Who Must Submit an Audited Financial Statement in the Philippines?

March 5, 2025

An Audited Financial Statement in the Philippines is a crucial requirement for businesses, ensuring transparency, regulatory compliance, and financial accuracy. The Bureau of Internal Revenue (BIR), the Securities and Exchange Commission (SEC), and other regulatory bodies mandate businesses of a specific size or financial standing to submit audited financial statements. Failing to comply with these requirements can result in penalties, legal consequences, and reputational risks. Understanding business audit requirements for Philippine businesses is essential for corporate compliance and financial planning. This article discusses which entities are required to submit audited financial statements in the Philippines, the legal framework governing these requirements, and how businesses can effectively prepare for an audit.

Businesses Required to Submit Audited Financial Statements

Several types of businesses in the Philippines must comply with financial reporting and audit regulations. The following entities are required to submit audited financial statements:

Corporations with Gross Annual Revenue Exceeding PHP 3 Million: Under the BIR’s regulations, any business exceeding this threshold must submit audited financial statements.
Partnerships and Sole Proprietorships Reaching the Revenue Threshold: Non-corporate businesses that exceed the PHP 3 million revenue requirement must also comply.
Companies Registered with the SEC: Any corporation, particularly stock corporations and publicly listed companies, must provide audited reports.
Businesses Applying for Loans or Government Contracts: Banks, investors, and government agencies require audited financial statements as part of the due diligence processes.
Exporters and Importers: Many trade-related businesses must submit financial statements to obtain permits and tax incentives.

Failure to comply with requirements for financial statement audits in the Philippines can lead to monetary penalties and legal repercussions. Businesses should ensure timely submissions to avoid regulatory issues.

Legal Basis and Governing Agencies for Audited Financial Statements

Submitting audited financial statements is governed by multiple regulatory bodies and laws. Businesses must comply with the following legal frameworks:

Bureau of Internal Revenue (BIR): The BIR mandates that businesses earning over PHP 3 million annually submit BIR audited financial statements as part of their tax compliance.
Securities and Exchange Commission (SEC): The SEC requires corporations to file annual reports, including audited financial statements, to ensure corporate governance and financial transparency.
Department of Trade and Industry (DTI): Certain sole proprietorships and partnerships must comply with DTI financial reporting standards.
Philippine Financial Reporting Standards (PFRS): These standards dictate the proper format and content of financial statements to ensure consistency and accuracy.

Businesses should stay updated on changing regulations to ensure compliance with financial reporting laws.

Importance of Audited Financial Statements for Businesses

Audited financial statements are more than just a compliance requirement. They offer numerous benefits contributing to a company’s credibility and economic health.

Regulatory Compliance: Ensures businesses meet legal obligations and avoid fines or penalties.
Investor Confidence: Audited reports provide transparency, making companies more attractive to investors and stakeholders.
Financial Accuracy: A professional audit helps identify discrepancies and economic risks, reducing fraud and errors.
Improved Loan Approval Rates: Banks and financial institutions require audited statements when assessing loan applications.
Tax Compliance and Accuracy: Proper financial statements help businesses calculate the correct tax dues and minimize the risk of audits by the BIR.

Understanding the importance of audited financial statements allows businesses to use these reports as a tool for growth, economic stability, and risk management.

Steps to Prepare for an Audited Financial Statement

Businesses must take proactive steps to ensure they meet audit requirements efficiently. Here’s how to prepare audited financial statements in the Philippines:

Organize Financial Records: Maintain complete and accurate financial records, including receipts, invoices, and ledgers.
Ensure Proper Bookkeeping Practices: Adopt standardized bookkeeping methods or outsource financial audit services in the Philippines.
Hire a Certified Public Accountant (CPA): Only accredited CPAs can audit and sign financial statements.
Review Financial Statements Regularly: Conduct internal audits to check for inconsistencies before the external audit.
Submit on Time: The BIR and SEC have strict deadlines for financial statement submission; businesses should ensure compliance to avoid penalties.

Following these steps helps businesses stay audit-ready and avoid unnecessary delays or penalties.

Consequences of Non-Compliance with Audit Requirements

Failing to submit audited financial statements can have serious repercussions for businesses. Companies that do not comply may face:

Fines and Penalties: The BIR and SEC impose financial penalties for late or missing financial statement submissions.
Legal Consequences: Non-compliance may result in legal action, including suspension or revocation of business permits.
Loss of Credibility: Investors, partners, and banks may lose confidence in a company that fails to meet financial reporting standards.
Difficulty Securing Loans or Investments: Lenders require audited financial statements to assess financial stability before approving funding.
Higher Risk of Government Audits: Businesses that fail to submit accurate financial statements may attract further scrutiny from regulatory agencies.

Understanding these consequences highlights the importance of audited financial statements in the Philippines and why businesses should comply with audit requirements.

Choosing a Trusted Provider for Financial Audit Services

Businesses can ensure compliance and accuracy by engaging professional financial audit services in the Philippines. When selecting an audit firm, consider the following factors:

Experience in the Industry: Choose firms with a proven track record of conducting financial audits for businesses similar to yours.
Certified Public Accountants (CPAs): Ensure the audit firm employs accredited professionals authorized to conduct audits.
Knowledge of Philippine Tax and Corporate Laws: A trusted audit provider should have deep expertise in tax compliance and financial regulations.
Comprehensive Financial Services: Some firms offer additional financial statement preparation and tax advisory services to streamline compliance.
Reputation and Client Testimonials: Check client reviews and feedback to ensure reliability and quality service.

A reliable audit firm simplifies compliance, reduces financial risks, and ensures businesses meet all regulatory requirements.

Final Thoughts

Submitting Audited Financial Statements in the Philippines is a legal obligation for businesses that meet specific financial thresholds. It ensures compliance with the BIR, SEC, and other regulatory agencies while enhancing financial transparency and credibility. Companies should proactively prepare for audits to avoid penalties and benefit from accurate financial reporting.

Is Assistance Available?

Yes! Triple i Consulting offers expert financial audit services in the Philippines to help businesses meet compliance requirements. Contact us today to schedule an initial consultation to ensure your financial statements are accurate, timely, and fully compliant with regulatory standards.