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The Securities and Exchange Commission says the new guidelines are meant to 'enhance transparency'
MANILA, Philippines – The Securities and Exchange Commission (SEC) is tightening rules on auditor fees, as it is requiring publicly listed companies and other corporations to disclose any fees paid to their external auditors.
In a memorandum circular issued on December 26, 2024, the corporate watchdog said the guidelines are meant to “enhance transparency relevant to the auditors’ experience.”
Under the new guidelines, companies are required to provide specific fee-related information in a two-year comparative format as an addendum to their Annual Financial Statements (AFS).
“The required disclosure covers fees paid or payable to, or as agreed with, the external auditor/audit firm and network firms for the audit of financial statements on which the external auditor expresses an opinion,” the corporate watchdog wrote in a statement.
The SEC also mandates that fees charged to the covered company and its related entities be presented in the two-year comparative format.
A company must also disclose if its payments to the external auditor are at least 15% of the total fees the auditor receives.
The SEC warned that failure to comply with the new guidelines could result in the imposition of fines under the revised SEC Rule 68 on financial reporting requirements and the commission’s consolidated scales of fines and penalties.
Apart from public firms, the new guidelines will also cover companies who are in the process of going public, as well as holders of secondary licenses issued by the SEC, the Philippine central bank, and Insurance Commission, and other corporations that the SEC deems “public interest entities.”
However, companies do not need to follow the new guidelines if the information is related to a parent entity or an entity owned by another public interest entity as it would already be in their financial reports.
The guidelines will apply to financial statements covering the period ending December 31, 2024, and thereafter.
The full memorandum circular can be viewed here. – Rappler.com
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