THE Securities and Exchange Commission (SEC) is pushing to exempt more corporations, particularly micro, small and medium enterprises (MSMEs), from the mandatory submission of audited financial statements (AFS) to reduce compliance costs.
The SEC, in a policy paper submitted to the Department of Finance (DOF), recommended raising the audit exemption threshold to corporations with total assets or liabilities not exceeding P3 million.
The current threshold requires firms with at least P600,000 in total assets or liabilities to submit AFS prepared by an independent certified public accountant.
The proposal suggests that firms falling below the new P3-million limit would instead submit annual financial statements certified under oath by their treasurer or chief financial officer, in lieu of audited statements.
If approved by the DOF, the higher exemption is slated to take effect for fiscal years ending on or after Dec. 31, 2025. The move aims to ease regulatory and financial burdens on micro enterprises.
SEC chairman Francisco Lim said the move is part of the SEC’s commitment to improving the business environment for entrepreneurs.
“We have repeatedly said that MSMEs are the backbone of the Philippine economy,” Lim said, adding that the proposal would “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.”
The SEC believes the proposal will also help reduce incidents of “rubber-stamp audits,” lower barriers to registration, and simplify compliance obligations for small firms, allowing the commission to focus its supervision on higher-risk entities.
While seeking to remove the audit requirement for smaller firms, the SEC said it would retain regulatory oversight over these companies.
The existing P600,000 threshold is outlined in Revised Rule 68 of the implementing rules and regulations of Republic Act No. 8799, or the Securities Regulation Code.
The Revised Corporation Code (RCC) Section 74 authorizes the DOF to determine the threshold for requiring AFS.
