The Securities and Exchange Commission (SEC) has tightened accreditation and financial reporting requirements for external auditors, including those handling government contractors, as part of efforts to strengthen audit quality, transparency and public accountability.
The SEC issued Memorandum Circular No. 26, Series of 2026 (MC 26) on September 1, amending provisions governing the accreditation of auditing firms and independent auditors of SEC-regulated entities under Revised Rule 68 of Republic Act No. 8799, or the Securities Regulation Code.
Under the new rules, government contractors are brought under the SEC’s accreditation oversight, with requirements based on the size and value of their government contracts.
Corporate general contractors must engage Group A independent auditors if they have a single government contract worth more than ₱750 million, or cumulative government contracts exceeding ₱1 billion.
Contractors with a single government contract valued at ₱400 million to ₱750 million, or cumulative contracts worth ₱500 million to ₱1 billion, must engage Group B independent auditors.
The accredited external auditor must remain engaged until the contracted projects are fully completed or delivered. Covered corporations must also submit a notarized schedule detailing project descriptions, costs and status, supported by an auditor’s report.
SEC Chairperson Francis Lim said stronger audit standards are intended to reinforce transparency and public trust in financial reporting.
The revised rules also raise the experience requirements for auditors seeking accreditation. Group A applicants must have at least five corporate clients with total assets of at least ₱100 million each, while Group B applicants must have five corporate clients with assets of at least ₱50 million each.
For Group C accreditation, applicants must have at least five corporate clients with assets of at least ₱5 million each.
MC 26 likewise introduces additional grounds for outright denial of accreditation, including misrepresentation or concealment of information, issuing an unqualified opinion despite material misstatements caused by an incorrect accounting framework, and failure to maintain auditor independence.
For Group A and Group B applicants, audit work must meet stricter quality thresholds for five-year accreditation. The financial statements of each evaluated client must have no material findings, while minor findings are subject to prescribed limits.
The new rules will apply to audits of annual or interim financial statements for fiscal years or periods ending on or after June 30, 2027. Other requirements will take effect after the memorandum circular is duly published.
