SEC MC No. 26, series of 2026AMENDMENTS TO SEC ACCREDITATION GUIDELINES OF AUDITING FIRMS AND EXTERNAL AUDITORS

Exchange Securities and Commission

BAGONG PILIPINAS

SEC MEMORANDUM CIRCULAR NO. 26 SERIES OF 2026

TO ALL CONCERNED AUDITING FIRMS AND EXTERNAL AUDITORS AND COVERED CORPORATIONS

SUBJECT GUIDELINES OF AUDITING FIRMS AND EXTERNAL AUDITORS AMENDMENTS TO SEC ACCREDITATION

WHEREAS, the Revised Securities Regulation Code (SRC) Rule 68 provides under Part I, Section 3.B the requirements for independent auditors of SEC-regulated and auditing firms, individual independent auditors or signing partners of audit firms, other covered entities, including the accreditation categories, the grounds for suspension and revocation of accreditation, and the accreditation requirements for Rule 68 establishes the standards for evaluating the quality of audit work of applicants for accreditation and accredited independent auditors; particularly their required track records. Further, Annex 68-A of the Revised SRC

WHEREAS, Securities and Exchange Commission (SEC) Memorandum Circular No.20, series of 2019, entitled Guidelines on the Adoption of Centralized Auditors/Auditing Firms of the Securities and Exchange Commission, Bangko Sentral ng Pilipinas and Insurance Commission's Regulated and Supervised Institutions, provides the guidelines on the accreditation and selection of external auditors/auditing firms and likewise sets out the accreditation categories and the corresponding required track record for such auditors; (One-Stop-Shop) Frameworkfor Accreditation/Selection of External

WHEREAS, Section 179 of the Revised Corporation Code and Section 5 of the Securities Reguiation Code provide that the SEC shall have the power and authority to exercise supervision and jurisdiction over all corporations.

WHEREAS, the SEC amended Paragraph 3.B.(i) (Accreditation Categories) of Part I of the Revised SRC Rule 68 and Section 3 of SEC Memorandum Circuiar No. 20] Series of 2019 to update the coverage of SEc accreditation by including accredited auditors; corporations with government contracts among those required to be audited by sEc.

Part I. 5 of the Revised SRC Rule 68 to facilitate the monitoring of corporations with WHEREAS, the SEC deems it necessary to include an additional schedule under government contracts;

Published on: Philippine Star, 19 September 2026 Manila Standard, 19 September 2026 Filed with UP Law Center: 17 September 2026

Accreditation of Part I of the Revised SRC Rule 68 to include instances when demonstrate a pattern of repeated violations. The amendments strengthen ongoing oversight by ensuring that accreditation remains: contingent on continuous compliance with audit quality, ethical, and regulatory standards. WHEREAS, the SEC amended Par. 3. B. (ii). (g) Suspension or Revocation of auditors commit deliberate acts of manipulation or conceal material findings, or

investor confidence, and upholding the integrity of financial reporting: WHEREAS, to update the SEC group category threshold, the SEC amended Par. 3. Section 5 of SEC Memorandum Circular No. 20, Series of 2019 by increasing the auditors with sufficient experience, and track records are accredited to handle audits of SEC-regulated entities, which is vital for enhancing audit quality, safeguarding B. (iii). (b). (4). Specific Requirements of Part I of the Revised SRC Rule 68 and threshold relative to qualification per group category, thereby ensuring that only

WHEREAS, to enhance the quality of audit work and strengthen evaluation investor interests. standards for SEC Accreditation the SEC amended Items 3 and 4 of ANNEX 68-A of the Revised SRC Rule 68 by imposing stricter thresholds, thereby requiring auditors to demonstrate a higher level of competence, diligence, and adherence to the standards, which is essential for ensuring reliable financial reporting and protecting

ensuring that conditional accreditation remains a temporary corrective measure WHEREAS, to update the Conditional Accreditation Limitations, the SEC amended 2nd paragraph of Item 3.B (v) of ANNEX 68-A of the Revised SRC Rule 68 by rather than a recurring alternative to full compliance.

