The Securities and Exchange Commission (SEC) is pushing for the exemption of more corporations from the mandatory submission of audited financial statements, in a bid to further reduce compliance costs for micro, small and medium enterprises (MSMEs).
In a policy paper submitted to the Department of Finance (DOF) on October 28, the SEC recommended that corporations with total assets or liabilities not exceeding P3 million be required to submit annual financial statements certified under oath by their treasurer or chief financial officer in lieu of audited financial statements.
The proposed policy will apply to financial statements covering fiscal years ending on or after December 31, 2025, subject to final approval of the DOF. If implemented, the higher threshold is expected to ease the regulatory and financial burden of micro enterprises, particularly those with total assets or total liabilities not exceeding P3 million, by exempting them from mandatory audits.
At present, the SEC requires corporations with total assets or liabilities of at least P600,000 to submit annual financial statements audited by an independent certified public accountant, pursuant to Section 177 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC). Corporations with total assets and liabilities below the threshold need only submit financial statements certified under oath by their treasurer or chief financial officer.
The current audit exemption threshold is reiterated in Revised Rule 68 of the Implementing Rules and Regulations of Republic Act No. 8799, or the Securities
Regulation Code. Section 74 of the RCC, however, recognizes the authority of the DOF to determine the threshold for the application of the requirement for corporations to submit audited financial statements.
“We have repeatedly said that MSMEs are the backbone of the Philippine economy, which is why the SEC remains committed to implementing measures that will foster a business environment that is easier to navigate for our budding entrepreneurs,” SEC Chairperson Francis Lim said.
“Our proposed policy will not only improve the ease of doing business, but will also cut unnecessary compliance requirements for micro entities, in support of the government’s goal of driving inclusive economic development,” he added.
Beyond relieving the financial pressure on MSMEs, the proposed policy will reduce incidents of rubber-stamp audits, cut barriers to registration, simplify compliance obligations, and allow the SEC to reallocate its supervision efforts toward high-risk entities.
Despite the removal of the audit requirement, the SEC will maintain regulatory oversight over the covered corporations through its visitorial powers under the RCC, which grants the Commission the power to require audits if warranted by public interest, among others.
“We assure the public that the proposal will not dilute oversight over corporations, including entities engaged in public infrastructure projects or other regulated sectors, as they generally exceed the P3 million threshold,” Chairperson Lim said.
