Assurance service offered by Philippine accounting/auditing firms

Assurance service pertains to independent professional services designed to improve the quality of information, or its context, for decision making. In the Philippines, this type of service includes assurances on the reliability of financial and nonfinancial information, business processes and controls, regulatory compliance, and information used in strategic transactions. Based on the foregoing, different practitioners offer not only financial statement audit but also various types of assurance services.

For all Securities & Exchange Commission registered organizations - whether subsidiaries of US domestic registrants or foreign private investors - that need to comply with the requirements of section 404 of the Sarbanes-Oxley Act (SOX), assurance providers offer services to achieve compliance.

The assurance providers attest to the managements assessment of the effectiveness of the company's internal controls over financial reporting and include their findings in the company's annual report to shareholders. Different firms are currently offering SOX compliance to US-listed companies or subsidiaries of foreign companies such as PLDT and Shell.

Another assurance service is due diligence. It is used to investigate and evaluate a business opportunity. It is conducted to confirm that the business is what it appears to be and avoid a bad business transaction. Due diligence is very much helpful during company takeovers or when a company wishes to go public.

Before fully acquiring back Coca-cola Philippines from San Miguel, Coca-cola Atlanta asked an assurance provider to conduct due diligence procedures. Aside from audit, attest services offering different levels of assurance about management's assertions include review and agreed-upon procedures.

IASB issues amendments permitting the reclassification of financial instruments

Philippine accounting firms which offers audit engagements to various companies should take note of the IASB's issued amendments permitting the reclassification of financial instruments.

The International Accounting Standards Board (IASB) recently issued amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures that would permit the reclassification of some financial instruments in rare circumstances.

One of the primary considerations for these amendments is the concern from some sectors of the implications of the fair value measurements of debt securities and loans and receivables that the entities no longer intend to hold for the short term. This is especially relevant in the current economic setting and it is not surprising that the deterioration of the world’s financial markets during the third quarter of this year is cited as a possible example of rare circumstances that will allow reclassification.

The amendments also address the desire of regional and international bodies to reduce the differences between IFRS and US Generally Accepted Accounting Principles (GAAP), as the latter already permit certain reclassifications of financial assets.

The effective date for the amendments is 1 July 2008.

Philippine accounting firms should advise their clients to disclose the above amendments to their respective financial statements.