Violation. WHEREAS, to update the considerations for outright denia! of the application for Rule 68 by addressing serious audit failures, ethical breaches, and repeated non- compliance that cannot be remedied through conditional accreditation. It explicitly covers misrepresentation, non-cooperation with regulatory review, improper use of accounting frameworks, excessive material findings, and recurring client-related accreditation, the SEC amended Item No. 2 of ANNEX 68-A of the Revised SRC

WHEREAs, the foregoing amendments are intended to protect the public interest!

continue to comply with professional, ethical, and regulatory standards; reinforce accountability, maintain and uphold the integrity and credibility of the accreditation system throughout the validity of accreditation, and ensure that auditors

NOW, THEREFORE, in the exercise of its regulatory authority, the SEC hereby promulgates the following amendments to strengthen the accreditation framework under Part l. 3.B, Part I. 5, and Annex 68-A of the Revised SRC Rule 68, as follows:

SEcTiON 1. Amendments to Part I. 3.B. Additional Requirements for Independent Auditors of SEC-Regulated Entities and Other Entities

B. Additional Requirements for Independent Auditors of SEC-Regulated Entities and Other Entities

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(i) Accreditation Categories

mechanism or quality assurance review by the Commission on the work of the accredited external auditors. The accreditation of independent auditors serves as a quality control

Commission under the appropriate category: The following entities shall have independent auditors accredited by the

Group A 1. Issuers of registered securities which have sold a class of securities certificates which are covered in Group B. This category shall also cover pursuant to a registration under Section 12 of the SRC except those issuers of registered timeshares, proprietary and non proprietary membership corporations applying for the registration of their securities;

2. Listed companies with securities traded on an exchange;

3. Public companies or those which have total assets of at least Fifty Million Pesos (P50 Million) or such other amount as the Commission shall prescribe, and having two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities:

4. Clearing agencies and clearing agencies as depositories:

5. Stock exchanges, securities exchanges, and other self-regulatory organizations; and

Group B 1. Issuers of registered timeshares and membership certificates (proprietary or non-proprietary) 2. Investment houses 3. Brokers and dealers of securities 4. Investment companies without registered securities or not in the process of registration

5. Government securities eligible dealers

6. Universal banks registered as underwriters

7. Investment company advisers

8. Special purpose corporations under the Securitization Act of 2004 9. Other SEC-supervised corporations as may be required by law

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Group C 1. Financing companies with assets over P10 million in the preceding year 2. Lending companies with assets over P5 million in the preceding year 3.Transfer agents

4. Non-stock, non-profit corporations including foundations which solicit or amounting to more than One Hundred Million Pesos (P100 Million), in receive annual donations or contributions amounting to more than the three (3) most recently ended fiscal years, consecutively; or such higher amount that the Commission may set through order or guidelines. Twenty-Five Million Pesos (P25 Million), or with annual fund balance

A non-stock, non-profit corporation that is already scoped in by the above requirement can be excluded if it fails to meet the criteria for at least one (1) year during the 3 year consecutive period; and

5 Other corporations were deemed vested with public interest by the Commission, even without a secondary license requirement.

For Government Contracts:

and consulting services, and the contracting for infrastructure projects office, or instrumentality of the Government of the Philippines, including government-owned . government financial institutions (GFIs), state universities and colleges (SUCs), and local government units (LGUs). Government contracts cover the procurement or acguisition of goods by the national government, any branch, agency, department, bureau and/or -controlled corporations. (GOCCs)

For all corporate general contractors, they shall engage with appropriate categories: independent auditors accredited by the Commission under the

Category Group A More than P750 million Single Government Contract Cumulative Government More than P1 billion Contracts

Group B P400 million to P750 million P500 million to P1 billion

general contractor shall have the sole responsibility to comply with the Notwithstanding any subcontracting arrangements, the corporate accreditation requirements.

