SEC exempts micro firms from mandatory audit

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January 22, 2026 | 12:00am

MANILA, Philippines —  The Securities and Exchange Commission (SEC) has taken another step to reduce the regulatory burdens for small companies by exempting micro businesses from the submission of audited financial statements as part of their reportorial requirements.

The SEC issued on Jan. 20 Memorandum Circular 4, Series of 2026, exempting both stock and non-stock corporations with total assets or liabilities not exceeding P3 million from submitting audited financial statements.

Only stock and non-stock corporations with total assets or liabilities less than P600,000 were previously exempted from mandatory audit.

“This reform recognizes the realities faced by micro enterprises, which often operate with very limited resources,” SEC chairperson Francis Lim said.

By allowing the submission of certified financial statements instead of audited ones, Lim said the SEC is making compliance more proportionate, allowing micro enterprises to redirect their resources to growing their business.

“At the same time, the new threshold preserves accountability by requiring management to formally assume responsibility for the accuracy and integrity of their financial statements, ensuring that regulatory oversight remain firmly in place,” he said.

The SEC said the higher threshold would apply to financial statements covering fiscal years ending on or after Dec. 31, 2025, with corporations with fiscal years ending prior to the effectivity of the memorandum circular to follow the threshold in effect at the close of their fiscal year.

It said that a corporation that does not meet the audit threshold must submit financial statements accompanied by a statement of management’s responsibility (SMR) instead of audited financial statements.

For stock and non-stock corporations, the SMR must be signed under oath by the chairman or the board, president or chief executive officer and treasurer or chief financial officer, all duly authorized by its board of directors, while the president and treasurer must sign the SMR for one person corporations.

The signatories will assume full responsibility for the accuracy, completeness and truthfulness of the submitted financial statements.

The new threshold will not apply to entities classified under Groups A, B and C of the Revised Securities and Regulation Code Rule 68, as well as corporations vested with public interest due to the nature of their regulatory obligations and the degree of public interest they represent.

Group A covers corporations such as public companies or those with at least P50 million worth of assets, and with 200 or more holders, each holding at least 100 shares; issuers of securities listed in an exchange  and stock and securities exchanges and other self-regulatory organizations.

Included in Group B are issuers of registered timeshares, proprietary and non-proprietary membership certificates and corporations applying for the registration of such securities; investment houses; brokers and dealers; government securities eligible dealers and universal banks registered as underwriters of securities.

Group C, meanwhile, is composed of financing companies with assets of over P10 million in the preceding year; lending firms with assets of over P5 million the year before; transfer agents and non-stock, non-profit corporations, including foundations, which solicit or receive annual donations or contributions and/or with fund balance of more than P25 million.