SEC Raises Audit Threshold to ₱3 Million: What It Means for Financial Reporting in the Philippines

November 11, 2026

Financial Reporting Services in the Philippines

The Securities and Exchange Commission (SEC) has introduced new changes to the Audit Threshold for corporations in the Philippines. They have raised the requirement from ₱600,000 to ₱3 million in total assets or total liabilities. This change, formalized in the SEC Memorandum Circular No. 4 Series of 2026, means that thousands of stock and non-stock corporations are no longer required to pay for external audit fees. Whilst fewer companies will now need to provide audited accounts, the requirement for reliable Financial Reporting services has increased due to the need to ensure accurate books and avoid heavy administrative penalties. Failure to understand the new requirement could leave you out of compliance with either the SEC or BIR, as both agencies will use completely different criteria to determine compliance. Ensure your board of directors and finance team fully understand the requirements for your balance sheet.

New Audit Threshold 2026

The Audit Threshold 2026 is the biggest change to company Financial Reporting in the Philippines in over a decade. This change comes directly from the Revised Securities Regulation Code (SRC) Rule 68. The ₱600,000 threshold had been stuck for some time despite inflation, property prices, and costs increasing. This was causing micro and small companies to pay disproportionate amounts for their statutory audit. With agreement from the Department of Finance, the Audit Threshold has been increased fivefold to reflect the current economic climate and ensure that it aligns with policy to support micro, small, and medium enterprises (MSME) in the Philippines. This means that qualifying companies can now put their money to better use.

Increased Balance Sheet Threshold: Any stock or non-stock company that has total assets or total liabilities of over ₱3 million will need to obtain an independent audit. Any company with total assets or total liabilities equal to or less than ₱3 million is classed as a micro entity.
Threshold Applies From: The increased requirement will apply to accounts for any fiscal year ending on or after December 31st 2025. Companies with a fiscal year end date before this date will still be required to follow the previous threshold of ₱600,000.
Statement of Management’s Responsibility (SMR): Companies that qualify for the exemption will need to produce unaudited accounts. These will need to include a Statement of Management’s Responsibility, which must be signed under oath by the Chairman of the Board, President/CEO, and Treasurer/CFO for regular stock and non-stock companies.
New Micro and Small Entity Definitions: A company is now classed as a micro entity if it has total assets or total liabilities equal to or less than ₱3 Million. Small Entities are those with total assets or total liabilities exceeding ₱3 Million but not exceeding ₱100 Million. Micro entities can choose to report under either the income tax basis or PFRS for Small Entities.
Still Need to Submit: Whilst qualifying for the audit exemption, you will still need to submit your annual accounts. This will need to be uploaded to the SEC Electronic Filing and Submission Tool (eFAST).
Warning: There is a warning from the SEC that if you fail to provide complete, accurate, or non-misleading unaudited accounts, then you will face serious administrative penalties. You will also be required to undertake an audit.

Impact on Audited Accounts in the Philippines

The change to the Audit Threshold will have a big impact on how your company’s treasurer and controllers approach Financial Reporting. Previously, any company with a small amount of office equipment, lease improvements, or initial paid-up capital would have exceeded the ₱600,000 requirement. Lean businesses and start-ups can now legally avoid paying for an external audit. However, your directors must understand that whilst they are not required to undertake an external audit, they must still be diligent with their accounts.

Cash: Any company with unutilized investor funds, escrow funds, or large amounts of cash in its bank accounts must include this as current assets. Even a start-up with little physical equipment will have to undertake an audit if its bank balance at year-end exceeds ₱3 Million.
Liabilities: The ₱3 Million threshold relates to both sides of your balance sheet. If you have total assets of only ₱1.5 Million but have bank loans, shareholder loans, or payables of ₱3.5 Million, you will still be required to submit audited accounts.
Personal Liability: When an external auditor signs off on your accounts, it has been verified by an independent third party. However, when you do not undertake an audit, then the officers of the company signing the SMR will have full personal liability for the figures.
Requirements from Commercial Lenders and Investors: The exemptions do not apply to private financial institutions. Many commercial banks, VC’s and grant providers will require you to have audited accounts.
Documentation: You will need to have well-organized documentation including your general ledger, monthly bank reconciliations, official receipts, supplier contracts, and payables/receivables. If the SEC were to undertake a spot check or ask for clarification, you must be able to provide evidence for everything on your balance sheet.

Double Check Compliance with BIR

One of the most common and expensive mistakes made by companies in the Philippines is to assume that if you qualify for an audit exemption with the SEC, you will also qualify for an exemption with the BIR. The SEC looks at your company size based on your balance sheet, whereas the BIR looks at your company activity based on your turnover. This can cause problems with your income tax return being rejected and you facing large surcharges.