(ii) Scope and Limitation of Accreditation

xXX XXx

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(g) The accreditation of an auditing firm and/or partner ("Auditor") shall remain effective unless any of the following occurs:

1. The Auditor's request for withdrawal of accreditation is 2. The BOA registration and license have expired; or 3. The accreditation of the Auditor is suspended or revoked by the Commission. approved by the Commission; or

modified by the Commission, after notice and hearing, under any of the following circumstances: The accreditation of the Auditor may be suspended, revoked or

2. The Auditor committed repeated violations of the 1. The Auditor has committed acts that would constitute provisions of this Rule--whether identified through Securities Regulation Code, Revised SRC Rule 68, Commission; Philippine Standards on Auditing (PSAs), or other grounds for outrightdenial under the evaluation applicable regulations. post-approval monitoring, or any other or investigationconducted relevant by review, the

Repeated violation is defined as multiple violations of the same or similar requirement by the same company. client.

3. The Auditor has aided, abetted, counseled, commanded, 4 The Auditor has engaged in any act, transaction, induced or procured any violation of this rule, regulation or order of the Commission or laws being implemented by the Commission;

5. The Auditor has failed to comply with the SOAR requirements or for such other grounds as provided in operate as a fraud or deceit upon any person; and this Rule. practice or course of business which operates or would

(ili) Accreditation Requirements for Individual fndependent Auditors or Signing Partners

XXX XXX

(b) Specific Requirements

XXX XXX

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(4) At the time of application, the applicant must have the following track record:

(iii) For Group C, he shall have had a minimum of five (5) (ii) For Group B, he shall have had a minimum of five (5) corporate (i) For Group A applicant, he shall have had a minimum of five (5) corporate clients with total assets of at least Five Million Pesos (P5 Million) each, or such amount as may be prescribed by the Commission. Million Pesos (P100 Million) each, or such amount as may be prescribed by the Commission; clients with total assets of at least Fifty Million Pesos (P50 Million) each, or such amount as may be prescribed by the Commission; corporate clients with total assets of at least One Hundred

SECTION 2. Amendments to ANNEX 68-A

QUALITY OF AUDIT WORK OF APPLICANTS FOR ACCREDITATION AND

ACCREDITED INDEPENDENT AUDITORS

1. The latest Audited Financial Statements (AFS) of at least two (2) clients of the

from the certified list of clients provided by the applicant, shall be submitted applicant to be selected using a risk-based approach, by the Commission

for review.

he is the EQCR to be selected randomly from the certified list of clients In case the applicant is an Engagement Quality Control Reviewer (EQCR)1] the Commission shall review the latest AFS of at ieast two (2) clients, where submitted by the applicant. If there are noted deficiencies in the AFs subjected for evaluation, in relation to an EQcR's application, the Commission is not precluded from re-evaluating the existing accreditation of the related signing partner of the evaluated AFs since he is primarily responsible for the audit of the financial statements on which he expressed an opinion. The Commission shall likewise consider in the evaluation the findingsl under the SOAR Inspection Program shall likewise be considered. on the financial statements of the applicant's clients or the accredited auditorsj clients that were reviewed in relation to regulatory monitoring or processing of an application of the company-client. Results of the engagement level review

2. An application for accreditation shall be outright denied, and the remedy

following circumstances: of conditional accreditation shall not be available under any of the

Gross negligence in the conduct of the audit to comply with any of the PSA and such other issuances of the AASC and/or the Commission:

J. Conduct of an audit despite the lack or eventual loss of independencel

in the Philippines; as provided for under the Code of Ethics for Professional Accountants

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Conduct of any non-audit services for his statutory audit clients, if he independence: has not undertaken the safeguards to reduce the threat to his

iv. When the applicant misrepresents, conceals, :or submits financial statements of a selected company, whether intentionally or through gross negligence; erroneous or misleading information during the evaluation of the

