MANILA, Philippines — The Securities and Exchange Commission (SEC) is proposing a policy that would require companies with large government contracts to undergo audits by accredited external auditors as part of efforts to strengthen transparency and financial accountability.
Under a draft memorandum circular, corporations awarded a single government contract worth at least P100 million, or multiple contracts totaling P150 million within a reporting year, would be required to engage a Group A SEC-accredited external auditor. The external auditor must remain engaged until the government project has been fully completed or delivered.
The proposal forms part of amendments to the accreditation rules for auditing firms and independent auditors under Revised Rule 68 of the Securities Regulation Code, which governs financial reporting requirements of entities regulated by the SEC.
According to the SEC, the measure aims to improve oversight of corporations involved in large government projects and ensure that public funds are properly monitored through reliable financial reporting.
If approved, covered companies will also be required to submit a notarized schedule of project descriptions, costs and project status, which must be supported by an auditor’s report.
The draft rules also propose stricter qualifications for auditing firms seeking SEC accreditation.
For Group A auditors, applicants must have at least five corporate clients with assets of at least P100 million each, an increase from the current requirement of P50 million per client.
Meanwhile, Group B auditors must have five corporate clients with assets of at least P50 million each, up from three clients with P20 million, while Group C auditors must have five clients with assets of at least P5 million each, instead of three.
The SEC is likewise introducing additional grounds for denying accreditation, including misrepresentation during the evaluation process, issuing clean audit opinions despite material misstatements in financial statements, multiple material findings, and lack of independence, such as when auditors prepare the financial statements they are tasked to review.
The commission said the proposed amendments are intended to ensure that only qualified and credible auditors oversee companies handling major public projects, while strengthening confidence in financial disclosures.
The SEC is inviting stakeholders and the public to submit comments on the proposed rules before finalizing the policy.
