3 weeks ago
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The Bangko Sentral ng Pilipinas (BSP) has approved the revised framework on the selection of external auditors to ensure the safety and soundness of all BSP supervised financial institutions (BSFIs).
BSP Circular No. 1210, signed on Feb. 17, 2025, was approved through Monetary Board Resolution No. 147 last Feb. 5. In its policy statement, the BSP said the amended rules on the selection of external auditors update and make it consistent with the other changes in BSFIs’ corporate governance framework as per the General Banking Law of 2000 as amended, and other relevant laws and regulations.
The BSP said it “considers the external auditing profession as partner in promoting the safety and soundness of BSFls.”
It noted that external auditors – which are audit firms, partners, or an individual/sole practitioner in public practice -- through the conduct of audits and opinions rendered on Audited Financial Statements (AFS) “contribute to enhancing corporate governance and empowering the public and investors to make informed financial decisions.”
Based on the circular, when it comes to the appointment and selection of external auditors, BSFIs will only engage the services of an external auditor included in the BSP’s “List of Selected External Auditors for BSFIs”.
“In this respect, a BSFI will only appoint an external auditor belonging to the same category or from categories higher than the category of the BSFI concerned as provided in this section,” said the BSP.
The Monetary Board may require the BSFI to appoint an external auditor from higher categories as part of the BSP's supervisory action on the BSFI; or at the expense of the BSFI, require the external auditor to undertake a specific review of a particular aspect of the BSFI's operations/transactions.
External auditors will be classified into three categories, two of which are: Group A which are the universal and commercial banks, foreign banks and branches or subsidiaries of foreign banks including offshore banking units, digital banks and trust departments and trust corporations; and Group B which are thrift banks, non-bank financial institutions with quasi-banking license, virtual asset providers and credit card issuers/acquirers.
The last category Group C includes rural and cooperative banks, non-stock savings and loans associations, pawnshops, and remittance and transfer companies/money changers/foreign exchange dealers.
In determining the categories, the BSP said this will be based on their track record and the results of the BSP's assessment of their continuing eligibility to be included in the List of Selected External Auditors for BSFIs.
Meanwhile, external auditors applying for inclusion in the BSP list will have to qualify and submit documentary requirements. Inclusion in the list is valid for five years but it could be less than that, depending on the BSP.
The BSP said it will “periodically evaluate the external auditor's performance by assessing the quality of the BSFI's audited financial statements and its compliance with the requirements”. This assessment will determine if an external auditor is qualified to remain in the list.
The circular also revised the audit engagement and reportorial requirements, supervisory enforcement action, and the guidelines on the suspension/delisting of external editors in the BSP list.
As for transitory provisions, external auditors in good standing whose validity for inclusion has expired after the audit of 2025 financial statements will be allowed to engage in the audit of the 2024 financial statements, said the BSP.
Meanwhile, all applications for inclusion in the list to cover the audit of 2024 financial statements and thereafter will be submitted to the Financial Supervision Sector.
“External auditors who were suspended or delisted (prior) to the effectivity of this circular may apply for reinclusion after the lapse of the effectivity of suspension or five years” from the effectivity of this circular in the case of delisting, said the BSP.
