TheSecurities and Exchange Commissionhas issuedMemorandum Circular (MC) No. 4, Series of 2026, introducing updated audit requirements designed to ease compliance costs for smaller corporations while maintaining accountability and transparency.
This new circular significantly raises the audit threshold, allowing more corporations to file unaudited financial statements, provided certain conditions are met.
Below is a clear breakdown of what this means for your business.
What Has Changed Under SEC MC No. 4, s. 2026?
1. Higher Audit Threshold
Onlystock and non-stock corporations with total assets or total liabilities exceeding ₱3,000,000are now required to submitaudited financial statements (AFS).
2. Audit Exemption for Smaller Corporations
Corporations withassets or liabilities at ₱3,000,000 or belowareno longer required to submit audited financial statements.
This change reduces compliance costs and administrative burden, especially for startups and small enterprises.
New Filing Requirement for Exempt Corporations
While audits may no longer be required, exempt corporations must still submit the following:
•Unaudited Financial Statements
•Statement of Management’s Responsibility (SMR)
•SMR must be signed under oath
The SMR serves as a formal declaration that management takes full responsibility for the accuracy and completeness of the submitted financial statements.
Who Must Sign the Statement of Management’s Responsibility?
For Regular Corporations
The SMR must be signed by all of the following:
• Chairman of the Board
• President or Chief Executive Officer (CEO)
• Treasurer or Chief Financial Officer (CFO)
For One-Person Corporations (OPCs)
The SMR must be signed by:
• President
• Treasurer
Important Reminder on Accountability
All signatories of the SMRassume full legal responsibilityfor the truthfulness and correctness of the financial statements.
Any misrepresentation may expose the signatories to regulatory sanctions and penalties.
When Does This Take Effect?
The new audit threshold applies tofinancial statements for fiscal years ending on or after December 31, 2025.
Corporations preparing for 2025 year-end reporting should already assess whether they qualify for audit exemption.
Who Is NOT Covered by the Audit Exemption?
The ₱3,000,000 audit thresholddoes not applyto the following entities:
• Public Interest Entities (PIEs)
• Corporations classified underGroup A, B, or C
• Entities determined by the SEC to be vested with public interest
These entities arestill required to submit audited financial statements, regardless of asset or liability size.
How This Impacts Your Corporation
This circular is a welcome relief for many small corporations, but it also increases management responsibility. Choosing whether to file audited or unaudited financial statements should be done carefully, with proper professional guidance.
If you are unsure whether your corporation qualifies for audit exemption or need assistance preparing compliant unaudited financial statements and SMRs, professional advice is strongly recommended.
Source:Securities and Exchange Commission (SEC) Philippines