V When the company-client adopts an accounting framework lower

opinion, adverse opinion, or disclaimer of opinion; than or inconsistent with the appropriate framework required under the Revised SRc Rule, and the external auditor expresses an unqualified opinion, despite the presence of material misstatements arising from the use of an incorrect accounting framework, where such circumstances warrant a qualified

Vi. When the applicant refuses or fails to submit explanations,

Commission during the evaluation or review process; confirmations, supporting documents, or access to records required by the Office of the General Accountant (OGA) or the

Vii. The Auditor's Report does not substantially comply with the PSA. SRC Rule 68, and other relevant regulations;

vii. When the applicant fails to maintain independence from the client, has undisclosed conflicts of interest, or otherwise violates where it is proven that the auditor directiy prepared the financial applicable ethical and professional standards, including cases statements, and there is evidence after review that such preparation compromises the integrity, objectivity, or reliability of the audit engagement;

Ix. When, after evaluation of the financial statements of a selected

company, the applicant is formally assessed by the Office of the General Accountant (OGA) to have committed a fifth offense arising from violations related to the same audit client, as determined during the review process;

X When a single set of financial statements contains six (6) or more material findings;

Xi When the review of the application conducted by the OGA establishes that the applicant or accredited external auditor that does not comply with consolidation requirements,-despite prior written advice or notice of such non-compliance; and repeatedly accepted or continued audit engagements with a client

Xii. When the review of the application shows that the applicant has

records of previous delisting, suspension, or revocation of accreditation, the application may only be accepted after the lapse

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the Commission. of two (2) audit periods, or such period as may be prescribed by

3. For Groups A and B Applications

A. For Group A or Group B applications, the audit work of an applicant the audited financial statements (AFS) of each of the applicant's clients shall not exceed two (2) items for each AFS. The level of minor findings that do not exceed three (3) items for each AFS. shall be approved for five (5)-year accreditation only if the evaluation of shows no material findings. The number of minor findings therein deficiencies acceptable for Group B accreditation shall also be

B. Notwithstanding the rules of outright denial of application, if the

then evaluation results in material findings, and the folilowing are met,

Group A and B if there is ONLY one (1) material finding for each AFS The applicant shall be granted conditional accreditation under

If there are two (2) material findings, the applicant may be given a downgraded Conditional B.

For any conditional accreditation under Groups A or B, the

provided that the results of the financial statement evaluation applicant is also given an option for a downgraded 5-yr c,

qualify the applicant for five-year Group C accreditation.

subject to the consideration and approval of the approving intent to avail, the final accreditation and group category remain authority. Notwithstanding the group category applied for and the manifested

C. An applicant may only be granted conditional accreditation on the same category up to three (3) consecutive times.

If, after the third conditional accreditation, the subsequent application is still eligible only for conditional accreditation, then applicants under Group A and Group B may be granted either five (5)-year accreditation or conditional accreditation under a lower category, provided they qualify based on the number of material findings; otherwise, the application shall be' outright denied.

Applicants who are outright denied due to exceeding the limit of three (3) conditional accreditations or withdrawn or abandoned, may only re-apply after one (1) audit period.

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For clarity, conditional accreditation shall not be'available for any application falling under the grounds for outright denial, as specified in the relevant provisions.

D. In case of renewal applications and the findings on the clients' AFs include material deficiency or misstatement, the applicant independent

13, Series of 2009 or subsequent circulars issued by the auditor shall be assessed penalties based on Section 12 of Mc No. Commission.

