SEC tightens audit rules to protect investors, curb corruption

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April 12, 2026 | 12:00am

MANILA, Philippines — The Securities and Exchange Commission (SEC) is stepping up efforts to protect the investing public and prevent corruption by tightening oversight and elevating qualification standards for auditing firms and external auditors.

The commission has issued for public comment a draft memorandum circular containing amendments to SEC accreditation guidelines for auditing firms and external auditors.

The SEC said the proposed guidelines seek to strengthen the accreditation framework and protect the public’s interest by expanding oversight for government contractors, elevating qualification and track record standards, as well as providing a more rigorous evaluation process, among others.

The SEC accredits auditing firms and independent auditors for quality assurance review. They are classified into three categories.

Group A consists of issuers of registered securities, except timeshares/membership certificates; listed companies; public companies with assets of at least P50 million and 200 or more holders; clearing agencies and clearing agencies as depositories; as well as stock exchanges and other self-regulatory organizations.

Group B covers investment houses, brokers and dealers of securities, investment companies, government securities eligible dealers and universal banks registered as underwriters, as well as issuers of registered timeshares and membership certificates.

Meanwhile, Group C includes financing companies with assets over P10 million, lending companies with assets over P5 million and transfer agents.

The SEC is proposing to increase the track record threshold for all accreditation groups to ensure that only auditors with sufficient experience handle regulated entities.

For Group A, applicants should have at least five corporate clients with total assets of at least P100 million each, compared to P50 million under the current rules.

The requirement for Group B will be increased to five corporate clients with assets of at least P50 million each from the current standard of three corporate clients with total assets of at least P20 million.

Applicants for Group C accreditation, meanwhile, should have at least five corporate clients, instead of the current rule requiring three, with assets of at least P5 million each.

Under the proposed rules, corporations awarded a single government contract amounting to at least P100 million, or combined government contracts totaling at least P150 million within the reporting year, will also be required to engage an SEC-accredited external auditor under the Group A category.

The SEC said the duly accredited external auditor would be engaged until the projects have been fully completed or delivered.

To facilitate oversight, the commission said these corporations would be required to submit a notarized schedule disclosing project descriptions, costs and status, which must be covered by an auditor’s report.

The proposed amendments likewise introduce more rigorous evaluation standards by providing more grounds for the outright denial of applications for accreditation.

The proposal seeks to add as grounds for outright denial: misrepresentation or concealment of information during evaluation; expressing an unqualified opinion when a client uses an incorrect accounting framework despite material misstatements; discovery of six or more material findings in a single set of financial statements; and failure to maintain independence, including cases where the auditor directly prepared the financial statements.