The Securities and Exchange Commission (SEC) wants to exempt more corporations from the mandatory submission of audited financial statements, in a bid to further reduce compliance costs for micro, small, and medium enterprises (MSMEs).

In a policy paper submitted to the Department of Finance (DOF) on Oct. 28, the SEC recommended that corporations with total assets or liabilities not exceeding ₱3 million be required to submit annual financial statements (FS) certified under oath by their treasurer or chief financial officer (CFO) in lieu of audited FS.

“We have repeatedly said that MSMEs are the backbone of the Philippine economy, which is why the SEC remains committed to implementing measures that will foster a business environment that is easier to navigate for our budding entrepreneurs,” SEC Chairperson Francis Lim said.

He added that, “Our proposed policy will 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 proposed policy will apply to FS covering fiscal years (FYs) ending on or after Dec. 31, 2025, subject to the final approval of the DOF.

If implemented, the higher threshold is expected to ease the regulatory and financial burden of micro enterprises, particularly those with total assets or total liabilities not exceeding ₱3 million, by exempting them from mandatory audits.

At present, the SEC requires corporations with total assets or liabilities of at least ₱600,000 to submit annual FS audited by an independent certified public accountant (CPA), pursuant to Section 177 of the Revised Corporation Code of the Philippines (RCC).

Corporations with total assets and liabilities below the threshold need only submit FS certified under oath by their treasurer or CFO.

The current audit exemption threshold is reiterated in revised rule 68 of the implementing rules and regulations (IRR) of the Securities Regulation Code (SRC).

Section 74 of the RCC, however, recognizes the authority of the DOF to determine the threshold for the application of the requirement for corporations to submit audited FS.

Beyond relieving the financial pressure on MSMEs, the proposed policy will reduce incidents of rubber-stamp audits, cut barriers to registration, simplify compliance obligations, and allow the SEC to reallocate its supervision efforts toward high-risk entities.

Despite the removal of the audit requirement, the SEC will maintain regulatory oversight over the covered corporations through its visitorial powers under the RCC, which grant the Commission the power to require audits if warranted by public interest, among others.

“We assure the public that the proposal will not dilute oversight over corporations, including entities engaged in public infrastructure projects or other regulated sectors, as they generally exceed the ₱3-million threshold,” Lim said.