SEC wants firms with P100-million gov't contracts to undergo accredited audits

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April 7, 2026 | 5:45pm

MANILA, Philippines — Companies holding government contracts worth at least P100 million or more would face mandatory external audits under new rules proposed by the Securities and Exchange Commission.

The draft circular, issued April 1 and now open for public comment, would also raise qualification standards for auditing firms across the board. It doubles the asset thresholds needed to earn accreditation and expands the grounds for denying applications outright. 

In practical terms, the SEC's proposal would require large government contractors to hire an independent, SEC-accredited accountant to review their financial books until project completion — the same level of scrutiny currently applied to companies listed on the stock exchange. Right now, contractors are not required to do this.

The move comes as the country continues to deal with the aftermath of the flood control corruption scandal that erupted in mid-2025 and has since drawn in lawmakers, public works officials, and private contractors. Finance Secretary Ralph Recto's estimates share in a previous Senate hearing estimated the government's total losses from ghost projects to be around P42.3 billion to P118.5 billion.

As of late March, the Department of Justice said it had recovered just P611 million of the stolen funds. 

One of the issues the investigations exposed was the role — or failure — of auditors themselves. Sen. Francis Pangilinan called on the Commission on Audit last September to probe its own auditors, after a former Department of Public Works and Highways district engineer testified that Commission on Audit Commissioner Mario Lipana had allegedly peddled a list of flood control projects in Bulacan. 

A University of the Philippines policy paper noted that accountability for the scandal extends beyond lawmakers and engineers to procurement boards, auditors, and regulatory agencies "whose complicity or negligence facilitated the laundering of anomalous funds."

https://cids.up.edu.ph/flood-control-fiasco-a-policy-reckoning-for-accountability-in-the-philippines/

The SEC's proposal nor its press release for it does not explicitly cite the 2025 flood control scandal. But its new guidelines target a gap the controversy laid bare: the absence of independent financial oversight over private firms that profit from public contracts.

The amendments seek to "strengthen the accreditation framework and protect the public's interest by expanding oversight for government contractors, elevating qualification and track record standards, and providing a more rigorous evaluation process," the SEC said in its press release Tuesday, April 7.

Comments may be submitted to the SEC Office of the General Accountant at [email protected] on or before May 15.

What contractors would have to do

Under the draft rules, corporations awarded a single government contract of at least P100 million — or combined contracts totaling P150 million or more within a reporting year — would be required to engage an auditor accredited under the SEC's Group A category. 

That is the commission's most stringent tier, the same one that covers listed companies, public firms with at least P50 million in assets, and stock exchanges.

The auditor must stay on until the projects are fully completed or delivered.

Contractors would also have to file a notarized schedule for each government project. The schedule must list the project description, the specific agency involved, total contract cost, current status, start date, and expected completion date. An auditor's report must cover the entire disclosure.

In short, the SEC is pushing for a paper trail that an independent accountant has to sign off on.

Tougher standards for the auditors themselves

The SEC also wants to roughly double the experience requirements that auditing firms must meet to earn accreditation.

For Group A, applicants would need at least five corporate clients with total assets of P100 million each. The current threshold is P50 million. 
Group B — which covers investment houses, brokers, dealers, and universal banks registered as underwriters — would require five clients with assets of at least P50 million each. That is up from three clients at P20 million. 
Group C, covering financing and lending companies, would move from three clients to five, with a minimum asset threshold of P5 million each.

Denial of accreditation 

The draft rules also lay out new grounds for the outright denial of accreditation. 

Under the current framework, an auditor can be denied for gross negligence, loss of independence, or performing non-audit work for audit clients without safeguards.

The SEC now wants to add four more: auditors who lied or concealed information during the evaluation process; auditors who gave a clean bill of health to financial statements that contained serious errors or used the wrong accounting framework; cases where a single set of financial statements turned up six or more major errors; and auditors who prepared the very financial statements they were supposed to independently review.

A new three strikes provision would also limit the use of conditional accreditation. This is a temporary pass the SEC grants to firms that don't fully meet requirements but are allowed to operate while they catch up. 

Currently, there is no cap on how many times a firm can receive this status. Under the new rules, three is the limit — consecutive or not — across an applicant's entire history. After the third, any firm still falling short gets denied.