The Securities and Exchange Commission is now requiring publicly-listed companies and other corporations to report fees paid to their external auditors.
The SEC issued Memorandum Circular No. 18, Series of 2024 which provides the new guidelines for disclosing fee-related information about external auditors.
It said this aims to improve transparency in financial and operational reporting. The guidelines will apply to the annual financial statements (AFS) of affected companies starting from the period ending Dec. 31, 2024.
The companies affected by these guidelines include publicly-listed companies, companies that issued securities registered under the Securities Regulation Code (SRC) and public companies with assets of at least P50 million and 200 or more shareholders holding at least 100 shares each.
It said the guidelines also apply to companies filing financial statements for issuing securities in the public market, holders of secondary licenses from the SEC, Bangko Sentral ng Pilipinas and the Insurance Commission, and any other companies the SEC might consider in the future as public interest entities.
The new rules require companies to report specific fee-related information for the past two years. The information should show fees paid to the external auditor and any related firms for auditing the company’s financial statements.
If fees were paid to the external auditor or related firms for services provided to the company or its related entities (those the company controls), the information should also be reported in a two-year comparative format.
If the fees received by the external auditor from the covered company make up more than 15 percent of the total fees received by the auditor for two consecutive years, this should also be disclosed, including the year this started.
Companies do not need to follow these rules if the information is already included in group or consolidated financial statements for a parent company or a wholly-owned entity, the SEC said.
Companies that will fail to follow these guidelines will face penalties after notice and hearing, according to the Revised SRC Rule 68 and the SEC’s fines and penalties system.