QAR, ISQM, and BIR’s RUN AFTER FAKE TRANSACTIONS (RAFT) Campaign: A Recall of Quality Audits = Playing a Sustainable Future

The public has a high regard for accountants. In this profession, the public and the stakeholders look up to and show respect for accountants for making a difference in terms of handling business operations, management, financial matters, consultancy, advisory, and compliance services which in the end results in wise business decision making. We are in awe when the Bureau of Internal Revenue in the Philippines started its new campaign regarding the collection of taxes that should otherwise accrue to the government revenue. This BIR’s campaign is considered a bit scandalous and alarmingly affecting the public practice and we do not need to be mum on it, to say at least: Why were the professional title (as a CPA) and accreditation (as Tax Practitioners) included in the campaign?

What is RAFT, the BIR Newest Campaign?

BIR’s recent campaign RUN AFTER FAKE TRANSACTIONS (abbrev. “RAFT”; RMC No. 38-2023) is to investigate and prosecute businesses across the country who are using fake invoices and receipts. Using fake invoices and receipts lowers the taxable income, decreasing the tax due and collection of revenue of the government. Run After Tax Evaders (RATE), Tax Mapping, the Oplan Kandado Program, and other government-enforced tax collecting schemes are not new. However, this RAFT program is the first in history to look for CPAs and tax practitioners who accept or allow their clients’ tax evasion despite knowing such facts. Being said, this campaign also suspends or cancels the certificate of accreditation of Tax Practitioners and initiates administrative complaints for the suspension and revocation of professional licenses of CPAs involved in fake transactions. From the perspective of the CPA and Tax Practitioners, this is a significant accusation. Are the services offered by CPAs and tax practitioners going beyond the tax laws and standards, or is it a symptom of unethical behaviors and unrefreshed memories of discontinued professional development? For the determination of such facts, we leave it to the BIR’s judgment.

The Bottom Line: QAR AND ISQM Implementation

What does BIR point out in this campaign? They are waging war against CPAs and tax practitioners who are involved in such unethical behaviors. Does it affect public practice? Absolutely yes! External auditors who issue an unmodified (clean) opinion to the Financial Statements is bound by such obligations under the Philippine Standards on Audit (PAS). For example, if the auditor concludes that the identified or suspected non-compliance either to law or regulations has a material effect on the financial statements and has not been adequately reflected in the financial statements, the auditor shall, in accordance with PSA 705 (Revised), express a qualified opinion or an adverse opinion on the financial statements. (Ref: PSA 250)

This comes into light the importance of QAR Inspection related to ISQM Implementation on which the CPAs in public practice must have a system of quality management that deals with a firm’s responsibilities to design, implement and operate a system of quality management for audits or reviews of financial statements, or other assurance or related services engagements. QAR is like a doctor’s prescription, giving you a proper dosage of ISQM implementation to enhance or improve the quality of assurance services like audit and tax advisory provided.

QAR AND ISQM, a heyday in quality audits

CPAs in public practice, their commitment to providing quality assurance services like an audit of financial statements helps shape the future of every Filipino. QAR and ISQM are something we can use as a weapon to provide a quality audit and safeguard the interest of the firm, our clients, and the public. In addition, compliance with QAR and ISQM minimizes the risks of being under investigation for BIR’s RAFT program. At the end of the day, all the efforts of CPAs towards nation-building will not be put to waste if compliance is made with established standards and principles affecting the practice of the profession. No one wants to be gaslighted in the end by noncompliance with current standards like ISQM, PSA, and Tax Laws on public practice, which in effect, expose a deemed called “CPAs and tax practitioners” to public scrutiny.

BIR is not an enemy; it is an agency tasked to observe the tax laws and our full cooperation through observance of tax laws (proper advice to clients and communicating the risks involved) alongside issuance of proper audit opinion (checking compliance with PAS, ISQM) will be of immense help. A dull and dry future for everyone awaits if we do not take action now. Arm in arm, we stand in confidence and integrity in the name and love of the profession- we contribute to a sustainable future by making it right. No detours, just comply.