SEC Balance Sheet Requirement: The SEC will look solely at your total assets and total liabilities at year-end to determine if you qualify for an audit.
BIR Gross Turnover Requirement: Under section 232(A) of the National Internal Revenue Code (amended by the TRAIN Law), any company with a turnover of over ₱3 million must submit audited accounts.
Example: If you are a high-turnover trading company, consultancy, or digital services company, you may have low assets and liabilities but a turnover of ₱10 million. You will therefore qualify for an exemption from an audit with the SEC but will still need to submit audited accounts with the BIR.
Order of Submission: In the Philippines, you will need to submit your Annual Income Tax Return and accounts to the BIR first (usually by April 15th if you are a calendar year company). Attachments will need to be uploaded to the BIR Electronic Audited Financial Statements (eAFS) portal and then the acknowledged copies submitted to the SEC.
Ensure Figures Match: The figures included in your unaudited accounts must match those included in your schedules, balance sheet, and income statement submitted to the BIR. Any discrepancies will be flagged by the matching system, and you could face investigation.
Exceptions: Even if your total assets, total liabilities, and turnover are all below ₱3 Million, you may still be required to undertake an audit. The SEC has wide powers to require certain companies to undertake an independent audit due to the nature of their business putting them at higher risk. Ensure your board of directors and legal team fully understand if your company falls into any exceptions.
Public Interest Entities (Group A, B & C): Companies that fall under Groups A, B or C (listed companies, registered securities issuers, commercial banks, insurance providers and large non-stock foundations) will need to have an independent audit undertaken annually.
Secondary Licenses: Companies with a secondary license from the SEC (financing companies, lending companies, investment houses and broker-dealers) will still need to undertake strict annual audits.
Large Government Contractors: Any corporate contractor who has a single government contract of ₱400 Million or more or total government contracts of ₱500 Million or more will need an external audit from an SEC-accredited Group A or Group B auditor. This is outlined in the SEC Memorandum Circular No. 26 Series of 2026.
SEC Powers: Memorandum Circular No. 4 specifically states that the SEC has the power to require any company (regardless of their balance sheet size) to undertake an independent audit if it feels it is necessary to protect investors, investigate complaints from shareholders, or address any enforcement issues.
By-Laws: Your company’s articles of incorporation or by-laws may include clauses requiring an annual external audit by a Chartered Accountant. Unless your board of directors and stockholders pass resolutions to change this, you will be contractually obligated to undertake an annual audit.

Why You Should Use Financial Reporting Services

Navigating the complexities of the SEC Memorandum Circular No. 4, BIR requirements, and PFRS can be tricky. Triple i Consulting can help you, as we understand how complicated the process is, and any errors made with your balance sheet, tax return, or SMR can lead to multiple penalties from different government bodies. We provide reliable compliance and accounting solutions for companies in the Philippines. Whether your company qualifies for the exemption or you require a full statutory audit, we can ensure your requirements are met.

Threshold Determination: Our experienced accountants can determine whether you qualify for the exemption with both the SEC and BIR by looking at your year-end trial balance, turnover recognition, and accruals.
Preparation of PFRS Compliant Statements: Even your unaudited accounts must comply with PFRS for Small Entities or the income tax basis. Our specialists can prepare accurate Statements of Financial Position, Statements of Income and detailed Notes to the Financial Statements.
Protection for SMR Signatories: As the officers of your company will have personal liability when signing the SMR, we can provide assurance by having Chartered Accountants review and compile your unaudited accounts.
eAFS & eFAST: Our compliance team can ensure your accounts are correctly formatted, converted to PDF/A format, and notarisation arranged for both the BIR eAFS and SEC eFAST portals.
External Auditors: If your company exceeds the ₱3 Million threshold or you wish to undertake a voluntary audit to obtain funding from your bank or investors, we can liaise directly with external auditors.

Prepare Your Company

As the 2026 reporting period is now underway, it is important to ensure your company is set up correctly for the new requirements. Many companies wait until the April tax period or until they have submitted to the SEC, which can cause last-minute reconciliations, missed eFAST deadlines, and unnecessary late surcharges. Having a robust process in place for your year-end will help to keep your company in good standing and ensure you can easily obtain funding.

Check Balance Sheet: Try to estimate your total assets and total liabilities 60 days prior to the end of your year.
Monthly Reconciliations: Ensure your general ledger is kept up to date with your bank reconciliations, receivables aging, inventory, and fixed assets.
Board Resolutions: Ensure that you have passed the correct resolutions to allow your Chairman, President, and Treasurer (or duly appointed substitutes) to sign the SMR.
Track Total Turnover: Keep track of your total turnover to date to ensure you do not get caught out with the BIR requirement.
Keep Track of SEC Deadlines: Keep track of the deadlines set by the SEC for your annual submissions (usually 120 calendar days after the end of your year) to ensure you do not incur monthly penalties and remain in good standing.

Final Thoughts

The increase in Audit Threshold to ₱3 Million by the SEC will provide relief to qualifying companies in the Philippines. However, they have placed more responsibility on company leaders. Using reliable Financial Reporting services will ensure your company understands the requirements of both the SEC and BIR and has clean, compliant accounts. By having a robust process in place for your accounts and using our expert knowledge, you can make the most of the new exemption.

Is Assistance Available?

Triple i Consulting can help your company understand these complex requirements. We provide comprehensive Financial Reporting services to meet your exact requirements. Contact our team of Chartered Accountants and compliance specialists today to ensure your company is protected from any penalties and has clean accounts. Contact us today to speak to one of our experts: