independence of his professional actuations. A firm of certified public accountants, one of the members of which is actually keeping or supervising the keeping of the books of accounts of a certain taxpayer, cannot audit or examine the said books of accounts of the latter. SECTION 2. The heading of Chapter II of Revenue Regulations No. V-1 and Section 334 of the National Internal Revenue Code quoted in said Regulations should be corrected so as to read as follows: "Chapter II. Books of Accounts and Audit by Independent Certified Public Accountants. All corporations, companies, partnerships, or persons required by law to pay internal revenue taxes shall keep a journal and a ledger, or their equivalents: Provided , however , that those whose gross quarterly sales, earnings, receipts, or output do not exceed five thousand pesos shall keep and use a simplified set of Bookkeeping Records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the Government may readily and accurately be ascertained and determined anytime of the year: And provided , further , that in the case of corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty five thousand pesos, shall have their Books of Accounts audited and examined yearly by Independent Certified Public Accountants and their income tax returns accompanied with certified balance sheets, profits and loss statements, schedules listing income-producing properties and the corresponding incomes therefrom and other relevant statements." (Section 334, National Internal Revenue Code, as amended by Republic Acts Nos. 438 and 658). SECTION 3. There is hereby inserted between sections 8 and 9 of Revenue Regulations No. V-1 a new section to be known as section 8-A, reading as follows: "Sec. 8-A. Audit to be performed by independent certified public accountants . (1) Corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed twenty-five thousand pesos, shall have their books of accounts audited and examined yearly by independent certified public accountants. The audit to be performed by an independent certified public accountant shall embrace an examination of the accounting for assets, liabilities and capital together with a review of the income, and expense accounts of the taxpayer, in accordance with generally accepted auditing standards and procedures. "(2) Accountant's Certificate. The accountant's certificate shall be dated, signed manually, and shall identify without detailed enumeration the financial statements covered by the certificate and shall be submitted and filed with the taxpayer's income tax return. However, if the audit and examination has been performed by a firm of certified public accountants, the certificate shall indicate the firm name, signed either by the certified public accountant of the firm who actually performed the audit and examination or by the responsible officer thereof. The certificate shall include statements and/or answers on the following: CAIHTE (a) Kinds and amounts of taxes payable by the taxpayers during the year. (b) Degree of relationship by consanguinity or affinity of the accountant to the taxpayer, to its President, Manager or principal stockholder. (c) Have all such taxes due or assessed against the taxpayer been fully paid? (d) How much of such taxes or assessments still remains unpaid? (e) Has the audit been made in accordance with generally accepted auditing standards and procedures? If not, in accordance with what accounting standards and procedures was the audit made? What was the reason or reasons for the omission of any of the audit procedures or the non-compliance with accepted auditing standards? SECTION 4. Date of Effectivity. These regulations shall take effect on January 2, 1952. aScITE (SGD.) AURELIO MONTINOLA Secretary of Finance Recommended by: (SGD.) S. DAVID Collector of Internal Revenue