Material findings on the AFS of the applicant/s' company clients of 2009 or subsequent circulars issued by the Commission. shall also be assessed penalties based on SEC MC. No. 08, Series

4. For Group C Applications

A. An application for accreditation under Group C may only be recommended for a CONDITIONAL ACCREDITATION if, upon evaluation, the AFs of company-clients show that there are material

findings therein. as follows:

i. When any of the basic components of -the financial statements, as prescribed by the applicable financial reporting framework, or any of the

to the following: required supporting documents, is not presented, including but not limited

b.SEC supplementary schedules covered by the Auditor's Report a. Supplemental Written Statement of the Auditor (for stock corporations not covered by Part Il of this Rule)

ii. The Notes to Financial Statements are substantially incomplete due to the absence of more than three (3) disclosure items on significant accounts; (material disclosure deficiency)

jii. More than two (2) accounting policies on significant accounts are not in accordance with the applicable financial reporting framework)

material misstatement). and/or there are material misstatements (material deviation and

A combination of more than one (1) material finding under items (ii) and (ili), even if below the limit per each category, would constitute a ground to grant only a conditional accreditation.

B. An applicant may only be granted conditional accreditation on the

same category up to three (3) consecutive times.

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If, after the third conditional accreditation, the subsequent application is still eligible only for conditional accreditation, then applicants shall be outright denied.

three (3) conditional accreditations or withdrawn or abandoned, may only re-apply after one (1) audit period. Applicants who are outright denied due to exceeding the limit of

For ciarity, conditional accreditation shall not be available for any application falling under the grounds for outright denial, as specified in the relevant provisions.

C. In case of renewal applications and the findings on the clients' AFs include material deficiency or misstatement, the applicant independent auditor and company-clients shall be assessed penalties based on

Section 12 of Mc No. 13, Series of 2009 or subsequent circulars issued by the Commission.

Material findings on the AFS of the applicant/s' company clients shall also be assessed penalties based on SEC MC. No. 08, Series of 2009 or subsequent circulars issued by the Commission.

5. The materiality of a deficiency, misrepresentation or misstatement shall be determined based on the tests set by the Commission in Part IIl of this Rule or any amendments thereto.

6. Existing accredited external auditors under Group B or C can only apply for upgrading of accreditation after one (1) year from the grant of their accreditation.

7. The Commission is not precluded from re-evaluating an existing accreditation the circumstances would warrant further re-evaluation. of an external auditor, regardless of the validity of its accreditation period, if

Section 3. Amendments to Part I. 5. OTHER DOCUMENTS TO BE FILED WITH THE FINANCIAL STATEMENTS

with the AFs by corporations that hold government contracts. The schedule as provided in Annex 68-L must be accomplished and submitted

covered by an Auditor's Report. A notarized schedule shall disclose the following details for each project or Status; and (v) Start date and expected completion date. This schedule must be contract entered into with any government agency: (i) Description of the project; (ii) Name of the specific government agency involved; (iii) Total contract cost; (iv)

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Section 4. REPEALING CLAUSE

All other rules and regulations, circulars, or memoranda or any part thereof, in conflict with or contrary to this Rule or any portion hereof, are hereby repealed or modified accordingly.

Section 5. EFFECTIVITY CLAUSE

A. This Circular shall become effective for audit of financial statements, whether 2027 annual or interim, for the fiscal year or period, ending on or after 30 June

B. All other requirements shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) newspapers of national circulation in the Philippines.

Makati City, Philippines.

September 01, 2026

FRaNCi$CO ED LIM Chairberson ?

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Annex 68-L

SCHEDULE OF CONTRACTS WITH THE GOVERNMENT

Name of Company SEC Registration No.

For the year Ended

Number Item (a Awarding Government Agency: Name of Project/Program/Activity: Projects/Program/Activities Description of (b Contract Cost ((c Accomplished* On-going** Planned*** Status ( Date of Award ( Start Date () Project Duration Completion Date g)

Location:

* Accomplished: Please indicate the actual completion date of the project. **On-going: Please indicate the percentage (%) of completion and projected completion date of the project. ***Planned: Please indicate the projected completion date of the project.

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