SEC enhances financial reporting rules

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September 23, 2026 | 12:00am

MANILA, Philippines — The Securities and Exchange Commission (SEC) is enhancing the overall quality and integrity of financial reporting by mandating the conduct of audits for government contractors and elevating qualification standards for external auditors and auditing firms.

The commission has issued Memorandum Circular 26, Series of 2026, amending pertinent provisions on the accreditation of independent auditors of SEC-regulated entities under Revised Rule 68 of the Securities Regulation Code.

The SEC said the revised 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.

“High-quality audits serve as a foundation of transparency in capital markets, fostering public trust in the financial system,” SEC chairperson Francis Lim said.

“By tightening our accreditation standards and extending oversight to auditors of major government contractors, we are reinforcing accountability, ensuring that public funds and investors’ hard-earned money are protected by rigorous and independent financial reporting,” Lim said.

The circular expands the coverage of Group A and B auditors to government contractors, or those with contracts for the procurement or acquisition of goods and consulting services and the contracting for infrastructure projects by the national government and its instrumentalities.

Under the new guidelines, all corporate general contractors are required to engage Group A independent auditors if they have a single government contract of more than P750 million, or cumulative government contracts amounting to more than P1 billion.

Contractors with single government contracts worth P400 million to P750 million, as well as those with cumulative government contracts worth P500 million to P1 billion, meanwhile, should tap Group B independent auditors.

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

These corporations will be required to submit a notarized schedule disclosing project descriptions, costs and status, which must be covered by an auditor’s report.

Overall, the SEC accredits auditing firms and independent auditors for quality assurance review based on three categories: Groups A, B and C.

To ensure that only auditors with sufficient experience handle regulated entities, the commission also increased the track record threshold for all accreditation groups.

For Group A, applicants are now required to have at least five corporate clients with total assets of at least P100 million each, up from P50 million in the previous rules.

The requirement for Group B has been set to five corporate clients with assets of at least P50 million each, up from three corporate clients with total assets of at least P20 million.

Applicants for Group C accreditation, meanwhile, must have at least five corporate clients, up from the previous rule of three corporate clients, with assets of at least P5 million each.

The circular also introduced more rigorous evaluation standards by providing more grounds for the outright denial of applications for accreditation.