The Securities and Exchange Commission (SEC) is pushing for the exemption of more corporations from the mandatory submission of audited financial statements (FS), 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), the SEC argued that corporations with total assets or liabilities not exceeding P3 million should 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.
The SEC, at the moment, requires corporations with total assets or liabilities of at least P600,000 to submit annual financial statements audited by an independent certified public accountant.
Corporations with total assets and liabilities below the threshold need only submit financial statements certified under oath by their treasurer or chief financial officer.
‘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 Chairman Francis E. 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.’
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 Revised Corporation Code, 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,’ Lim said.