The Securities and Exchange Commission (SEC) is taking a more active role in enhancing the quality of financial reporting by promoting high-quality audits to protect the investors and public interest.
This commitment was made by the SEC when it represented the Philippines recently in the International Forum of Independent Audit Regulators (IFIAR) Inspection Workshop in Mauritius.
Hosted by the Financial Reporting Council, Mauritius’ audit oversight and market regulator, from March 5 to 7, 2025, the IFIAR Inspection Workshop brought together over 100 audit regulators from 56 member countries to exchange insights on strengthening global audit oversight and regulatory best practices.
“The SEC marked another milestone as it presented at the IFIAR Inspection Workshop for the first time, demonstrating its commitment to global initiatives and elevating the Philippines’ presence in the international audit and regulatory community,” SEC Chairperson Emilio B. Aquino said.
The Commission, represented by Assistant Director and SEC Oversight Assurance Review (SOAR) Inspection Team Leader Guada May S. Preciados, and SOAR Deputy Inspection Team Leader Rizzo D. Tarroza, co-presented with South Africa a session titled, “A Practical Deep Dive into Revenue Inspections.”
The session focused on revenue as a critical audit area due to its complexity and the challenges in applying IFRS 15 (Revenue from Contracts with Customers).
In its presentation, the SEC identified instances of misapplication of accounting policies by companies, particularly in recognizing and measuring revenue using the five-step model under the Philippine Financial Reporting Standards (PFRS) 15, citing case studies from the Philippines.
The Commission also highlighted the failure of auditors to properly evaluate whether the application of accounting policies complied with PFRS 15, exposing gaps in audit quality and professional judgment.
These challenges in financial reporting underscored the need for stricter oversight and enhanced auditor training to ensure that auditors exercise a heightened level of professional skepticism and due care when assessing the appropriateness of revenue recognition practices, the SEC emphasized during the presentation.
Establishing robust consultation policies and procedures within audit firms is also vital to enable auditors to seek guidance and challenge complex accounting treatments effectively, it added.
As part of its efforts to uphold audit quality, the Commission issued SEC Memorandum Circular No. 1, Series of 2024, providing for the adoption of PFRS and Philippine Interpretations Committee questions and answers as part of the rules and regulations implemented by the SEC on financial reporting.
“The SEC remains steadfast in its commitment to ensure that companies are strictly compliant with accounting policies and upholding audit quality as it continues to promote good governance in the corporate sector,” Aquino said.
The IFIAR Inspection Workshop is an annual event hosted by a member country, with its Inspection Workshop Working Group currently led by the Auditor Oversight Body of Germany.