Increased SEC Statutory Audit Thresholds

Early-stage companies and micro-enterprises in the Philippines have received significant compliance relief. Under SEC Memorandum Circular No. 04, Series of 2026, the Securities and Exchange Commission raised the mandatory Audited Financial Statement (AFS) asset and liability threshold from ₱600,000 to ₱3,000,000.

This adjustment lowers annual compliance expenses, allowing growing startups and One Person Corporations (OPCs) to redirect capital toward core operations.

1. What Changed Under the New Rule?

Previously, any corporation with total assets or liabilities reaching ₱600,000 was legally required to hire an independent Certified Public Accountant (CPA) to perform an annual audit.

┌─────────────────────────────────────────────────────────────┐
│                 Determining AFS Requirement                 │
└──────────────────────────────┬──────────────────────────────┘
                               │
             ┌─────────────────┴─────────────────┐
             ▼                                   ▼
┌──────────────────────────┐       ┌──────────────────────────┐
│  Assets or Liabilities   │       │  Assets or Liabilities   │
│   ≤ ₱3,000,000           │       │   > ₱3,000,000           │
└────────────┬─────────────┘       └────────────┬─────────────┘
             ▼                                  ▼
┌──────────────────────────┐       ┌──────────────────────────┐
│ Unaudited Financials     │       │ Audited Financials (AFS) │
│ + Sworn Statement (SMR)  │       │ Independent CPA Audit    │
└──────────────────────────┘       └──────────────────────────┘

• Old Threshold: ₱600,000 Total Assets or Total Liabilities.

• Updated Threshold: ₱3,000,000 Total Assets or Total Liabilities.

• New Submission Requirement: Entities at or below the ₱3,000,000 mark may file certified financial statements accompanied by a sworn Statement of Management’s Responsibility (SMR) signed by authorized corporate officers.

2. Signing Requirements for the Sworn SMR

While an external CPA audit is no longer mandatory for qualifying companies, corporate officers assume direct legal responsibility for the accuracy of their financial records.

• Stock and Non-Stock Corporations: The SMR must be sworn under oath and signed by:

  1. Chairman of the Board

  2. President or Chief Executive Officer

  3. Treasurer or Chief Financial Officer

• One Person Corporations (OPCs): Under SEC MC No. 10, Series of 2026, the SMR must be signed under oath by both the President and the Treasurer.

3. Comparison: AFS vs. SMR Submission

Important Exclusion: The audit exemption does not apply to entities regulated under special SEC coverage (such as public companies, financial intermediaries, or entities vested with public interest), regardless of their asset size.